FINDING 2024-004
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY 2023, FY 2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation had not established effective internal controls that would likely be effective
in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child
receiving meals.
Any child enrolled in a participating school or summer camp, or attending a Summer Food Service
Program (SFSP) meal service site, who meets the applicable program's definition of "child," may receive
meals under the applicable program. In the case of the National School Lunch Program and School
Breakfast Program, children belonging to households meeting nationwide income eligibility requirements
may receive meals at no charge or at reduced-price. Children who have been determined ineligible for free
or reduced-price school meals pay the full price, set by the School Food Authority, for their meals. Children
attending SFSP meal service sites receive their meals at no charge. As a general rule, a child's eligibility
for free or reduced-price meals under a Child Nutrition Cluster program may be established by the
submission of an annual application or statement which furnishes such information as family income and
family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing
the data reported by the child's household to published income eligibility guidelines. Additionally, a child
may be Direct Certified. For a Direct Certification, annual eligibility determinations are based on the child's
household receiving benefits under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most
circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its participation
in one of these programs, or the school, institution, or sponsor may obtain the information directly
from the state or local agency that administers these programs. Certain foster, runaway, homeless, and
migrant children are categorically eligible for free school lunches and breakfasts. Direct Certified
households do not need to complete an application.
INDIANA STATE BOARD OF ACCOUNTS
21
LIBERTY-PERRY COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The School Corporation's process for determining student eligibility based on income was that the
Food Service Director made the initial eligibility determination and the High School Treasurer reviewed the
determination made. Per the School Corporation, 10 percent of free or reduced-priced applications
received were subject to this process. However, the School Corporation did not provide a list of student
applications which had been reviewed during the audit period. Therefore, it could not be determined
whether the internal control over free and reduced-price applications was in place.
The Food Service Director directly imports the initial list of directly-certified students into the school
lunch software at the beginning of each school year. Students who are determined to be directly-certified
after the initial import are manually entered into the school lunch software by the Food Service Director.
There was no documented review or other internal control in place to ensure students who were directlycertified
were entered into the system correctly.
A sample of 40 students receiving free or reduced-priced meals that were selected for testing to
determine whether required eligibility determinations were made, participants were determined to be
eligible, and that only eligible individuals participated in the program. Of the 40 students receiving free or
reduced-priced meals that were selected for testing, supporting documentation was not provided for 1
student selected for testing. Therefore, it could not be determined that the correct eligibility status was
made in the system software for this student.
The lack of internal controls and noncompliance were systemic issues 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). . . ."
7 CFR 245.6 states in part:
". . . (b) Direct certification. In lieu of requiring a household to complete the free and reduced
price meal or free milk application, as specified in paragraph (a) of this section, the local
educational agency must certify children as eligible for free meals or free milk in accordance
with paragraph (b)(1)(i) of this section or may certify children as eligible for free meals or free
milk in accordance with paragraph (b)(2) of this section. If a household also submits an
application for directly certified children, the direct certification eligibility determination will take
precedence. . . .
(5) Direct certification documentation.
(i) The required documentation for direct certification is provided in paragraph (2) of
the definition of Documentation in § 245.2.
INDIANA STATE BOARD OF ACCOUNTS
22
LIBERTY-PERRY COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(ii)
(A) Beginning in School Year 2012-2013, direct certification with SNAP shall be
conducted using a data matching technique only. Letters to households for
direct certification may be used only as an additional means to notify
households of children's eligibility based on receipt of SNAP benefits. The last
period that letters to households may be used as the primary method for direct
certification is School Year 2011-2012. While such notices cannot be the
primary method used by a state to document receipt of SNAP, the local
educational agency shall accept such a letter if presented by a household.
(B) Letters or other documents may be used as the primary method for direct
certification to document receipt of FDPIR or TANF benefits.
(iii) Individual notices from officials of eligible programs for a Foster child, a Homeless
child, a Migrant child, a Runaway child, or a Head Start child, as defined in § 245.2,
may continue to be used. These notices are provided to school officials who must
certify these children as eligible for free meals or free milk, as applicable, without
further application, upon receipt of such notice.
(c) Determination of eligibility . . .
(2) Use of prior year's eligibility status. Prior to the processing of applications or the
completion of direct certification procedures for the current school year, children from
households with approved applications or documentation of direct certification on file
from the preceding year, shall be offered reimbursable free and reduced price meals
or free milk, as appropriate. The local educational agency must extend eligibility to
newly enrolled children when other children in their household (as defined in § 245.2)
were approved for benefits the previous year. However, applications and documentation
of direct certification from the preceding year shall be used only to determine
eligibility for the first 30 operating days following the first operating day at the beginning
of the school year, or until a new eligibility determination is made in the current school
year, whichever comes first. At the State agency's discretion, students who, in the
preceding school year, attended a school operating a special assistance certification
and reimbursement alternative (as permitted in § 245.9)) may be offered free
reimbursable meals for up to 30 operating days or until a new eligibility determination
is made in the current school year, whichever comes first. . . .
(4) Calculating income. The local educational agency must use the income information
provided by the household on the application to calculate the household's total current
income. When a household submits an application containing complete documentation,
as defined in § 245.2, and the household's total current income is at or below
the eligibility limits specified in the Income Eligibility Guidelines as defined in § 245.2,
the children in that household must be approved for free or reduced price benefits, as
applicable. . . ."
Cause
The School Corporation was unable to provide documentation of student eligibility as noted in the
Condition and Context and did not have internal controls over Direct Certification. The School Corporation
did not have policies and procedures in place to properly maintain supporting documentation or establish
internal controls over Direct Certification.
INDIANA STATE BOARD OF ACCOUNTS
23
LIBERTY-PERRY COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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. As a result, a student's eligibility for free or reduced-price meals could not be determined.
Noncompliance with the grant agreement and the compliance requirement could result in the loss of future
federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended the School Corporation's management establish a proper system of internal
controls and develop policies and procedures to ensure only eligible students receive benefits.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.