Finding Text
FINDING 2023-004
Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, COVID-19 - National School Lunch Program, National
School Lunch Program, Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY 2023, 212IN002H1703,
222IN059N8903, 232IN059N8903,
FAYETTE COUNTY 2395
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Audit Finding: Material Weakness
Condition and Context
The School Corporation had not designed nor implemented internal controls that would likely be
effective in preventing, or detecting and correcting, noncompliance related to the allowable activities and
costs for one vendor.
The School Corporation entered into a cost-reimbursement contract with a food service
management company (FSMC) to oversee the School Corporation's food service operations. The FSMC
purchased food and other supplies on behalf of the School Corporation. Additionally, some food service
personnel paid with program funds were employees of the FSMC, not the School Corporation. The FSMC
billed the School Corporation for food, supplies, and personnel on a regular basis. Invoices were provided
with the bills to support the amount requested. However, there was no documented oversight or review
process in place to ensure that the amounts billed were allowable activities and were in conformance with
the applicable cost principles for the child nutrition program.
The lack of internal controls was isolated to purchases from the one vendor.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(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). . . ."
Cause
A proper system of internal controls was not implemented by management of the School
Corporation, which would include segregation of key functions. Embedded within a properly designed and
implemented internal control system should be internal controls consisting of policies and procedures.
Policies reflect the School Corporation's management statements of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies.
INDIANA STATE BOARD OF ACCOUNTS
23
FAYETTE COUNTY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Effect
Without the proper design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.