Finding Text
Criteria:
2 CFR Part 200 (Uniform Guidance) and the Compliance Supplement indicate USDA Foods may only be distributed to individual program participants who meet income eligibility requirements. Determinations are generally made by recipient agencies in accordance with the criteria and procedures established by the state agencies.
A recipient agency must be either a public agency or a private entity possessing tax-exempt status under the Internal Revenue Code and must enter into a written agreement with the state agency, or with another recipient agency where permitted, binding it to perform the duties of a recipient agency (7 CFR sections 247.4, 247.7(a), 251.3(d), and 251.5(a)).
Condition/Context:
The Organization provided a list of 184 ERAs receiving distributions from the Organization during the year. We selected a sample of 19 agencies from this list and found the Organization had signed agreements meeting the requirements for all of the agencies in our sample selected from this list. However, in our testing of 40 USDA food distributions made to 5 recipient groups during the year (this included ERAs and individuals), we noted a distribution made to an agency that was not included on the eligible ERA list provided to us by the Organization. The Organization did not have a signed agreement with this agency.
Cause:
Management indicated the agency discussed above was not one of the usual contractual agencies to which the Organization typically distributed USDA foods; as such, there was no formal signed agreement with the recipient. Management noted when the Organization has a surplus of commodities that needs to be distributed prior to the foods’ expiration, the Organization may occasionally distribute these foods to agencies that are not on their pre-approved USDA agency list. The Organization does not have a process in place to obtain a signed agreement from these entities. Management indicated the usual process followed includes ensuring the recipient agency is properly registered as a nonprofit organization by utilizing a website such as the Secretary of State site, however, the documentation for this process is not retained.
Effect:
As documentation is not maintained to support the eligibility of recipient agencies that are not on the pre-approved USDA agency list and who may occasionally receive surplus commodities, the Organization is not able to substantiate there are controls in place to meet the requirement that accurate and complete records must be maintained with respect to the receipt, distribution/use, and inventory of USDA Foods. Lack of compliance with requirements may result in reduced future funding for the program.
Auditor’s recommendation:
We recommend controls be strengthened to ensure proper documentation is maintained verifying a subrecipient is eligible to receive TEFAP products when new subrecipients are added during the year that are not on the pre-approved USDA listing. In order for a subrecipient to be eligible to receive TEFAP products, the subrecipient must be tagged as such in the inventory system. At the beginning of each fiscal year, a report should be reviewed of all agencies and their qualifiers. This should be checked against the agencies’ files to ensure 1) the removal of any qualifiers for which documentation has not been received, and 2) follow-up of agencies to obtain the necessary documents. This will ensure completeness, timeliness, and consistency among all agencies and all documents.
Auditee’s response:
The Organization has created a process to move all documents to cloud based storage, including recipient agency contracts for USDA and proof of tax-exempt status under Internal