FINDING 2025-001 Subject: Child Nutrition Cluster - Eligibility 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): FY24, FY25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 13 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. Condition and Context Any child enrolled in a participating school or summer camp, or attending a 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. Direct Certifications The Food Service Director ran the direct certification report monthly and uploaded it to the school lunch point-of-sale system. However, documentation of an oversight or review process to ensure the monthly upload occurred, had imported correctly, and students' status was updated accordingly was not evidenced. Applications The Food Service Director was responsible for reviewing the online and paper application eligibility status and entering the information into the school lunch point-of-sale system. Furthermore, the Assistant Food Service Director had access to make changes to eligibility. Documentation of an oversight or review process to ensure that the income verification, calculations, and eligibility status entered into the school lunch point-of-sale system and subsequent changes were accurate and properly supported was not evidenced. Of the 60 students tested for the school year ended June 30, 2024, the eligibility determinations were not correct as follows: There was 1 student that received free meals; however, based on the application's income and family size, eligibility should have been for reduced-price meals. Students were determined to be free or reduced without a properly completed application. As a result, 2 students received free meals and 1 student received reduced-price meals instead of paying regular price for meals. INDIANA STATE BOARD OF ACCOUNTS 14 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, the Indiana Department of Education (IDOE) conducted an administrative review in April 2025 covering the 2024-2025 school year. The IDOE review identified multiple applications that were certified incorrectly or were approved with falsified information. The finding noted household income reported on the income application was changed by a school staff member to allow households to qualify for a free or reduced benefit. The lack of internal controls and noncompliance was systemic 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(c)(4) states: "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." 7 CFR 245.6(e) states: "Recordkeeping. The local educational agency must maintain documentation substantiating eligibility determinations on file for 3 years after the date of the fiscal year to which they pertain, except that if audit findings have not been resolved, the documentation must be maintained as long as required for resolution of the issues raised by the audit." Cause Management had not developed an adequate system of internal controls to ensure student eligibility status was properly determined. Effect As a result of the IDOE administrative review, the School Corporation had to return funds totaling $32,052, of which $24,639 was from the National School Lunch Program and $7,413 from the School Breakfast Program. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 15 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure student eligibility is accurately determined. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.