Finding Text
U.S. Department of Agriculture; Pass-Through Iowa Department of Education; Child Nutrition Cluster: 10.553 School Breakfast Program; 10.555 National School Lunch Program; 10.555 National School Lunch Program-Supply Chain Assistance; 10.555 Commodities (Noncash); 10.555 Commodities -DOD (Noncash); 10.559 COVID-19 Summer Food Service Program for Children; 10.582 Fresh Fruit and Vegetable Program; Federal Award Year 2023. Finding: The District overcharged the program for indirect costs.
Criteria: The federal criteria for indirect costs and allocations is established in 2 Code of Federal Regulations (CFR) Part 200, Appendix VII: “…Base means the accumulated direct costs (normally either total direct salaries and wages or total direct costs exclusive of any extraordinary or distorting expenditures) used to distribute indirect costs to individual Federal awards. The direct cost base selected should result in each Federal award bearing a fair share of the indirect costs in reasonable relation to the benefits received from the costs.” “…The distribution base may be (1) total direct costs (excluding capital expenditures and other distorting items, such as pass-through funds, subcontracts in excess of $25,000, participant support costs, etc.), (2) direct salaries and wages, or (3) another base which results in an equitable distribution.”
The Iowa Department of Education criteria was established in the Iowa Department of Education Local Education Agency Federal Indirect Cost Rate Proposal dated December 2019 and Guidance for State Agencies, Public School District School Food Authorities dated March 29, 2013. Guidance to Iowa School Food Authorities was updated in September 2022 to clarify the earlier memos and guidance the department had issued. The March 29, 2013 document states in the section How to Apply the Indirect Cost Rate, “..The federal grant amount to which the rate may be applied is the total expenditures in the federal grant excluding the same unallowed or excluded costs that were unallowed or excluded within the state plan.” The Iowa Department of Education provided the worksheet calculation to school districts which requires districts to compare total direct base cost expenditures and total federal revenues and to use the lesser of the two totals for the calculation.
Condition: The District charged the program for indirect costs using a calculation based on total revenue rather than the direct cost base expenditures which were less than total federal revenue for the fiscal year.
Cause: The calculation for the indirect costs charged to the program has historically been based on total federal revenues due to direct cost base expenditures exceeding federal revenues received in prior years. However, in the current year, federal revenues exceeded the direct cost base expenditures. The District charged the program using the same calculation as the prior year instead of adjusting the calculation for the lesser of the two base amounts.
Effect: The Child Nutrition Cluster program was overcharged for indirect costs.
Questioned Costs: Known questioned costs are $69,916.
Context: Indirect costs represent 0.72 percent of total program expenditures reported on the Schedule of Expenditures of Federal Awards and 2.8 percent of the Child Nutrition Cluster program.
Identification as a repeat finding: This is not a repeat finding.
Recommendation: We recommend the District revise the indirect cost calculation to include a comparison of federal revenues and direct cost base expenditures and use the lesser of the two totals for the annual adjustment. We recommend the District use the Iowa Department of Education template.
Response and Corrective Action Plan: The District will update the annual calculation to include a comparison of the base used for the indirect cost adjustment. Upon identification of the overcharge, the District posted a correcting entry to reduce the indirect costs of the program.