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FINDING 2025-003 Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Special Milk Program for Children, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.556, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024, FY2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-009. 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 the 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. INDIANA STATE BOARD OF ACCOUNTS 18 RUSH COUNTY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. There was no documented evidence of the Food Service Director reviewing the eligibility determinations for free and reduced lunches that were made by the Cafeteria Secretary during the audit period. In addition, there was no documented review by the School Corporation to ensure accuracy of the income eligibility parameters that were entered by the software vendor. The lack of internal controls was a systemic issue 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). . . ." Cause Due to staff turnover, including a change in the Food Service Director during the audit period, the required reviews were not always performed due to vacancies within this department. Also, the most recently hired Food Service Director started duties late in the audit period and thus was in the early stages of gaining familiarity with this compliance requirement and the processes necessary to meet those. Effect The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the Eligibility compliance requirement. A lack of an effective internal control system could also allow noncompliance with compliance requirements and allow the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the program. INDIANA STATE BOARD OF ACCOUNTS 19 RUSH COUNTY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure that students receive the correct benefits and that 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.