Finding Text
2024-006 Unauthorized Use of Child Nutrition Funds
Type of Finding: Material Weakness in Internal Control Over Compliance
New or Repeat Finding: Repeat; see prior year finding #2023-005 and #2023-006.
Federal Program: Child Nutrition Cluster (ALNs 10.553, 10.555, 10.582)
Federal Agency: U.S. Department of Agriculture
Pass-through Entity and
Identifying Numbers:
Texas Department of Agriculture (NT4XL1YGLGC5), Texas Education Agency (71402401, 71302401)
Compliance
Requirement(s):
A - Activities Allowed or Unallowed, B - Allowable Costs / Costs Principles
Criteria: Under 2CFR200.403 and 2CFR200.405, federal program costs must be allocable to the program,
allowable under applicable federal cost principles, and properly supported by accounting records.
Additionally, the Texas Department of Agriculture (TDA) and federal program guidelines require that
Child Nutrition funds be accounted for separately and used solely for the operation of the school
food service program. All uses of funds must be properly documented and justified to ensure
restricted federal funds are not used for unallowable general government purposes.
Condition: The district’s general ledger and cash transfer records indicated that funds were transferred between
the Child Nutrition Service (CNS) fund and the general fund during the year. Due to inadequate
tracking and reconciliation controls, the district was unable to provide clear documentation
demonstrating that restricted CNS funds were used solely for allowable Child Nutrition Cluster
program expenditures and were not applied to general fund purposes. As a result, the auditors were
unable to fully verify that all CNS program expenditures were allowable under federal requirements.
Cause: The district did not have adequate internal controls to track, reconcile, and document transfers of
restricted CNS funds. Turnover in key finance positions and implementation of new finance software
contributed to the weak oversight over cash transfers between funds.
Effect or Potential Effect: There is a risk that restricted federal Child Nutrition funds were used for unallowable general fund
expenditures, potentially resulting in noncompliance with federal cost principles. Although the
auditors did not identify specific questioned costs, the district’s lack of clear tracking and
documentation limits the ability to demonstrate compliance and increases the risk of future
unallowable expenditures.
Questioned Costs: None identified, as auditors were unable to quantify specific unallowable costs due to the lack of
sufficient documentation.
Context During review of the District's response to the corrective action plan, we noted the Child Nutrition
Fund was reimbursed $701,402 for the amount due from the General Fund as of August 31, 2023.
However, due to lack of proper reconciliation controls during fiscal year 2024, we were unable to
determine the general fund was reimbursed for additional improper transfers that could have
occurred during the year.
Recommendation: We recommend the district strengthen internal controls by establishing clear written procedures for
tracking, approving, and reconciling any transfers between the CNS fund and the general fund. The
district should ensure all restricted Child Nutrition funds are used solely for allowable program
purposes, consistent with federal and state requirements. Staff responsible for financial oversight
should receive training on federal cost principles and documentation standards to ensure continued
compliance.
Views of Responsible
Officials:
District officials agree with the finding. The District will review transfers made after September 1,
2022 to determine if made in compliance with legal restrictions.