Audit 402509

2025-002 The District did not have adequate internal controls for ensuring compliance with federal eligibility requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Grantor Name: U.S. Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of the Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 227WAWA3N1199 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. In the 2024-25 school year, the District received $2,078,919 in federal funding to administer these programs. Federal regulations require recipients to establish, document and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls including eligibility requirements. Districts providing free and reduced priced meals to students must verify students’ eligibility for these programs by either obtaining applications at the beginning of each school year or through the direct certification process, which is used for categorically eligible children for free meals without further application. Description of Condition The District did not have adequate internal controls to ensure it only provided free and reduced-price meals to eligible students. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District experienced staffing changes during the audit period and the staff responsible for managing eligibility for the program lacked adequate training over the requirements and were not aware of the requirement to retain all applications to support the free- and reduced-meal status. Effect of Condition Using a statistical sample, we found two out of 29 students tested (6.9%) were not supported by documentation evidencing their eligibility. Without documentation showing the students were eligible for free and reduced-price meals, the District cannot demonstrate compliance with the awarding agency’s eligibility requirements. These errors resulted in the District receiving $1,350 in excess federal funds. Based on the projection of our sample, we identified an additional $108,745 in estimated overpayments for free and reduced meal costs. Recommendation We recommend the District establish and follow internal controls to ensure it complies with federal and OSPI requirements for verifying eligibility for free or reduced-price meals and maintain documentation of this verification process. District’s Response Mandatory Staff Training & Professional Development: • Food Services staff responsible for processing and managing student meal applications using Qmlativ will undergo training provided by ESD113 in August and online OSPI CNEEB Application and Direct Certification Training. • Training will explicitly cover federal regulations under 7 CFR Part 245.6 (Application, Eligibility, and Certification) and 2 CFR Part 200.303 (Internal Controls over federal programs). Implementation of Dual-Review Internal Controls: • The District will establish written protocols for processing online and paper applications. • In collaboration with ESD 113, a report will be developed which will be run monthly reviewing any application that have not been validated for income eligibility or direct certification provided by the state. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 7 CFR Part 245, Section 245.6 – Application, eligibility and certification of children for free and reduced price meals and free milk.