Finding 383540 (2023-004)

Material Weakness
Requirement
B
Questioned Costs
-
Year
2023
Accepted
2024-03-22

AI Summary

  • Core Issue: The School Corporation lacks a proper system of internal controls, leading to potential noncompliance with federal cost principles.
  • Impacted Requirements: Compliance with 2 CFR 200.303 and 7 CFR regulations regarding allowable costs and internal controls is not being met.
  • Recommended Follow-Up: Implement a robust internal control system with clear policies and procedures to ensure payroll compliance and prevent future issues.

Finding Text

FINDING 2023-004 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 Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): 2021-2022, 2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context A cash reimbursement is provided to the School Corporation based on meals served under the School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children. The cash reimbursement is to be used for the benefit of the food service program. The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. There was no documented internal control in place over payroll claims to ensure that payroll charged to the grant was reviewed and approved by an individual knowledgeable about the cost principles. In addition, pay rates could not be tied directly to the salary ordinance for 4 of the 40 payroll payments tested. Timecards were provided which substantiated the hours worked; however, the hourly rate at which the employees were paid could not be tied to the salary ordinance or other internal records provided. The hourly rates paid to these four employees did not differ significantly from the rates documented in the salary ordinances. 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: (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). . . ." INDIANA STATE BOARD OF ACCOUNTS 22 COMMUNITY SCHOOLS OF FRANKFORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: . . . (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 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. . . ." 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 . . . (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. . . ." INDIANA STATE BOARD OF ACCOUNTS 23 COMMUNITY SCHOOLS OF FRANKFORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed 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. 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. As a result, payroll disbursements identified above could not be tied to an approved salary. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. 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 ensure that employees charged to the grant are paid the approved rate of pay. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Categories

Allowable Costs / Cost Principles School Nutrition Programs

Other Findings in this Audit

  • 383527 2023-002
    Material Weakness
  • 383528 2023-002
    Material Weakness
  • 383529 2023-002
    Material Weakness
  • 383530 2023-002
    Material Weakness
  • 383531 2023-002
    Material Weakness
  • 383532 2023-002
    Material Weakness
  • 383533 2023-003
    Material Weakness Repeat
  • 383534 2023-003
    Material Weakness Repeat
  • 383535 2023-003
    Material Weakness Repeat
  • 383536 2023-003
    Material Weakness Repeat
  • 383537 2023-003
    Material Weakness Repeat
  • 383538 2023-003
    Material Weakness Repeat
  • 383539 2023-004
    Material Weakness
  • 383541 2023-004
    Material Weakness
  • 383542 2023-004
    Material Weakness
  • 383543 2023-004
    Material Weakness
  • 383544 2023-004
    Material Weakness
  • 383545 2023-005
    Material Weakness
  • 383546 2023-005
    Material Weakness
  • 383547 2023-005
    Material Weakness
  • 383548 2023-005
    Material Weakness
  • 383549 2023-005
    Material Weakness
  • 383550 2023-005
    Material Weakness
  • 383551 2023-006
    Material Weakness
  • 383552 2023-006
    Material Weakness
  • 383553 2023-006
    Material Weakness
  • 383554 2023-006
    Material Weakness
  • 383555 2023-006
    Material Weakness
  • 383556 2023-006
    Material Weakness
  • 959969 2023-002
    Material Weakness
  • 959970 2023-002
    Material Weakness
  • 959971 2023-002
    Material Weakness
  • 959972 2023-002
    Material Weakness
  • 959973 2023-002
    Material Weakness
  • 959974 2023-002
    Material Weakness
  • 959975 2023-003
    Material Weakness Repeat
  • 959976 2023-003
    Material Weakness Repeat
  • 959977 2023-003
    Material Weakness Repeat
  • 959978 2023-003
    Material Weakness Repeat
  • 959979 2023-003
    Material Weakness Repeat
  • 959980 2023-003
    Material Weakness Repeat
  • 959981 2023-004
    Material Weakness
  • 959982 2023-004
    Material Weakness
  • 959983 2023-004
    Material Weakness
  • 959984 2023-004
    Material Weakness
  • 959985 2023-004
    Material Weakness
  • 959986 2023-004
    Material Weakness
  • 959987 2023-005
    Material Weakness
  • 959988 2023-005
    Material Weakness
  • 959989 2023-005
    Material Weakness
  • 959990 2023-005
    Material Weakness
  • 959991 2023-005
    Material Weakness
  • 959992 2023-005
    Material Weakness
  • 959993 2023-006
    Material Weakness
  • 959994 2023-006
    Material Weakness
  • 959995 2023-006
    Material Weakness
  • 959996 2023-006
    Material Weakness
  • 959997 2023-006
    Material Weakness
  • 959998 2023-006
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
10.555 National School Lunch Program 2022 $2.19M
10.555 National School Lunch Program 2023 $2.07M
84.425 Education Stabilization Fund 2023 $1.75M
84.425 Education Stabilization Fund 2022 $1.40M
84.010 Title I Grants to Local Educational Agencies 2023 $769,665
84.027 Special Education_grants to States 2022 $667,028
84.010 Title I Grants to Local Educational Agencies 2022 $643,422
10.553 School Breakfast Program 2023 $528,679
10.553 School Breakfast Program 2022 $520,601
84.048 Career and Technical Education -- Basic Grants to States 2023 $226,461
93.575 Child Care and Development Block Grant 2023 $181,784
93.778 Medical Assistance Program 2022 $161,879
84.048 Career and Technical Education -- Basic Grants to States 2022 $135,903
84.367 Improving Teacher Quality State Grants 2023 $129,080
84.367 Improving Teacher Quality State Grants 2022 $118,173
93.778 Medical Assistance Program 2023 $114,302
84.365 English Language Acquisition State Grants 2023 $82,785
84.027 Special Education_grants to States 2023 $74,774
84.358 Rural Education 2022 $70,740
84.424 Student Support and Academic Enrichment Program 2023 $68,059
84.424 Student Support and Academic Enrichment Program 2022 $67,603
84.365 English Language Acquisition State Grants 2022 $51,627
10.559 Summer Food Service Program for Children 2023 $36,851
10.559 Summer Food Service Program for Children 2022 $31,121
84.173 Special Education_preschool Grants 2023 $29,951
84.173 Special Education_preschool Grants 2022 $28,346