Finding Text
FINDING 2023-005
Subject: Child Nutrition Cluster - Reporting, Special Tests and Provisions -
Verification of Free and Reduced Price Applications (NSLP)
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
Assistance Listings Numbers: 10.553, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Reporting, Special Tests and Provisions - Verification
of Free and Reduced Price Applications (NSLP)
Audit Finding: Material Weakness
Repeat Finding
This is a repeat finding from the prior audit report regarding Special Tests and Provisions -
Verification of Free and Reduced Price Applications (NSLP). The prior audit finding number was 2021-003.
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to reimbursement requests and verification of free and
reduced price applications.
Reporting
The School Corporation had not designed or implemented effective internal controls to ensure
that reimbursement requests were accurately submitted. The reimbursement requests were
prepared by one employee based on meals served without evidence of an oversight or review
process to ensure they were accurate.
Special Tests and Provisions - Verification of Free and Reduced Price
Applications (NSLP) (Applies to National School Lunch Program only)
The School Corporation had not designed or implemented effective internal controls to ensure
the verification of free and reduced price applications were accurately completed. One
employee selected and verified the required sample of approved free and reduced price applications
without an oversight or review process.
The lack of internal controls was a systemic issue throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
Cause
A proper system of internal controls was not designed and implemented by management of the
School Corporation, which would include segregation of key functions. Embedded within a properly
designed and implemented internal control system should be internal controls consisting of policies and
procedures. Policies reflect the School Corporation's management statements of what should be done to
effect internal controls, and procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the internal
control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.