FINDING 2025-003 Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2023-2024, FY 2024-2025 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Eligibility, Procurement and Suspension and Debarment, Reporting Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit regarding internal controls over eligibility and suspension and debarment. The prior audit finding number was 2023-003. Condition and Context The School Corporation had not properly designed or implemented an effective system of internal controls, which would have included segregation of duties, that would have likely been effective in preventing, or detecting and correcting, material noncompliance. INDIANA STATE BOARD OF ACCOUNTS 20 PLYMOUTH COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Eligibility Any child enrolled in a participating school or summer camp, who meets the applicable program's definition of "child," may receive meals under applicable programs. A child belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children that have been determined ineligible for free or reduced-price meals pay the full price for their meals. A child's eligibility for free and reducedpriced meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnished such information as family income and family size. The School Corporation determines eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Annual eligibility determinations may also be based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program, or, under most circumstances, the TANF program. A household may furnish documentation of its participation in one of those programs, or the School Corporation may obtain the information directly from the State or local agency that administers those 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 utilized a software vendor to determine eligibility based on free and reduced applications submitted online by parents. The income guidelines were updated in the software by one employee without an oversight or review process in place to ensure accuracy. Additionally, one employee uploaded the Direct Certification reports from the state into the software system without a documented oversight or review process in place to ensure directlycertified students were properly processed. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. The School Corporation did not have internal controls in place over suspension and debarment. The Food Service Director verified that vendors were not suspended or debarred, but there was no evidence of a second review. Reporting 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 did not have internal controls in place over reporting. The Food Service Director submitted the monthly claims for reimbursement, but there was no evidence of a second review of these claims. The lack of internal controls over eligibility was isolated to fiscal year 2023-2024. The lack of internal controls over suspension and debarment and reporting was systemic throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 21 PLYMOUTH COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 The Food Service Manager was unaware of the need for internal controls. This was due to turnover issues with the management of the School Corporation. The Treasurer had not communicated this need to the Food Service Manager. Therefore, a proper system of internal controls was not designed or implemented by management of the School Corporation, which would have included 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 design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system was not capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation 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.