FINDING 2023-003
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 21-22, FY 22-23
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Eligibility, Procurement and Suspension and Debarment
Audit Finding: Material Weakness
Repeat Finding
This is a repeat finding from the prior audit regarding Internal Controls over Procurement and
Suspension and Debarment. The prior audit finding number was 2021-005.
Condition and Context
The School Corporation had not properly designed or implemented an effective system of internal
controls, which would include segregation of duties, that would likely be effective in preventing, or detecting
and correcting, material noncompliance.
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 if 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 directly
certified 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 Food Service Department and Business office worked together to ensure vendors
were properly procured; however, this process did not include ensuring vendors with whom it
plans to enter into a covered transaction with are not suspended, debarred, or otherwise
excluded from participation in federal programs. While the Food Service Department did obtain
a signed certification, there was no oversight or review process in place to ensure vendors
were not suspended, debarred, or otherwise excluded from participation in federal programs
prior to entering into covered transactions.
The lack of internal controls over eligibility was isolated to the 2022-2023 school year. The lack of
internal controls over suspension and debarment 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). . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include 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 cannot be 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.