Audit 393142

2025-001 Unpaid Meal Balances (Material Weakness) Federal Agency: U.S. Department of Agriculture Pass-through Agency: New Hampshire Department of Education Cluster/Program: Child Nutrition Cluster Assistance Listing Numbers: 10.553, 10.555, 10.582 Passed-through Identification: N/A Compliance Requirement: Allowable Activities or Unallowed Activities Type of Finding: Internal Control over Compliance – Material Weakness Criteria or Specific Requirement: Federal regulations at 7 CFR 210.14(a) require School Food Authorities to maintain a nonprofit school food service, with revenues used solely for the operation and improvement of the food service program. Additionally, USDA Policy Memoranda SP 46-2016 and SP 23-2017 require School Food Authorities to implement and effectively enforce meal charge and overdue account policies to promote financial sustainability and program integrity. Condition: The School District has adopted meal charge and overdue account policies that align with USDA guidance. However, as of year-end, the Food Service Fund reported approximately $154,000 in unpaid student meal balances, representing a 23% increase over the prior year. In addition, the General Fund subsidized the Food Service Program by approximately 22% during the fiscal year. Cause: Although policies are in place, monitoring and enforcement controls over delinquent meal balances were not sufficiently robust to prevent the continued growth of unpaid accounts or to reduce the program’s reliance on General Fund subsidies. Effect: As a result, the School District is exposed to increased financial risk and reduced program sustainability, which may impair its ability to operate the food service program in compliance with nonprofit school food service requirements and may divert General Fund resources from other educational priorities. Questioned Costs: None identified. The finding relates to a deficiency in internal control over compliance; no instances of unallowable expenditures were identified during our testing. Identification as Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the School District strengthen monitoring and enforcement of existing meal charge and overdue account policies, implement formal periodic financial reviews, and develop a corrective action plan to reduce unpaid balances and minimize General Fund subsidization. Views of Responsible Officials: Management’s views and corrective action plan are included at the end of this report.