Finding Text
Criteria
The United States Department of Agriculture has established several grant programs for the purpose of providing school breakfast and lunch for eligible children, known as the Child Nutrition Grant Program. These programs contain requirements on how the grants can be used related to the District providing child nutrition services.
Condition
As noted in comment 2023.003, the District borrowed legally restricted monies to support general fund operations, which included monies borrowed from the Child Nutrition Grant Program. The Child Nutrition Program, for purposes of the District’s single audit for 2023, is classified as a major program resulting in test of internal control and compliance with laws and regulations. Accordingly, we are required to specifically report the material weakness in internal control and noncompliance with laws and regulations for this program separately, although part of the District-wide issue.
The use of cash for general fund operations from the Child Nutrition Grant Program is not considered an allowable activity or allowable costs for grant compliance purposes. Context Review of the District’s bank reconciliation as of year end for the Child Nutrition Grant Program listed a material transfer into the restricted bank account. It was noted that this amount was not received within 30 days of year end.
Cause
The core issue stems from the declining fund balance of the general fund and general fund operating cash balance, which appear to result in District personnel addressing the matter by holding restricted cash in the general fund bank account, effectively borrowing monies from restricted sources as well as not reporting the matter to the Board.
Effect
It appears the District likely violated legal and contractual obligations by using monies for unauthorized purposes.
Recommendation
The District should promptly reimburse the restricted cash accounts utilized for general fund operations. A thorough review of cash flow management practices is imperative, accompanied by the implementation of strategies to enhance liquidity, such as short-term financing or improved budgetary planning. Strengthening internal controls, providing staff training on fund management, and conducting regular cash flow projections are recommended.
The District should consider implementing supervision and review procedures over the bank reconciliation process. These procedures should include: reviewing the reconciliations for unusual activity, including large transfers and deposits; looking for repeat reconciling items from month-to-month; and reviewing the following month’s bank statement to ensure deposits and transfers of monies listed on the reconciliation cleared the bank. This review should be documented within the system or on the bank reconciliation by initialing and noting the date of the individual performing the review.
View of Responsible Officials
See Corrective Action Plan