Finding Text
FINDING 2022-002 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles, Special Tests & Provisions ? Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Assistance Listing Numbers: 10.533, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): SY 2020/2021, SY 2021/2022 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Allowable Cost/Cost Principles, Special Tests & Provisions ? Non-Profit School Food Service Accounts Audit Findings: Material Weakness, Other Matters 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 awards 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 200.430(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; FINDING 2022-002 (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 (for IHE, this per the IHE's definition of IBS); . . . (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. . . ." 34 CFR 76.730 states: "A State and a subgrantee shall keep records that fully show: (a) The amount of funds under the grant or subgrant; (b) How the State or subgrantee uses the funds; (c) The total cost of the project; (d) The share of that cost provided from other sources; and (e) Other records to facilitate an effective audit." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." 7 CFR 220.7(e) states in part: ?. . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) . . . . (ii) . . .use all revenues received by such food service only for the operation or improvement of that food service. . . ? 7 CFR 210.14(a) states: ?Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under ?210.19(a) of this part. . . . ? Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Allowable Costs/Cost Principles and Special Tests & Provisions ? Non-Profit School Food Service Accounts compliance requirements. Cause: Management had not developed a system of internal controls that would have ensured compliance with the Allowable Costs/Cost Principles and Special Tests & Provisions ? Non-Profit School Food Service Accounts compliance requirements. Context: The School Corporation did not have effective controls in place to ensure that only applicable employees were paid from program funds. Six of the 24 employees? time charged to the program, did not have adequate documentation to support their wage allocations. The School Corporation paid a portion of the wages for three Elementary School Teachers, two Elementary Instructional Assistants, and one Library Aide from the School Lunch Fund based on fixed percentages. There was no supporting documentation to indicate how the percentages were determined. Wages and benefits charged to the program for the above noted employees totaled $19,073. This amount was considered questions costs. Effect: The failure to establish an effective internal control system by the School Corporation enabled noncompliance with the grant agreement and the Allowable Costs/Cost Principles and Special Tests & Provisions - School Food Service Accounts compliance requirements. Noncompliance with the grant agreement and the Allowable Costs/Cost Principles and Special Tests & Provisions ? Non-Profit School Food Service Accounts compliance requirements could result in the loss of federal funds to the School Corporation. Questioned Costs: $19,073. Identification as a repeat finding, if applicable: No Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to the grant agreement and the Allowable Costs/Cost Principles and Special Tests & Provisions ? Non-Profit School Food Service Accounts compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.