Finding Text
FINDING 2023-002
Subject: Child Nutrition Cluster (CNC) – Internal Controls
Federal Agency: Department of Agriculture
Federal Program: School Breakfast Program, National School Lunch Program
Assistance Listing Number: 10.553, 10.555
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs
Audit Findings: Material Weakness
Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards
carried out through grants, cost reimbursement contracts, and other agreements with state and local
governments. To be allowable, under federal awards, cost must meet certain criteria:
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.
c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other
activities of the non-Federal entity.
d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any
other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as
an indirect cost.
e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state
and local governments and Indian tribes only, as otherwise provided for in this part.
f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally
financed program in either the current or a prior period.
g) Be adequately documented.
h) Cost must be incurred during the approved budget period.
Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must 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
terms and conditions of the Federal award.
Condition: The School Corporation did not have adequate internal controls in place to ensure that the
School Corporation complied with the allowable cost requirements.
Cause: A proper system of internal control was not designed by management of the School Corporation
that included a thorough review of expenditures charged to the grant.
Effect: Without the proper implementation of an effectively designed system of internal controls, the control
system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance.
Questioned Costs: There were no questioned costs identified.
Context: During testing of vendor disbursements for the CNC program, we identified 9 disbursements in
a sample of 60, for which there was no evidence of a formal documented review of the disbursement taking
place prior to the disbursement.
Additionally, during testing of CNC payroll disbursements, we selected 8 pay periods for controls testing
and noted that none of the 8 pay periods had proof of a formal review of the payroll distribution prior to
remittance.
Identification as a repeat finding: Not a repeat finding.
Recommendation: We recommend that management of the School Corporation establish a proper system
of internal control to ensure that charges to the grant are formally reviewed for accuracy and allowability.
Views of Responsible Officials and Planned Corrective Actions: For the views of the responsible
officials, refer to the Corrective Action Plan that is part of this report.