FINDING 2025-002 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): SY23-24, SY24-25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-002. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that was effective in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals. Any child enrolled in a participating school who meets the applicable program's definition of "child," may receive meals under the applicable program. For the School Breakfast Program and the National School Lunch Program, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children who have been determined ineligible for free or reduced-price school meals pay the full price set by the School Food Authority for their meals. As a general rule, a child's eligibility for free or reduced-price meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the child's household to published income eligibility guidelines. INDIANA STATE BOARD OF ACCOUNTS 17 EASTERN PULASKI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, a child may be directly certified. For a direct certification, annual eligibility determinations are based on the child's household receiving benefits under the Supplemental Nutrition Assistance Program (SNAP), the Food Distribution Program on Indian Reservations (FDPIR), the Head Start Program (ALN 93.600), or, under most circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its participation in one of these programs, or the school, institution, or sponsor may obtain the information directly from the state or local agency that administers these programs. Certain foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and breakfasts. Direct certified households do not need to complete an application. The School Corporation's child nutrition program software company, Skyward, automatically imported the eligibility parameters into the system and the Food Service Director (FSD) reviewed to ensure accuracy. Parents submitted applications online as part of the registration packet with eligibility determined by the software; the FSD would then approve the application. The FSD generated and reviewed the direct certification reports without an oversight or review process in place. Based on a test of 60 students who received free or reduced-price meals, 9 were determined to not be eligible for free or reduced meals as follows: There were 2 students identified as eligible for free meals due to income applications that did not submit applications for that school year and were not included on the direct certifications provided by the School Corporation. There were 3 students identified as eligible for reduced meals due to income applications that did not submit applications for that school year and were not included on the direct certifications provided by the School Corporation. There were 3 students identified as eligible for free meals due to being directly certified that were not included on any of the direct certification reports provided by the School Corporation. There was 1 student identified as eligible for reduced meals due to being directly certified that was not included on any of the direct certification reports provided by the School Corporation. All 9 of the students identified above should have had a paid status in the nutrition program software. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 18 EASTERN PULASKI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 7 CFR 245.6 states in part: ". . . (b) Direct certification. In lieu of requiring a household to complete the free and reduced price meal or free milk application, as specified in paragraph (a) of this section, the local educational agency must certify children as eligible for free meals or free milk in accordance with paragraph (b)(1)(i) of this section or may certify children as eligible for free meals or free milk in accordance with paragraph (b)(2) of this section. If a household also submits an application for directly certified children, the direct certification eligibility determination will take precedence. . . . (5) Direct certification documentation. (i) The required documentation for direct certification is provided in paragraph (2) of the definition of Documentation in § 245.2. (ii) (A) Beginning in School Year 2012-2013, direct certification with SNAP shall be conducted using a data matching technique only. Letters to households for direct certification may be used only as an additional means to notify households of children's eligibility based on receipt of SNAP benefits. The last period that letters to households may be used as the primary method for direct certification is School Year 2011-2012. While such notices cannot be the primary method used by a state to document receipt of SNAP, the local educational agency shall accept such a letter if presented by a household. . . . (iii) Individual notices from officials of eligible programs for a Foster child, a Homeless child, a Migrant child, a Runaway child, or a Head Start child, as defined in § 245.2, may continue to be used. These notices are provided to school officials who must certify these children as eligible for free meals or free milk, as applicable, without further application, upon receipt of such notice. . . ." (c) Determination of eligibility— (1) Duration of eligibility. Except as otherwise specified in paragraph (c)(3) of this section, eligibility for free or reduced price meals, as determined through an approved application or by direct certification, must remain in effect for the entire school year and for up to 30 operating days into the subsequent school year. The local educational agency must determine household eligibility for free or reduced price meals either through direct certification or the application process at or about the beginning of the school year. The local educational agency must determine eligibility for free or reduced price meals when a household submits an application or, if feasible, through direct certification, at any time during the school year. . . . (4) Calculating income. The local educational agency must use the income information provided by the household on the application to calculate the household's total current income. . . ." Cause The School Corporation did not have effective internal controls in place to ensure the students' eligibility status went to paid when a current application was not received or the student was not included on the direct certification list for that year. INDIANA STATE BOARD OF ACCOUNTS 19 EASTERN PULASKI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation cannot ensure students receiving free or reduced-price meals are eligible for the benefits received. Providing ineligible students with reduced or free meals would cause the School Corporation to receive too much federal funding from the program as funding received is based on meals served to eligible students. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure student eligibility for free or reduced-price lunches is accurately determined. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-003 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. Condition and Context The School Corporation had not properly implemented an effective system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. A property record or capital asset listing, which would include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property, is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. INDIANA STATE BOARD OF ACCOUNTS 20 EASTERN PULASKI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) During the audit period, the School Corporation purchased six pieces of equipment with COVID-19 - Education Stabilization Funds that exceeded the capitalization threshold. Of the six assets, one was not added to the detailed listing of capital assets. Additionally, of the five that were added to the capital asset listing, the records did not include all the required information such as a serial or identification number, the source of funding for the property (including the federal award identification number), who holds title, acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, location of the property, and the use and condition of the property. In addition, assets were not properly safeguarded and maintained. 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 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." Cause The School Corporation did not have adequate internal controls to ensure compliance with the Equipment and Real Property Management compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 21 EASTERN PULASKI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation cannot ensure that capital asset purchases are properly accounted for in the capital asset listing. Not properly accounting for equipment that meets the capital asset threshold does not provide an accurate depiction of the total capital assets maintained by the School Corporation and does not denote whether federal funds were used to acquire the asset. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information and new assets are added individually. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.