Audit 402413

U.S. Department of Agriculture Pass-through Entity: South Carolina Department of Agriculture Program Name: Food Distribution Cluster Federal Assistance Listing Number: 10.568-CL Significant Deficiency and Non-Material Noncompliance – Special Tests Finding 2024-002 Criteria: Accurate and complete records must be maintained with respect to the receipt, distribution/use, and inventory of USDA foods; including end products processed from USDA foods in TEFAP. The Organization must perform an annual physical inventory of all storage facilities. Such inventory must be reconciled annually with the Organization’s inventory records and maintained on file by the Organization. Condition: While the Organization maintains clean and organized warehouses and performs annual physical inventory counts, these counts are not properly reconciled to the inventory records within the financial system and accurate and complete reporting cannot be obtained with respect to the receipt, distribution/use, and inventory of USDA foods. Cause: The Organization experienced significant turnover in the finance department during the year, and therefore, the Organization was unable to implement adequate internal controls over the inventory process. Additionally, the system implementation was not successful, and there were several script errors and inventory reporting was inconsistent and inaccurate. Effect: Inventory balances were materially misstated prior to the audit adjusting entries. Questioned Costs: USDA food distributed was understated by $22,901 after all adjusting entries were made. Context: The annual inventory counts were not reconciled to the inventory records. Several adjustments were posted to the inventory accounts to correct incorrect quantities and prices. Identification as a Repeat Finding: 2023-003 Auditor’s recommendation: Inventory counts should be properly reconciled to the inventory records, and inventory records should be maintained separately for USDA foods to properly report the required information in the consolidated financial statements and the SEFA. Views of Responsible Officials: See Corrective Action Plan.

U.S. Department of Agriculture Pass-through Entity: South Carolina Department of Agriculture Program Name: Food Distribution Cluster Federal Assistance Listing Number: 10.568-CL Material Weakness and Non-Material Noncompliance – Eligibility Finding 2024-003 Criteria: A recipient agency must be either a public agency or a private entity possessing tax-exempt status under the Internal Revenue Code and must enter into a written agreement with the state agency, or with another recipient agency where permitted, binding it to perform the duties of a recipient agency. These written agreements are referred to as “Partner Agency agreements”. Additionally, before any food is distributed to a partner agency, the Organization should review the agency’s eligibility by signing the “Food Distribution agreement”. Condition: The Organization did not have signed Partner Agency or Food Distribution agreements with partner agencies during the year ended June 30, 2024 for all partner agencies subjected to testing procedures. Cause: The Organization experienced significant turnover in the finance department during the year, and therefore, the Organization was unable to implement adequate internal controls over the partner agency, and food distribution agreement tracking and retention process. Additionally, there was a flood that occurred during the year ended June 30, 2023, whereby documentation was lost and had not been backed up, and new back up controls were not put in place during the year ended June 30, 2024 to maintain accurate record keeping. Effect: The Organization could provide federal food commodities to agencies that are not eligible. Questioned Costs: No questioned costs reported. Context: There were 16 instances out of 42 samples tested where a signed Partner Agency agreement was obtained; however, it was not signed within the year ended June 30, 2023. Additionally, there was one instance out of 42 samples selected where a signed Partner Agency agreement was not obtained. Identification as a Repeat Finding: 2023-004 Auditor’s recommendation: All required documentation should be tracked, maintained and properly backed up to prevent loss due to staff turnover or unexpected calamities. Views of Responsible Officials: See Corrective Action Plan

U.S. Department of Agriculture Pass-through Entity: South Carolina Department of Agriculture Program Name: Food Distribution Cluster Federal Assistance Listing Number: 10.568-CL Material Weakness – Activities Allowed and Allowable Costs Finding 2024-004 Criteria: The Organization should maintain proper documentation of the review and approval of reimbursement requests for administrative costs. Condition: The Organization did not have documentation that the reimbursement requests were being reviewed and approved prior to submission. Cause: The Organization experienced significant turnover in the finance department during the year, and therefore, the Organization was unable to implement adequate internal controls over the reimbursement request submission process. Effect: The Organization could calculate administrative costs incorrectly or submit costs that are not allowable under the grant for reimbursement. Questioned Costs: No questioned costs reported. Context: There were 4 instances out of 4 samples tested where the reimbursement requests related to the Food Distribution Cluster were not reviewed and approved prior to submission. Identification as a Repeat Finding: 2023-005 Auditor’s recommendation: All documentation of review and approval of reimbursement requests should be formally documented and maintained. Views of Responsible Officials: See Corrective Action Plan