Finding Text
FINDING 2025-003 Subject: Child Nutrition Cluster - Eligibility and Reporting 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): FY2024, FY2025 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Eligibility, Reporting Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-002. Condition and Context Eligibility 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 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. The School Corporation's process was for the Food Service Director to review the eligibility determination determined by the software system, to ensure its accuracy, prior to notifying the family of the student's eligibility status. The parameters used by the School Corporation's software system were automatically pulled in from the USDA website but were not reviewed by the School Corporation to validate that the parameters were correct. INDIANA STATE BOARD OF ACCOUNTS 18 OAK HILL UNITED SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, student determinations made through direct certification comprised the majority of eligible students and there was no identified internal control over this process. Reporting The School Corporation had not established effective internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance related to the accurate reporting of program operations to the Indiana Department of Education (IDOE). School Food Authorities (SFAs) and sponsors must submit monthly claims for reimbursement for meals and snacks served to eligible students within 60 days following the last day of the month covered by the claim. The School Corporation submitted claims timely and had designed an internal control involving a review performed by the Chief Financial and Business Officer after submission of the claim by the Food Service Director. However, documentation evidencing the implementation of this review process could not be provided. The lack of internal controls 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 245.3(b) states in part: "Each participating local educational agency and all participating schools under its jurisdiction must adhere to the eligibility criteria specified in this part. . . ." Cause A proper system of internal controls was not designed and implemented by management of the School Corporation. 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. INDIANA STATE BOARD OF ACCOUNTS 19 OAK HILL UNITED SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure student eligibility for free or reduced price lunches is accurately determined and SFA monthly claims submitted to the IDOE are reviewed for accuracy. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.