Finding 2025-101 Federal Agency: U.S. Department of Agriculture Federal Program: Child Nutrition Cluster Assistance Listing Number: 10.553; 10.555 Federal Award Identification Number and Year: 256PA332N1199 - 2025 Pass-Through Agency: Pennsylvania Department of Education Pass-Through Number(s): N/A Award Period: July 1, 2024 to June 30, 2025 Finding Type: Significant Deficiency in Internal Control Over Compliance – Special Tests and ProvisionsCondition: The District lacks adequate segregation of duties within the business office to establish and monitor controls over the recording of School Food Service revenues and expenditures in the School Food Service Fund. Due to staffing limitations, a key control could not be identified to ensure that revenues generated from food service operations are properl y recorded in the food service fund and that required subsidy revenue is recognized through appropriate interfund activity. In addition, a single business office employee performs multiple duties related to federal program administration and cash disbursement activities, including processing accounts payable transactions, maintaining accounting records, preparing checks, reconciling bank accounts, and having access to the check signing machine. Consequently, incompatible duties related to the authorization, recording, processing, and monitoring of transactions are not adequately segregated. Criteria: The Special Tests and Provisions compliance requirement applicable to the Child Nutrition Cluster requires the District to maintain a nonprofit school food service account in which all revenues generated by the food service operation are retained and used solely for the operation and improvement of the school food service program. In addition, federal standards under the Uniform Guidance requires the District to establish and maintain effective internal control over federal awards that provides reasonable assurance that the District is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award. Effective internal control includes the segregation of incompatible duties over the authorization, recording, processing, and monitoring of transactions such that no single individual is in a position to both perpetrate and conceal an error or irregularity in the normal course of performing assigned duties. Context: Compliance with school food service account provision is dependent upon the complete and accurate recording of food service revenues and expenditures within the School Food Service Fund, including recognition of subsidy revenue through appropriate interfund activity. The conditions identified were observed through inquiry of business office personnel, observation of the cash disbursement and financial close processes, and our evaluation of the design and implementation of internal control over the Special Tests and Provisions compliance requirement. The deficiencies affect internal reporting, as management and the Board lack an independent review to validate that food service activity recorded in the general ledger is complete and accurate for purposes of monitoring school food service account. The deficiencies likewise affect external reporting, as the same underlying accounting records support the food service fund financial statements, the schedule of expenditures of federal awards, and the reimbursement claims and annual financial reports submitted to the Pennsylvania Department of Education and relied upon by the pass-through entity. The condition is systemic in nature and results from the limited size of the business office staff rather than from an isolated transaction or processing error. Cause: The conditions identified result from limited staffing within the District's business office. The size of the business office does not permit the assignment of the authorization, recording, processing, and monitoring functions over federal program administration and cash disbursement activities to separate individuals, and the District has not implemented documented compensating or mitigating controls — such as an independent review of bank reconciliations, check registers, and School Food Service Fund general ledger activity — to offset the resulting concentration of incompatible duties. In addition, the District has not established a formally designed and documented key control over the recording of food service revenues and expenditures in the School Food Service Fund, including the recognition of required subsidy revenue through interfund activity. As a result, internal control over the Special Tests and Provisions compliance requirement is not designed or operating at a level that would allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. Effect: Internal control over the Special Tests and Provisions compliance requirement is not designed or operating at a level that would allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. Food service revenues could be recorded outside the School Food Service Fund, subsidy amounts could be recognized in an incorrect fund or period, or errors or misappropriations of federal program funds could occur and remain undetected. Repeat Finding: No Recommendation: We recommend the District evaluate its current business office structure and, to the extent practicable within existing staffing resources, segregate the duties of processing accounts payable transactions, maintaining accounting records, preparing and signing checks, and reconciling bank accounts among separate individuals. Where full segregation is not cost-beneficial, we recommend the District implement documented mitigating controls, including an independent review and approval of the monthly bank reconciliations and check registers by an individual with no cash disbursement responsibilities, restricted and logged access to the check signing machine, and a periodic review by the Business Manager or designee of the School Food Service Fund general ledger activity and related interfund subsidy entries to confirm that all revenues generated by the food service operation are recorded in and retained by that fund. Evidence of these reviews should be documented through signature or electronic approval and retained to support both internal monitoring and the financial and reimbursement reports submitted externally. Views of Responsible Officials: The District acknowledges that the limited size of its business office staff does not currently permit full segregation of the duties of processing accounts payable transactions, maintaining accounting records, preparing and signing checks, and reconciling bank accounts among separate individuals. The District will evaluate its current business office structure and, to the extent practicable within existing staffing and budgetary resources, reassign these duties among separate personnel.