Audit 404948

Finding 2025‐001–Allowable Costs and Cost Principles and Activities Allowed and Unallowed—MATERIAL WEAKNESS IN INTERNAL CONTROLS OVER COMPLIANCE Federal Program: The Food Distribution Cluster Assistance Listing Number: 10.568 and 10.569 Year(s): 2025 Federal Agency: US Department of Agriculture (USDA) Pass‐Through Agencies: State of CA Department of Social Services, Second Harvest of Silicon Valley, San Francisco Marin Food Bank, Food Link Food Bank, and CAPK Food Bank. Criteria—In accordance with 2 CFR 200.502(g), Federal non-cash assistance food commodities received as part of a Federal award to carry out a Federal program must be valued at fair market value at the time of receipt, or the assessed value provided by the Federal agency, and must be included in determining Federal awards expended and reported on the Schedule. Condition and Context— We selected 60 food commodity delivery receipts for food commodities delivered to sub-recipients (Sub-ERAs) in order to test the controls related to food distributions to Sub-ERAs at the Division's Modesto Corps. Of the 60 selections, 51 selections did not have evidence of review, indicating a deficiency in the related internal controls. The delivery receipt includes the quantity, and thus the monetary value, of the food commodities distributed to Sub - ERAs. The monetary value of those food commodities is included in the Schedule. In addition, 4 sign-in-sheet selections related to the monthly control over food directly distributed to individuals at the Modesto Corps were provided. The sign-in sheets contained the quantity of food commodities that were distributed, which were then used to populate the Schedule. The 4 sign-in-sheet selections did not have evidence of review. The quantity of food commodities is measured in the number of food boxes, with each weighing either 13 or 50 pounds, and the monetary value of those food commodities is then included in the Schedule. Cause— Management is in the process of maintaining evidence pertaining to the review of the distribution of the food commodities. The process was not fully established as of the period under audit. Effect— Without evidence of proper reviews, discrepancies could exist between the amount of actual food commodities distributed and the amount recorded on the Schedule, which could lead to incorrect information being communicated to the grantor and the possible cessation of grant funding. Questioned Costs—None. Repeat Finding from Prior Year—Yes. Recommendation—We recommend management take steps to ensure that proper review is performed, and evidence of such reviews is maintained. View of Responsible Officials—See Corrective Action Plan.

Finding 2025-002—Eligibility—MATERIAL WEAKNESS IN INTERNAL CONTROLS OVER COMPLIANCE AND MATERIAL NON-COMPLIANCE Federal Program: The Food Distribution Cluster Assistance Listing Number: 10.568 and 10.569 Year(s): 2025 Federal Agency: US Department of Agriculture (USDA) Pass‐Through Agencies: State of CA Department of Social Services, Second Harvest of Silicon Valley, San Francisco Marin Food Bank, Food Link Food Bank, and CAPK Food Bank. Criteria—In accordance with the Code of Federal Regulations (7 CFR sections 247.4, 247.7(a), 251.3(d), and 251.5(a)), a sub recipient 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. Individual recipients must sign the Certificate of eligibility form (EFA-7), which is a self-declaration that they meet all the eligibility requirements to participate in the program. Specifically, the participants are required to self-declare their household’s gross income is at or below the applicable TEFAP income guideline amount and they are prohibited from selling, bartering, or trading food received through this program. Condition and Context— To test the eligibility of individual recipients, we made a total of 60 selections of individuals who received food commodities from distribution sites that maintained self-declaration forms. Of the 60 selections, there was no evidence that 10 of the individuals signed the self-declaration form. The value of the food commodities provided to the 10 individuals could not be determined due to the lack of applicable documentation. Additionally, the Division managed distribution sites that collectively distributed $1,294,618 of food commodities and did not require or maintain self-declaration forms for the participants in accordance with the grant. Cause—Management at certain distributions sites was unaware of the grant requirements requiring individuals to self-certify their eligibility and maintain such evidence. Effect—Ineligible individual participants could receive grant funded food commodities instead of eligible participants. Questioned Costs—$1,294,618 Repeat Finding from Prior Year—Yes. Recommendation—We recommend management take steps to ensure the distribution sites require participants to self-certify that they meet the grant eligibility requirements and to maintain such evidence. View of Responsible Officials—See Corrective Action Plan.

Finding 2025‐003—Special Test—Accountability for USDA Foods—MATERIAL WEAKNESS IN INTERNAL CONTROLS OVER COMPLIANCE Federal Program: The Food Distribution Cluster Assistance Listing Number: 10.568 and 10.569 Year(s): 2025 Federal Agency: US Department of Agriculture (USDA) Pass‐Through Agencies: State of CA Department of Social Services, Second Harvest of Silicon Valley, San Francisco Marin Food Bank, Food Link Food Bank, and CAPK Food Bank. 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. Failure to maintain records required by 7 CFR section 250.19 is considered evidence of improper distribution or loss of USDA Foods and the agency processor is liable for the value of the food or replacement of the food in kind (7 CFR sections 250.16 and 250.19(a)). Condition and Context— For the distribution site at the Division's Modesto Corps, supporting documentation of the inventory counts performed by the warehouse personnel and used by the management to prepare the inventory reports was not maintained. Even though the inventory reports were submitted to the grantor, there were no reviews of the inventory reports prior to being submitted. Cause—Management is in the process of implementing a control to ensure the inventory reports are reviewed for accuracy and completeness and that the backup documentation of inventory counts is maintained. The process was not fully established as of the period under audit. Effect—The inventory reports submitted to the grantor could contain discrepancies. This could lead to incorrect information being communicated to the grantor and possibly result in the agency processor being liable for the value of the food or replacement of the food in kind. Questioned Cost—None. Repeat Finding from Prior Year—Yes. Recommendation—We recommend management take steps to ensure the documentation related to inventory counts are maintained and the inventory reports are reviewed prior to being submitted to the grantor. View of Responsible Officials—See Corrective Action Plan.