Condition – The Salem Pantry failed to maintain adequate and verifiable inventory and distribution records for commodities received and distributed under TEFAP during the year ended December 31, 2024. USDA food commodities balance, including both inventory on hand and distributed quantities, could not be substantiated with reliable documentation.
Criteria – The proper maintenance of inventory and distribution records for USDA commodities is explicitly required by federal regulations and program guidelines and U.S. GAAP requires adequate internal controls over assets, including inventory, to ensure accuracy, completeness, and proper financial reporting. Without such records, the existence, completeness, and valuation assertions for inventory cannot be reliably audited.
Effect – This lack of appropriate record-keeping resulted in 1) a scope limitation on the audit: due to the inability to obtain sufficient appropriate audit evidence regarding the existence, completeness, and valuation of USDA commodity inventory and the accuracy of distributed quantities, we were unable to perform audit procedures necessary to form an opinion on the fairness of the financial statements as a whole. 2) non-compliance with federal regulations: The Salem Pantry is in material non-compliance with the specific requirements of 7 CFR Part 250 and USDA TEFAP program guidelines, placing current and future federal funding at severe risk. 3) inability to demonstrate accountability: The Salem Pantry cannot demonstrate proper stewardship and accountability for federal property, potentially leading to disallowances and recoupment of commodity values by USDA, and 4) unreliable financial information: The financial statements, particularly those related to inventory and cost of food and donated distributed, cannot be relied upon.
Cause – The Salem Pantry lacks formal documented internal controls over the inventory management and distribution processes for USDA and non-USDA commodities.
Recommendation – We recommend that The Salem Pantry take immediate and comprehensive corrective action, including:
1. Develop and implement a detailed corrective action plan to establish internal controls and record-keeping procedures for all aspects of TEFAP commodity management, along with staff training proper inventory management, record-keeping, and compliance with USDA regulations.
2. Create and disseminate comprehensive written policies and procedures for commodity receipt, storage, inventory tracking (e.g., perpetual inventory system), physical counts, reconciliation, and distribution, including all relevant written procedures required by the Uniform Guidance to provide reasonable assurance that federal award programs are managed in compliance with the applicable regulations.
3. Proactively engage with the USDA and funding agencies to ensure that all corrective actions meet their specific compliance requirements.
Views of Responsible Officials and Planned Corrective Actions – The Salem Pantry agrees with the finding and will implement the recommendation.
Condition – The Salem Pantry failed to maintain adequate and verifiable inventory and distribution records for commodities received and distributed under TEFAP during the year ended December 31, 2024. USDA food commodities balance, including both inventory on hand and distributed quantities, could not be substantiated with reliable documentation.
Criteria – The proper maintenance of inventory and distribution records for USDA commodities is explicitly required by federal regulations and program guidelines and U.S. GAAP requires adequate internal controls over assets, including inventory, to ensure accuracy, completeness, and proper financial reporting. Without such records, the existence, completeness, and valuation assertions for inventory cannot be reliably audited.
Effect – This lack of appropriate record-keeping resulted in 1) a scope limitation on the audit: due to the inability to obtain sufficient appropriate audit evidence regarding the existence, completeness, and valuation of USDA commodity inventory and the accuracy of distributed quantities, we were unable to perform audit procedures necessary to form an opinion on the fairness of the financial statements as a whole. 2) non-compliance with federal regulations: The Salem Pantry is in material non-compliance with the specific requirements of 7 CFR Part 250 and USDA TEFAP program guidelines, placing current and future federal funding at severe risk. 3) inability to demonstrate accountability: The Salem Pantry cannot demonstrate proper stewardship and accountability for federal property, potentially leading to disallowances and recoupment of commodity values by USDA, and 4) unreliable financial information: The financial statements, particularly those related to inventory and cost of food and donated distributed, cannot be relied upon.
Cause – The Salem Pantry lacks formal documented internal controls over the inventory management and distribution processes for USDA and non-USDA commodities.
Recommendation – We recommend that The Salem Pantry take immediate and comprehensive corrective action, including:
1. Develop and implement a detailed corrective action plan to establish internal controls and record-keeping procedures for all aspects of TEFAP commodity management, along with staff training proper inventory management, record-keeping, and compliance with USDA regulations.
2. Create and disseminate comprehensive written policies and procedures for commodity receipt, storage, inventory tracking (e.g., perpetual inventory system), physical counts, reconciliation, and distribution, including all relevant written procedures required by the Uniform Guidance to provide reasonable assurance that federal award programs are managed in compliance with the applicable regulations.
3. Proactively engage with the USDA and funding agencies to ensure that all corrective actions meet their specific compliance requirements.
Views of Responsible Officials and Planned Corrective Actions – The Salem Pantry agrees with the finding and will implement the recommendation.