FINDING 2023-001
Information on the federal program:
Subject: Child Nutrition Cluster
Federal Agency: Department of Agriculture
Federal Program: School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children
Assistance Listing Number: 10.553, 10.555, 10.559
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FINDING 2023-001
Information on the federal program:
Subject: Child Nutrition Cluster
Federal Agency: Department of Agriculture
Federal Program: School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children
Assistance Listing Number: 10.553, 10.555, 10.559
Federal Award Numbers and Years (Or Other Identifying Number): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Procurement and Suspension and Debarment
Audit Finding: Material Weakness, Qualified Opinion
Condition: There was not an effective control in place to review underlying transaction detail billed by the food service management compliance to verify compliance with Activities Allowed or Unallowed requirements. There was also not an effective control in place to monitor and review the food service management company followed procurement and suspension and debarment regulations.
Context: As a result of the COVID-19 pandemic, waivers from the federal government provided free meals to all students through the Summer Food Service Program and allowed meals to be consumed off-site. Due to the changing regulations, the USDA and IDOE required School Corporations to implement an Integrity Plan for any schools providing Grab and Go Meals which includes inquiring of any adult requesting meals without children present as to how many children under the age of 18 would be served. Prior to March 2020, the School Corporation was using a point-of-sale system to record meals served. Starting in March 2020, the School Corporation was authorized by IDOE to utilize a clicker to track meals served. During the summer months of 2021, the School Corporation was also authorized by IDOE to provide meal pickup service on Wednesdays from 3 – 6 p.m. for 5 days’ worth of meal for both breakfast and lunch, resulting in 10 meals being served per child under the age of 18 each week.
In June 2021, the Indiana Department of Education performed an unannounced meal site observation and a second, announced meal site review noting several program compliance and administrative issues.
In July 2021, the IDOE performed a targeted review of the Summer Food Service Program for the period of March 2020 through May 2021 noting the following program compliance issues.
• Meals were distributed without ensuring they were going to children ages 18 and younger as required by SFSP regulations.
• Meals were taken off site to be distributed/dropped off at non—approved locations.
• Meals were distributed and claimed on days when no meal service was approved,
• Meals were distributed outside of approved meal service times.
• Some meals were not distributed in household size quantities to the parent or guardian but distributed in bulk to large groups and knowingly transported in unsafe and unsanitary ways.
• Meal count records were incomplete, unsigned, or missing required information.
• Meal production was not adjusted when attendance fluctuations were noted.
• Different menu items were ordered for and distributed to a specific group of individuals that was not the same as the planned menu.
• Menu planning did not consider food inventory on hand and MSD of Pike Township’s access to USDA Foods (commodities) to reduce overall food costs.
• Unauthorized donation, distribution, and disposal of foods purchased with federal funds was made without MSD Pike administration knowledge or approval.
The review also noted a lack of administrative oversight of the food service management company contract including the following issues:
• Food service management company representatives were making decisions regarding child nutrition program operations without consulting MSD of Pike Township administration. This practice was ongoing and occurred over several administrations.
• Potential unallowable expenditures were noted in a review of monthly itemized invoices presented to MSD of Pike Township for recent payment. Items for personal consumption of food service management employees such as coffee, energy drinks, donuts, lunches, and even unauthorized travel expenses were presented but are considered unallowable expenditures from the food service account.
As a result of the IDOE review, a total of $1,299,365 was disallowed from the Summer Food Service Program. The School Corporation and IDOE agreed to a repayment plan to repay the disallowed costs identified. The School Corporation completed the repayment to IDOE in December 2021.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles
During the testing of activities allowed or unallowed and allowed costs/cost principles, we selected 6 monthly invoices from the food service management company during the audit period. We noted there was not an internal control in place by School Corporation personnel to obtain and view the underlying support of transactions charged by the food service management company to verify the transaction was for a business purpose. The School Corporation did not obtain and review source documents, such as invoices or proof of payment for vendor transactions or a schedule of employees, assigned locations, salaries, and hours to be worked for payroll transactions submitted by the food service management company for reimbursement.
We also selected a sample of 40 vendor transactions charged to Fund 0800 to test which were not related to the food service management company and incurred directly by the School Corporation. For 6 of the 40 transactions tested, we noted transactions for concession fees which were charged to the School Nutrition Program from July 2021 through September 2022 and are deemed unallowable. In October 2022, the School Corporation began recording all concession activity to Fund 2180, Concessions – District. The six concession transactions in our sample total $663 which are considered known questioned costs.
Procurement and Suspension and Debarment
The School Corporation did not have an internal control in place to monitor the food service management company was following proper procurement standards. School Corporations that contract with a food service management company on a cost reimbursement basis should ensure they are monitoring contracts sufficiently including verifying or reviewing the following:
• The School Corporation should receive contract commits to supply.
• Reviewing invoices received from the food service management company compared to amounts paid by the food service management company.
• Reviewing contracts for compliance with Buy American
• Verifying return of discounts, rebates, or credit are properly applied to the School Corporation’s account.
Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding. MSD of Pike Township (Pike) agrees during the audit period effective controls were not in place to review and approve meal counts tracked and submitted for reimbursement, review underlying transaction detail billed, nor monitor and review the Food Service Management Company (FSMC) followed procurement and suspension and debarment regulations. Pike has increased the Business Office oversight of the Food Service Management Company (FSMC). Pike has hired a Food Service Financial Specialist to provide more the detailed review of invoices and operations ledger and the underlying transaction details. Additionally, effective October 2022, MSD of Pike Township hired a Director of Food Service to provide oversight of the Food Service Management Company (FSMC) including but not limited to meal counts, site audits, and compliance with procurement regulations. The FSMC no longer has access to submit claims on the CNP website.
Responsible Party and Timeline for Completion: Greg A. Foster, Chief Financial Officer, will oversee the corrective action plan.