Finding Text
FINDING 2023-002
Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY 2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Other Matters
Repeat Finding
This is a repeat finding from the prior audit report. The prior audit finding number was 2021-007.
Condition and Context
A cash reimbursement is provided to the School Corporation based on meals served under the
School Breakfast Program, National School Lunch Program, and Summer Food Service Program for
Children. The cash reimbursement is to be used for the benefit of the food service program.
INDIANA STATE BOARD OF ACCOUNTS
16
MADISON-GRANT UNITED SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The School Corporation did not have internal controls in place over payroll disbursements charged
to the food service program. Payroll disbursements were paid without evidence that the detailed report of
payroll disbursements was reviewed and approved by another person not involved in the original payroll
process.
Additionally, a sample of 29 payroll charges were selected for testing. For 3 of the payroll charges
selected, timesheets could not be provided for the employees paid within that charge. As such, we could
not substantiate the amount paid, $7,298, to these employees out of the grant funds. This amount was
considered questioned costs.
The lack of 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 200.430(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); . . .
INDIANA STATE BOARD OF ACCOUNTS
17
MADISON-GRANT UNITED SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management statements of what should be done to effect internal control, 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, payroll charges could not be substantiated.
Questioned Costs
Known questioned costs of $7,298 were identified as noted in the Condition and Context.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls, and develop policies and procedures to ensure costs are adequately documented.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.