Finding 520621 (2024-001)

Findings and Questioned Costs Related to Federal Awards Finding Number: 2024‐001 Repeat Finding: No Program Name/Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.559 Federal Agency: U.S. Department of Education Federal Award Number: 7AZ300AZ3 Pass‐Through Agency: Arizona Department of Education Questioned Costs: $285,408 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Allowable Costs/Cost Principles Criteria According to the Memo SP60‐2016, Indirect Costs Guidance for State Agencies and School Food Authorities, issued by the United States Department of Agriculture (USDA), a District may recover indirect costs of services rendered to school food service at a rate not to exceed the unrestricted indirect cost rate approved by the Arizona Department of Education (ADE). The approved indirect cost rate is subject to change each fiscal year. Condition The District charged the Child Nutrition Cluster program, reported in the Food Service Fund, $391,714 in indirect costs for the fiscal year, whereas the maximum allowable indirect costs was calculated at $106,306. Cause The District was unaware that they could only take $25,000 of expenditures from their food service management costs. Effect The District overcharged indirect costs of $285,408 to the Child Nutrition Cluster program as reported in the Food Service Fund. Context When calculating indirect costs, the District did not exclude specific costs prohibited in the indirect cost calculation. As a result, the 25 percent indirect cost rate was applied to a net food service expenditure amount that was greater than it should have been. Therefore, the District overcharged $285,408 to the Child Nutrition Cluster program as reported in the Food Service Fund. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The District should ensure indirect costs are calculated in accordance with the formula set forth in the guidance issued by USDA and ADE. Views of Responsible Officials See Corrective Action Plan.