Finding 2025-101 Federal Agency: U.S. Department of Agriculture Federal Program: Child Nutrition Cluster Assistance Listing Number: 10.553; 10.555 Federal Award Identification Number and Year: 256PA332N1199 - 2025 Pass-Through Agency: Pennsylvania Department of Education Pass-Through Number(s): N/A Award Period: July 1, 2024 to June 30, 2025 Finding Type: Significant Deficiency in Internal Control Over Compliance – Special Tests and ProvisionsCondition: The District lacks adequate segregation of duties within the business office to establish and monitor controls over the recording of School Food Service revenues and expenditures in the School Food Service Fund. Due to staffing limitations, a key control could not be identified to ensure that revenues generated from food service operations are properl y recorded in the food service fund and that required subsidy revenue is recognized through appropriate interfund activity. In addition, a single business office employee performs multiple duties related to federal program administration and cash disbursement activities, including processing accounts payable transactions, maintaining accounting records, preparing checks, reconciling bank accounts, and having access to the check signing machine. Consequently, incompatible duties related to the authorization, recording, processing, and monitoring of transactions are not adequately segregated. Criteria: The Special Tests and Provisions compliance requirement applicable to the Child Nutrition Cluster requires the District to maintain a nonprofit school food service account in which all revenues generated by the food service operation are retained and used solely for the operation and improvement of the school food service program. In addition, federal standards under the Uniform Guidance requires the District to establish and maintain effective internal control over federal awards that provides reasonable assurance that the District is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award. Effective internal control includes the segregation of incompatible duties over the authorization, recording, processing, and monitoring of transactions such that no single individual is in a position to both perpetrate and conceal an error or irregularity in the normal course of performing assigned duties. Context: Compliance with school food service account provision is dependent upon the complete and accurate recording of food service revenues and expenditures within the School Food Service Fund, including recognition of subsidy revenue through appropriate interfund activity. The conditions identified were observed through inquiry of business office personnel, observation of the cash disbursement and financial close processes, and our evaluation of the design and implementation of internal control over the Special Tests and Provisions compliance requirement. The deficiencies affect internal reporting, as management and the Board lack an independent review to validate that food service activity recorded in the general ledger is complete and accurate for purposes of monitoring school food service account. The deficiencies likewise affect external reporting, as the same underlying accounting records support the food service fund financial statements, the schedule of expenditures of federal awards, and the reimbursement claims and annual financial reports submitted to the Pennsylvania Department of Education and relied upon by the pass-through entity. The condition is systemic in nature and results from the limited size of the business office staff rather than from an isolated transaction or processing error. Cause: The conditions identified result from limited staffing within the District's business office. The size of the business office does not permit the assignment of the authorization, recording, processing, and monitoring functions over federal program administration and cash disbursement activities to separate individuals, and the District has not implemented documented compensating or mitigating controls — such as an independent review of bank reconciliations, check registers, and School Food Service Fund general ledger activity — to offset the resulting concentration of incompatible duties. In addition, the District has not established a formally designed and documented key control over the recording of food service revenues and expenditures in the School Food Service Fund, including the recognition of required subsidy revenue through interfund activity. As a result, internal control over the Special Tests and Provisions compliance requirement is not designed or operating at a level that would allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. Effect: Internal control over the Special Tests and Provisions compliance requirement is not designed or operating at a level that would allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. Food service revenues could be recorded outside the School Food Service Fund, subsidy amounts could be recognized in an incorrect fund or period, or errors or misappropriations of federal program funds could occur and remain undetected. Repeat Finding: No Recommendation: We recommend the District evaluate its current business office structure and, to the extent practicable within existing staffing resources, segregate the duties of processing accounts payable transactions, maintaining accounting records, preparing and signing checks, and reconciling bank accounts among separate individuals. Where full segregation is not cost-beneficial, we recommend the District implement documented mitigating controls, including an independent review and approval of the monthly bank reconciliations and check registers by an individual with no cash disbursement responsibilities, restricted and logged access to the check signing machine, and a periodic review by the Business Manager or designee of the School Food Service Fund general ledger activity and related interfund subsidy entries to confirm that all revenues generated by the food service operation are recorded in and retained by that fund. Evidence of these reviews should be documented through signature or electronic approval and retained to support both internal monitoring and the financial and reimbursement reports submitted externally. Views of Responsible Officials: The District acknowledges that the limited size of its business office staff does not currently permit full segregation of the duties of processing accounts payable transactions, maintaining accounting records, preparing and signing checks, and reconciling bank accounts among separate individuals. The District will evaluate its current business office structure and, to the extent practicable within existing staffing and budgetary resources, reassign these duties among separate personnel.
Finding 2025-102 Federal Agency: U.S. Department of Agriculture Federal Program Name: Child Nutrition Cluster Assistance Listing Number: 10.553; 10.555 Federal Award Identification Number and Year: 256PA332N1199 - 2025 Pass-Through Agency: Pennsylvania Department of Education Pass-Through Number(s): N/A Award Period: July 1, 2024 through June 30, 2025 Finding Type: Significant Deficiency in Internal Control Over Compliance and Noncompliance – Procurement and Suspension/DebarmentCondition: The District procured milk products for its Child Nutrition Program in excess of the $23,800 bidding threshold without obtaining formal competitive bids, as required. Furthermore, the District did not perform or document verification of the selected vendor’s suspension or debarment status prior to awarding the procurement. Criteria: The District must comply with federal procurement standards under the Uniform Guidance when using funds from the school food service account. Procurement transactions must provide full and open competition, sealed bids or proposals are required for procurements exceeding the applicable threshold, and records sufficient to detail the history of each procurement must be maintained. The Pennsylvania Public School Code required formal competitive bidding for purchases exceeding $23,800 during the period under audit. In addition, the District is prohibited from entering into covered transactions with parties that are suspended, debarred, or otherwise excluded from federal programs, and must verify exclusion status through a SAM.gov search, vendor certification, or contract clause prior to award. The District is also required to maintain effective internal control providing reasonable assurance that the federal award is managed in compliance with applicable requirements. Context: Cumulative milk purchases from the vendor exceeded the formal bidding threshold during the fiscal year. The District was unable to provide procurement history documentation required by Uniform Guidance or SAM.gov search results, a vendor certification, or a contract clause evidencing exclusion verification for 2 out of 7 vendors in our procurement and suspension and debarment sample. No indication was noted that the vendor was in fact excluded or that the price paid was unreasonable. Cause: The District did not adhere to procurement procedures conforming to federal procurement standards under the Uniform Guidance and applicable Pennsylvania bidding thresholds, does not monitor cumulative vendor expenditures against applicable bidding thresholds, and has no procedure requiring suspension and debarment verification to be performed and retained prior to award. Food service and business office personnel have not received targeted training on federal procurement standards. Effect: Noncompliance with USDA, Uniform Guidance and Pennsylvania procurement requirements increases the risk of noncompetitive pricing for federally reimbursed food purchases and of contracting with a suspended or debarred vendor and may result in questioned costs or disallowances under the National School Lunch Program or findings during Pennsylvania Department of Education or USDA administrative reviews. Repeat Finding: No Recommendation: We recommend the District adhere to written federal procurement procedures conforming to Uniform Guidance and applicable Pennsylvania bidding thresholds and review those procedures annually for threshold adjustments. The District should implement a process to track cumulative purchases by vendor and commodity, conduct and document formal competitive bidding for purchases exceeding the threshold, retain procurement history documentation sufficient to federal procurement standards under the Uniform Guidance, and obtain and retain suspension and debarment verification prior to each contract award. Targeted training should be provided to food service and business office personnel on USDA procurement requirements and Pennsylvania bidding thresholds. Views of Responsible Officials: The District will adhere to written procurement procedures for Child Nutrition purchases conforming to the Uniform Guidance and Pennsylvania bidding thresholds, monitor cumulative vendor expenditures against those thresholds, conduct formal competitive bidding for purchases exceeding the threshold, and perform and retain suspension and debarment verification for all applicable vendors prior to award. Training will be provided to food service and business office personnel on federal procurement requirements.