Audit 398633

Finding Type: Significant Deficiency (control); Noncompliance (program) Criteria: Under 2 CFR § 200.302(b)(3), non-federal entities must maintain records that adequately identify the source and application of federal funds. Additionally, program costs must be based on actual, allowable expenditures and must be supported by proper documentation. For the Child Nutrition Cluster, districts are required to maintain accurate records of food service expenditures and reconcile these records to vendor invoices and food service provider statements to ensure correct reporting for reimbursement claims. Monthly claims should be supported by reconciled meal counts and free/reduced eligibility rosters. Condition: For three of ten months tested (September, November, and March), the District’s submitted claims to the pass-through agency did not reflect all eligible reimbursable meals served. Specifically, the District relied on their food service vendor meal counts that were not fully reconciled to daily edit checks and eligibility rosters before claim submission. As a result, allowable food service costs reported on monthly reimbursement claims were understated. Audit procedures identified underclaimed expenditures of approximately $17,087, which resulted in the District receiving less federal reimbursement than it was entitled to under the Child Nutrition Cluster. Cause: The District did not have adequate procedures to verify the completeness and accuracy of food service expenditures submitted for reimbursement. The reconciliation process relied solely on reporting from the food service provider and did not include review and comparison of food service vendor summaries with daily edit checks and eligibility files. Effect: The District did not request all federal reimbursement to which it was entitled, resulting in a loss of program revenue and reduced resources available to support child nutrition operations. Although no overpayments were identified, the absence of an effective reconciliation and review control increases the risk of future inaccurate claims (over- or under-claims) and noncompliance with federal reporting requirements. Recommendation: We recommend the District design and implement a formal month-end reconciliation and claim certification process that includes: (1) Matching food service vendor meal counts to daily edit checks and eligibility rosters prior to claim submission. (2) Dual Review and Approval: Require an independent reviewer to verify the reconciliation and sign/date a claim certification checklist before submission. (3) Timely Corrections: Submit adjusted/corrected claims to the pass-through agency within allowable timeframes to recover underpaid amounts. (4) Training and Cross-Training: Provide annual training for Food Service and Business Office staff on claim preparation, reconciliation steps, and record retention. (5) Monitoring: Implement a quarterly supervisory review of a sample of claim packets to ensure procedures are operating effectively. Views of Responsible Officials and Planned Corrective Action: The District agrees with the finding and the recommendations of the auditors. Management notes that the transition to a new Food Service Vendor contributed to missed reconciliation steps. The District will implement the corrective actions listed within the Corrective Action Plan (CAP).