Finding Text
FINDING 2022-004 Subject: Child Nutrition Cluster ? Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program, After School Snack Program, Summer Food Service Program for Children Assistance Listing Number: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021, FY2022 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness 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 200.430(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 (for IHE, this per the IHE?s definition of IBS); . . . . (iv) 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 a non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which allocated using different allocation bases; or an unallowable activity and a direct or indirect costs activity. . . .? Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with the requirements related to the grant agreement and the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements. Cause: The School Corporation's management had not designed or implemented internal controls which would have ensured compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system could enable material noncompliance to go undetected. Noncompliance with the grant agreement and the compliance requirements listed above could have resulted in the loss of funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: The School Corporation had not designed or implemented adequate internal controls to ensure that payroll disbursements were only for food service-related services. Payroll disbursements comprise approximately 45% of the program costs charged to the Child Nutrition Cluster. One employee was responsible for processing payroll. Payroll reports were submitted to the School Board and Treasurer for review and approval; however, the reports only provided a total gross amount paid from each fund. The reports did not list the employees who were paid from the fund. In March 2021, the Treasurer implemented a review of the payroll distribution report, which is broken out by fund and individual employee. The lack of controls related to payroll disbursements was isolated to the 2020-21 year. Additionally, payroll disbursements for custodial employees were allocated to the Child Nutrition Cluster based on a percentage of the custodial employees? salaries. However, there were no time and effort logs or other documentation maintained to support the percentage of the custodial salaries allocated to the Child Nutrition Cluster. The custodial salaries make up approximately 3% of the total payroll disbursements charged to the Child Nutrition Cluster. This was an issue throughout the audit period. Identification as a repeat finding, if applicable: Yes, see Finding 2020-004 Recommendation: We recommended that management continue to document controls surrounding payroll disbursement through review of the payroll distribution report each pay period. Additionally, we recommended that the School maintain written documentation supporting the portion of salaries paid from the School Lunch fund for custodial personnel. Views of Responsible Officials: Management agrees with the finding and has prepared a corrective action plan.