Finding 522638 (2024-001)

FINDING 2024-001 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY22-23, FY23-24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system, which would include segregation of duties, was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the compliance requirements for Eligibility related to income guidelines and direct certifications. The Food Service Director entered the income guidelines into the Harmony software at the beginning of each school year. Free and reduced applications are processed through the Harmony software, which makes the determination for each student based on the income guidelines entered by the Food Service Director. There were no internal controls in place to ensure the Food Service Director entered the income guidelines into the Harmony software correctly. There was no internal control in place to ensure that direct certification reports were processed at the start of the school year and monthly thereafter, or that the student statuses were updated accordingly. Additionally, there was no review to verify that the year-to-date direct certification reports were processed to identify any students that were missed in a prior month when the report was not processed. Of the 25 students tested, 1 had the wrong status in the Harmony software from August 9, 2022 to January 30, 2023. The student was listed as paying the reduced rate for meals but should have been classified as eligible for free meals. The direct certification reports for the audit period were not retained; therefore, we could not verify that the students who were enrolled during the fiscal years 2022-2023 or 2023-2024 qualified for free or reduced meals under the direct certification method. The lack of internal controls and noncompliance were systemic issues 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 16 NORTH CENTRAL PARKE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 7 CFR 245.3(c) states in part: "Each School Food Authority shall serve free and reduced price meals or free milk in the respective programs to children eligible under its eligibility criteria. . . ." 7 CFR 245.6(b)1(iii) states: "Beginning in School Year 2012-2013, direct certification shall be conducted using a data matching technique only and letters to household for direct certification may be used only as an additional means to notify households of children's eligibility based on receipt of SNAP benefits. The last period that letters to households may be used as the primary method for direct certification is School Year 2011-12." Cause The School Corporation was unaware that they needed to verify the income guidelines in the software system and to maintain the year-to-date direct certification reports as stated above. Effect Without an effectively designed system of internal controls, the School Corporation did not verify children who were on the direct certification listing monthly as required. This allowed a student to be incorrectly classified in the software system and prevented the student from receiving the appropriate assistance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management strengthen its system of internal controls to ensure that they review income guidelines in the Harmony software, process the direct certification reports monthly, and update the student statuses accordingly. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.