Finding 1056155 (2023-002)

Finding 2023-002 Department of Agriculture Food Distribution Cluster – Assistance Listing# 10.565, 10.568, 10.569 Award Year - January 1, 2023 to December 31, 2023 Award Number – 6000001537 Special Tests and Provisions – Federal Food Receipts Testing Type of Finding – Material Weakness Internal Controls and Noncompliance relating to Inventory Reporting Criteria: Internal Controls should be designed and implemented to ensure federal food receipts are properly reflected in the QuickBooks SMF activity. Additionally, controls should be implemented to ensure all federal food receipts and only federal food receipts are recorded as received under the USDA/CSFP accounts in the QuickBooks SMF activity. Condition: Federal food receipts recorded by the Organization differed from federal food donations reported by the Arkansas Department of Education (ADE) (formerly Arkansas Department of Human Services) for the year ended December 31, 2023. This included instances where food items were recorded at different amounts as well as instances where items were recorded as received by the Organization without a corresponding donation receipted by ADE. Context: The Organization exercises limited control and review procedures over inventory received, distributed and adjusted within the SMF QuickBooks on a monthly basis. Additionally, no reconciliation is performed on inventory at month-end and inventory reported to ADE. Effect or Potential Effect: Federal food inventory could be misstated as a result of the limited control and review procedures. Recommendation: All paperwork for federal food commodities received should be filed in separate folders according to the provider (USDA or CSFP). On each receiving document, a conversion should be notated to convert from cases to pounds based on the Organization’s weight of one case as listed in the account name detail. Receipts should be entered in the SMF system and submitted to ADE within 48 hours of delivery. Additional attention should be made to the proper coding of food items (USDA versus CSFP). We recommend all receipt of products from all sources and all distribution of product be verified by a secondary person, with any discrepancies being researched and corrected. We recommend the Organization count all federal food inventory at least quarterly to verify the federal food inventory amounts in the SMF QuickBooks file are correct. Additionally, after all receipts, disbursements and adjustments are made each month, the accounting system for inventory should be locked down with a password to prevent unintended changes. We also recommend the reporting to ADE be reconciled to the federal food receipts and inventory on hand at month-end. Views of Responsible Officials and Planned Corrective Actions: See corrective action plan on page 32.