Criteria: Management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP and that assets, including inventory, are safeguarded from loss or misuse. Additionally, organizations receiving USDA foods must maintain accurate records of receipts, distributions, and adjustments to account for the disposition of all commodities. Condition and Context: We identified that manual positive and negative inventory adjustments were recorded in the general ledger and CERES inventory system for donated inventory as well as Tennessee and Mississippi USDA programs during the fiscal year. The Food Bank has no formal approval process for these manual adjustments. Cause: The weakness results from the absence of designed and implemented controls to ensure that manual adjustments are reviewed, supported, and approved. Effect: The lack of preventive and detective controls increases the risk that inventory balances may be misstated during the year and that errors or irregularities could go undetected until year-end. While the Food Bank performs an annual physical inventory that trues up balances, this end-of-year process does not mitigate the risk of material misstatement throughout the reporting period. The unrestricted ability to post manual entries without documentation presents an ongoing risk of inaccurate financial reporting. Questioned Costs: None noted. Repeat Finding: No Recommendation: We recommend that management implement formal controls over manual inventory adjustments and reconciliations, including: • Requiring supervisory review and approval for all manual inventory adjustments; • Performing monthly reconciliations of inventory activity to supporting documentation and shipment records; • Ensuring all distributions are processed through the normal invoicing workflow rather than through post-period adjustments; and • Retaining documentation that clearly explains the nature and reason for each adjustment. View of Responsible Official: See Management’s Corrective Action Plan.
2025-002: Significant Deficiency – Special Tests and Provisions – Relating to the Food Distribution Cluster – (10.568/10.569). Criteria: Records of receipt, distribution, and use of USDA-donated foods must be maintained to substantiate proper distribution. Adequate documentation must include signed receipts or equivalent evidence acknowledging delivery and acceptance of USDA commodities by recipient agencies. These records form part of the Organization’s internal controls to ensure the accuracy and completeness of program reporting and accountability for USDA foods. Condition and Context: During testing of 40 Mississippi USDA food distribution transactions, we noted that two invoices lacked agency signatures acknowledging receipt of food. The unsigned invoices did include quantity and delivery information, but the absence of signatures prevents confirmation that the recipient agency received the commodities. Cause: The missing signatures appear to have resulted from oversight during the delivery process, where staff did not obtain signed acknowledgment at the time of transfer. Effect: Without signed agency receipts, this could result in unsubstantiated distributions, inventory discrepancies, or potential noncompliance with recordkeeping requirements. Questioned Costs: None noted. Repeat Finding: No Recommendation: We recommend that management reinforce procedures requiring agency signatures on all USDA food distribution receipts at the time of delivery. Since distributions are recorded when the truck is loaded, we suggest implementing a follow-up control—such as a delivery checklist or log—to confirm that all receipts are signed and returned after delivery. Consider periodic supervisory review to verify that all signed receipts are obtained and retained. View of Responsible Official: See Management’s Corrective Action Plan.
2025-003: Significant Deficiency – Reporting – Relating to the Food Distribution Cluster – (10.568/10.569). Criteria: Per the Organization’s grant agreements with the Tennessee Department of Agriculture (TDA) and the Mississippi Department of Human Services (MDHS), recipients of USDA-donated foods must maintain complete and accurate records of all commodity receipts, distributions, shortages, and balances, and must submit required financial and performance reports. Monthly inventory, the Emergency Food Assistance Program (TEFAP) distribution, and cost reports submitted to the States must accurately reflect activity recorded in the Organization’s internal inventory management system, reconcile to State-confirmed receipts, and include timely receipt confirmations as required by State program rules. Condition and Context: During compliance testing of reporting requirements under the Food Distribution Cluster for both Tennessee and Mississippi, we identified multiple instances where USDA reporting was not fully accurate, reconciled, or timely: • Inventory and receipt reconciliation: Comparison of monthly USDA inventory reports submitted to TDA to State confirmations of USDA foods allocated and received identified insignificant variances in three months (August 2024, January 2025 and April 2025) between reported quantities or items and State-confirmed data. • Distribution reporting to States: Testing of USDA food distributions reported under TEFAP noted discrepancies between amounts reported to the States and the underlying CERES records: o In Tennessee, 15 of 40 distribution transactions tested showed insignificant differences in quantities or item descriptions between submitted reports and CERES. o In Mississippi, 3 of 40 distribution transactions tested showed insignificant differences in quantities or item descriptions between submitted reports and CERES. • Unrecorded shortages: For Mississippi TEFAP distributions, we noted two instances where signed agency invoices documented shortages of USDA foods received; however, no corresponding credit memo or inventory adjustment was recorded in CERES. • Timeliness of receipt confirmations: testing of USDA commodity receipts identified two instances out of 40, where required 48-hour receipt confirmation emails were either submitted late or not submitted to Tennessee and Mississippi. Cause: The deficiencies appear to result from the absence of a comprehensive, formalized reconciliation and supervisory review process to ensure that USDA receipts, distributions, shortages, and confirmations are accurately recorded in CERES, reconciled to State documentation, and submitted timely in accordance with program requirements. Effect: Without consistent reconciliation and review procedures, there is an increased risk that USDA reports submitted to TDA and MDHS may be inaccurate, incomplete, or untimely. This reduces the States’ ability to effectively monitor USDA commodity activity. Questioned Costs: None noted. Repeat Finding: Partial repeat finding. The instances of untimely 48-hour confirmations were part of the original finding 2018-005 and the prior year finding was 2024-001. Recommendation: We recommend that management implement a comprehensive monthly reconciliation and review process over USDA reporting, including: • Review of confirmed USDA receipts to internal inventory records. • Reconciling all TEFAP distribution reports submitted to the States to CERES data prior to submission. • Ensuring shortages noted on signed agency invoices are promptly documented through credit memos or inventory adjustments in CERES. • Establishing a tracking mechanism to ensure all required 48-hour receipt confirmations are submitted timely and retained. • Assignment of clear responsibility for report submission, with documented supervisory review. Supervisory review should be documented to confirm reconciliations are completed, differences are investigated and resolved, and reporting complies with Federal and State requirements. View of Responsible Official: See Management’s Corrective Action Plan.
2025-004: Significant Deficiency – Special Tests and Provisions and Reporting – Relating to the Food Distribution Cluster – (10.568/10.569). Criteria: Per the Organization’s agreement with the TDA, the Food Bank must maintain accurate and complete records of all USDA-donated food receipts, including bills of lading, receiving reports, and acknowledgment by staff verifying quantities received. Supporting documentation should reconcile to CERES and the monthly TEFAP report submitted to TDA. Condition and Context: We tested 40 USDA food receipts under the Tennessee TEFAP program to verify that amounts and dates recorded on the Food Bank’s receiving worksheets agreed to both the bills of lading and the monthly TEFAP reports. • In one instance, no receiving worksheet or equivalent documentation could be located to support the recorded receipt. • In another instance, the receiving worksheet was available but the quantity listed did not agree to the amount recorded in CERES, which feeds into the monthly TEFAP report. Cause: These discrepancies appear to result from a lack of follow-up and reconciliation procedures when variances occur between receiving documentation and system entries. In the noted cases, differences or missing documentation were not identified or resolved through supervisory review prior to submission of the monthly TEFAP report. Effect: Incomplete or inaccurate receiving records reduce assurance that all USDA commodities received are properly supported and accurately reported to TDA. This weakens controls over recordkeeping. Questioned Costs: None noted. Repeat Finding: No. Recommendation: We recommend that management reinforce the requirement for maintaining a completed receiving worksheet for all TDA USDA commodity receipts, signed or initialed by the receiving employee. Additionally, all receiving documentation should be reconciled to CERES entries prior to submission of monthly TEFAP reports. A periodic supervisory review should verify that all receipts are supported and accurately recorded. View of Responsible Official: See Management’s Corrective Action Plan.