FAC Explorer

Finding 1238860 (2025-004)

Material Weakness Repeat Finding
Requirement
B
Questioned Costs
-
Year
2025
Accepted
2026-09-30
Audit: 413792
Organization: South Bend Community School Corporation (IN)
Auditor: INDIANA STATE BOARD OF ACCOUNTS

AI Summary

  • Core Issue: Ineffective internal controls led to missing documentation for payroll expenditures, resulting in questioned costs of $12,697.
  • Impacted Requirements: Compliance with 2 CFR 200.303 and 2 CFR 200.430(i) regarding documentation and allowable costs was not met.
  • Recommended Follow-Up: Management should implement a robust internal control system to ensure all costs charged to the program are properly documented and compliant.

Finding Text

FINDING 2025-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): BREAKFAST SY 24-25, LUNCH FY24-25, SUPPLY CHAIN SY 24-25, ADMIN 24-25, OPER FY 24-25, FY 2024-2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context Internal controls were not effective in ensuring that supporting documentation of pay rates were retained for payroll expenditures. Six payroll expenditures paid from the School Lunch fund were tested, and documentation supporting the pay rates for these expenditures was not provided for audit. As a result, these expenditures were considered questioned costs totaling $12,697. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 26 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.1 states in part: "Questioned cost means a cost that is questioned by the auditor because of an audit finding: (1) Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a Federal award, including for funds used to match Federal funds; (2) Where the costs, at the time of the audit, are not supported by adequate documentation; or (3) Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. (4) Questioned costs are not an improper payment until reviewed and confirmed to be improper as defined in OMB Circular A-123 appendix C. (See also the definition of Improper payment in this section)." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 27 SOUTH BEND COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause Management had not developed an adequate system of internal controls to ensure costs charged to the program were allowable and necessary for the operation of the program. Effect Without an effective review of the detailed records, federal expenditures were unallowable, which the funding agency could potentially recover. Questioned Costs Questioned costs in the amount of $12,697 were identified as described in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure costs that are charged to the program are allowable and necessary. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Corrective Action Plan

FINDING 2025-004 Finding Subject: Child Nutrition Cluster –Allowable Costs/Cost Principles Contact Person Responsible for Corrective Action: James Lutaaya, Ahnaf Tahmid & Marlaina Johns Contact Phone Number and Email Address: 574-393-6000, jlutaaya@sbcsc.k12.in.us, atahmid@sbcsc.k12.in.us, mjohns2@sbcsc.k12.in.us Views of Responsible Officials: We concur with the finding. Description of Corrective Action Plan: Human Resources worked with Regional Data Services to identify the cause of the issue and made corrections to prevent the data being lost on the administrative side moving forward. This involved updates to software stores and archives. PAYROLL EXPENDITURES All compensation an employee receives must go before the School Board for approval prior to the pay. Approvals are retained in the form of Personnel Requisitions, Union Contracts, Board Personnel Approval. Pay Change Process: Stipend Approval Process: STEP ACTIVITY PRIMARY EMPLOYEE LEVEL REVIEWED BY NOTE 1 Create Employee Change Personnel Requisition (in Applicant Tracker or on paper) Employee's Supervisor School / Department Department Supervisor Be specific and fill in all fields. 2 Submit to the Department Supervisor for Review & Approval Employee's Supervisor School / Department Department Supervisor 3 Submit to Human Resources for Review & Approval Department Supervisor Central HR HR will review to ensure compliance with approved salary and job titles 4 Submit to Finance for Review & Approval HR Central Finance Finance will verify vacant positions exists and provide funding information. 5 Submit to Human Resources for Processing Finance Central HR HR will update the employee's information in financial / employee software 6 Verify Accuracy of Updates HR - 2nd employee Central n/a 7 Save a Copy of all Requisitions HR Central n/a 8 All pay changes are included in the Personnel Report that is submitted to the Board to obtain approval. HR Central School Board This includes position changes, job title changes, raises, transfers, etc. INDIANA STATE BOARD OF ACCOUNTS 88 OVERTIME APPROVAL POLICY All overtime hours must receive prior approval from a supervisor or manager before extra hours are worked. Employees are not permitted to work overtime without explicit approval, except in emergency situations where prior approval is not feasible. Failure to obtain approval may result in the overtime hours being unpaid or other disciplinary actions. To request overtime, employees must submit a request to their supervisor with a brief explanation of the need for additional hours. Approval will be granted based on workload requirements and budget considerations. Corrected Date: 06/30/2026 INTEGRITY • ACCOUNTABILITY • EMPOWERMENT ACADEMIC QUALITY | EQUITY, INCLUSION & JUSTICE | FINANCIAL SUSTAINABILITY | COMMUNITY PARTNERSHIPS 737 Beale Street • South Bend, Indiana 46616 • 574-393-6100 • sb.school

Categories

Allowable Costs / Cost Principles School Nutrition Programs

Other Findings in this Audit

  • 1238847 2025-003
    Material Weakness Repeat
  • 1238848 2025-003
    Material Weakness Repeat
  • 1238849 2025-003
    Material Weakness Repeat
  • 1238850 2025-003
    Material Weakness Repeat
  • 1238851 2025-003
    Material Weakness Repeat
  • 1238852 2025-003
    Material Weakness Repeat
  • 1238853 2025-003
    Material Weakness Repeat
  • 1238854 2025-004
    Material Weakness Repeat
  • 1238855 2025-004
    Material Weakness Repeat
  • 1238856 2025-004
    Material Weakness Repeat
  • 1238857 2025-004
    Material Weakness Repeat
  • 1238858 2025-004
    Material Weakness Repeat
  • 1238859 2025-004
    Material Weakness Repeat
  • 1238861 2025-005
    Material Weakness Repeat
  • 1238862 2025-005
    Material Weakness Repeat
  • 1238863 2025-005
    Material Weakness Repeat
  • 1238864 2025-005
    Material Weakness Repeat
  • 1238865 2025-005
    Material Weakness Repeat
  • 1238866 2025-005
    Material Weakness Repeat
  • 1238867 2025-006
    Material Weakness Repeat
  • 1238868 2025-006
    Material Weakness Repeat
  • 1238869 2025-007
    Material Weakness Repeat
  • 1238870 2025-007
    Material Weakness Repeat
  • 1238871 2025-008
    Material Weakness Repeat
  • 1238872 2025-008
    Material Weakness Repeat
  • 1238873 2025-009
    Material Weakness Repeat
  • 1238874 2025-009
    Material Weakness Repeat
  • 1238875 2025-010
    Material Weakness Repeat
  • 1238876 2025-010
    Material Weakness Repeat
  • 1238877 2025-011
    Material Weakness Repeat
  • 1238878 2025-011
    Material Weakness Repeat
  • 1238879 2025-012
    Material Weakness Repeat
  • 1238880 2025-012
    Material Weakness Repeat
  • 1238881 2025-013
    Material Weakness Repeat
  • 1238882 2025-013
    Material Weakness Repeat
  • 1238883 2025-014
    Material Weakness Repeat
  • 1238884 2025-014
    Material Weakness Repeat
  • 1238885 2025-015
    Material Weakness Repeat
  • 1238886 2025-015
    Material Weakness Repeat
  • 1238887 2025-016
    Material Weakness Repeat
  • 1238888 2025-016
    Material Weakness Repeat
  • 1238889 2025-017
    Material Weakness Repeat
  • 1238890 2025-017
    Material Weakness Repeat
  • 1238891 2025-018
    Material Weakness Repeat
  • 1238892 2025-018
    Material Weakness Repeat
  • 1238893 2025-019
    Material Weakness Repeat
  • 1238894 2025-019
    Material Weakness Repeat
  • 1238895 2025-019
    Material Weakness Repeat
  • 1238896 2025-019
    Material Weakness Repeat
  • 1238897 2025-019
    Material Weakness Repeat
  • 1238898 2025-019
    Material Weakness Repeat
  • 1238899 2025-019
    Material Weakness Repeat
  • 1238900 2025-019
    Material Weakness Repeat
  • 1238901 2025-020
    Material Weakness Repeat
  • 1238902 2025-020
    Material Weakness Repeat
  • 1238903 2025-020
    Material Weakness Repeat
  • 1238904 2025-020
    Material Weakness Repeat
  • 1238905 2025-020
    Material Weakness Repeat
  • 1238906 2025-020
    Material Weakness Repeat
  • 1238907 2025-020
    Material Weakness Repeat
  • 1238908 2025-020
    Material Weakness Repeat
  • 1238909 2025-021
    Material Weakness Repeat
  • 1238910 2025-021
    Material Weakness Repeat
  • 1238911 2025-021
    Material Weakness Repeat
  • 1238912 2025-021
    Material Weakness Repeat
  • 1238913 2025-021
    Material Weakness Repeat
  • 1238914 2025-022
    Material Weakness Repeat
  • 1238915 2025-022
    Material Weakness Repeat
  • 1238916 2025-022
    Material Weakness Repeat
  • 1238917 2025-023
    Material Weakness Repeat
  • 1238918 2025-023
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
84.010 TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES 2024 $11.75M
10.555 NATIONAL SCHOOL LUNCH PROGRAM 2024 $9.52M
84.010 TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES 2025 $8.27M
10.555 NATIONAL SCHOOL LUNCH PROGRAM 2025 $8.02M
84.027 SPECIAL EDUCATION GRANTS TO STATES 2025 $4.53M
84.374 TEACHER AND SCHOOL LEADER INCENTIVE GRANTS (FORMERLY THE TEACHER INCENTIVE FUND) 2024 $3.40M
10.553 SCHOOL BREAKFAST PROGRAM 2024 $3.00M
10.553 SCHOOL BREAKFAST PROGRAM 2025 $2.41M
84.334 GAINING EARLY AWARENESS AND READINESS FOR UNDERGRADUATE PROGRAMS 2024 $1.83M
84.184 SCHOOL SAFELY NATIONAL ACTIVITIES 2024 $1.69M
84.334 GAINING EARLY AWARENESS AND READINESS FOR UNDERGRADUATE PROGRAMS 2025 $1.63M
84.367 SUPPORTING EFFECTIVE INSTRUCTION STATE GRANTS (FORMERLY IMPROVING TEACHER QUALITY STATE GRANTS) 2024 $1.11M
84.336 TEACHER QUALITY PARTNERSHIP GRANTS 2024 $1.05M
84.336 TEACHER QUALITY PARTNERSHIP GRANTS 2025 $1.01M
10.558 CHILD AND ADULT CARE FOOD PROGRAM 2024 $957,987
84.011 MIGRANT EDUCATION STATE GRANT PROGRAM 2024 $929,569
84.215 INNOVATIVE APPROACHES TO LITERACY; PROMISE NEIGHBORHOODS; FULL-SERVICE COMMUNITY SCHOOLS; AND CONGRESSIONALLY DIRECTED SPENDING FOR ELEMENTARY AND SECONDARY EDUCATION COMMUNITY PROJECTS 2024 $910,537
97.036 DISASTER GRANTS - PUBLIC ASSISTANCE (PRESIDENTIALLY DECLARED DISASTERS) 2024 $881,458
84.184 SCHOOL SAFELY NATIONAL ACTIVITIES 2025 $855,321
84.051 CAREER AND TECHNICAL EDUCATION -- NATIONAL PROGRAMS 2025 $839,868
10.558 CHILD AND ADULT CARE FOOD PROGRAM 2025 $707,849
84.424 STUDENT SUPPORT AND ACADEMIC ENRICHMENT PROGRAM 2024 $698,029
32.004 UNIVERSAL SERVICE FUND - SCHOOLS AND LIBRARIES 2024 $689,885
84.011 MIGRANT EDUCATION STATE GRANT PROGRAM 2025 $639,019
84.215 INNOVATIVE APPROACHES TO LITERACY; PROMISE NEIGHBORHOODS; FULL-SERVICE COMMUNITY SCHOOLS; AND CONGRESSIONALLY DIRECTED SPENDING FOR ELEMENTARY AND SECONDARY EDUCATION COMMUNITY PROJECTS 2025 $610,051
93.778 GRANTS TO STATES FOR MEDICAID 2024 $518,707
84.424 STUDENT SUPPORT AND ACADEMIC ENRICHMENT PROGRAM 2025 $456,802
84.367 SUPPORTING EFFECTIVE INSTRUCTION STATE GRANTS (FORMERLY IMPROVING TEACHER QUALITY STATE GRANTS) 2025 $408,733
93.778 GRANTS TO STATES FOR MEDICAID 2025 $402,182
84.048 CAREER AND TECHNICAL EDUCATION -- BASIC GRANTS TO STATES 2024 $346,769
84.027 SPECIAL EDUCATION GRANTS TO STATES 2024 $340,862
84.365 ENGLISH LANGUAGE ACQUISITION STATE GRANTS 2024 $328,319
84.048 CAREER AND TECHNICAL EDUCATION -- BASIC GRANTS TO STATES 2025 $308,148
10.559 SUMMER FOOD SERVICE PROGRAM FOR CHILDREN 2025 $270,301
32.004 UNIVERSAL SERVICE FUND - SCHOOLS AND LIBRARIES 2025 $262,809
10.559 SUMMER FOOD SERVICE PROGRAM FOR CHILDREN 2024 $217,903
84.002 ADULT EDUCATION - BASIC GRANTS TO STATES 2024 $209,421
84.365 ENGLISH LANGUAGE ACQUISITION STATE GRANTS 2025 $206,296
84.002 ADULT EDUCATION - BASIC GRANTS TO STATES 2025 $146,692
84.374 TEACHER AND SCHOOL LEADER INCENTIVE GRANTS (FORMERLY THE TEACHER INCENTIVE FUND) 2025 $131,008
93.566 REFUGEE AND ENTRANT ASSISTANCE STATE/REPLACEMENT DESIGNEE ADMINISTERED PROGRAMS 2024 $120,657
84.173 SPECIAL EDUCATION PRESCHOOL GRANTS 2025 $114,612
84.425 EDUCATION STABILIZATION FUND 2025 $78,748
93.243 SUBSTANCE ABUSE AND MENTAL HEALTH SERVICES PROJECTS OF REGIONAL AND NATIONAL SIGNIFICANCE 2024 $57,647
84.196 EDUCATION FOR HOMELESS CHILDREN AND YOUTH 2025 $35,554
84.051 CAREER AND TECHNICAL EDUCATION -- NATIONAL PROGRAMS 2024 $29,386
84.425 EDUCATION STABILIZATION FUND 2024 $27,119
93.566 REFUGEE AND ENTRANT ASSISTANCE STATE/REPLACEMENT DESIGNEE ADMINISTERED PROGRAMS 2025 $26,191
10.582 FRESH FRUIT AND VEGETABLE PROGRAM 2024 $13,468
84.173 SPECIAL EDUCATION PRESCHOOL GRANTS 2024 $7,749