Finding Text
FINDING 2022-002
Subject: Child Support Enforcement - Allowable Costs/Cost Principles
Federal Agency: Department of Health and Human Services
Federal Program: Child Support Enforcement
Assistance Listings Number: 93.563
Federal Award Number and Year (or Other Identifying Number): FY2022
Pass-Through Entity: Indiana Department of Child Services
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Noncompliance
Condition and Context
Indirect costs are expenses that are incurred by other County offices, which indirectly benefit the
County Title IV-D offices. Indirect expenses are allocated to the County Title IV-D offices through an indirect
Cost Allocation Plan (CAP) which is submitted to the Department of Child Services' Child Support Bureau.
Indirect costs charged are based on two-year prior expenditures; therefore, indirect costs charged in 2022
were based on expenditures from 2020.
A sample of 25 expenditures, totaling $27,077, from the department cost pools from the CAP were
selected for testing. For 1 of the 25 expenditures examined, the County was unable to provide the contract;
therefore, we were unable to verify if the correct rate for the contract payment was charged. For an
additional 2 contracts requested, the contract could not be provided at the initial time of request. The
contracts were provided nine months later at which time we verified the contract payment charged.
In addition, the County did not have written procedures for determining the allowability of costs in
accordance with Subpart E of 2 CFR 200.
The lack of effective 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). . . ."
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 200.302(b) states in part:
"The financial management system of each non-Federal entity must provide for the following:
. . .
(7) Written procedures for determining the allowability of costs in accordance with subpart
E of this part and the terms and conditions of the Federal award."
Cause
A proper system of internal controls over child support enforcement expenditures was not designed
by management of the County. Embedded within a properly designed and implemented internal control
system should be internal controls consisting of policies and procedures. Policies reflect the County'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 implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, expenses within the cost application plan could not be verified as accurate.
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 County.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the County establish a proper system of internal controls
and develop policies and procedures to ensure that costs included within the cost allocation plan have
adequate supporting documentation to support the amount paid.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Auditor's Response
Sufficient, appropriate audit evidence in regard to supplement not supplant was determined to not
have been obtained at the initial time of audit. As such, additional audit procedures were performed after
the report date of September 29, 2023. The missing contracts were a part of the original report which was
discussed and communicated to management on September 29, 2023. Contracts were not provided in
September, nor was there a disagreement with this portion of the finding in the original corrective action
plan provided by management. Documentation provided in June 2024 was unsolicited but was reviewed,
and the issue noted in the finding was updated accordingly. While we agree two of the three contracts
could be reviewed and verified once provided in June 2024, the third contract is still in question as noted in
the finding.