Finding Text
FINDING 2023-003
Subject: Child Nutrition Cluster - Internal Controls
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): FY 21-22, FY 22-23,
7182022IN890342,
7182023IN890342
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 did not have effective internal controls in place to ensure costs charged to
the food service program were allowable and in conformance with the cost principles.
The School Corporation designed and implemented a process to ensure that costs charged for
vendor claims to the food service program were allowable and in conformance with the cost principles. The
process was for vendor claims to be reviewed and approved by the department head or Food Service
Director and the Treasurer. However, during our test of 40 vendor claims, there were 5 claims that were
not approved by the department head or the Food Service Director and 1 claim not approved by the
department head or Food Service Director and the Treasurer.
The lack of internal controls was a systemic issue that occurred 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). . . ."
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.
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 regarding vendor claims.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.