Finding Text
1. FINDING NUMBER:14 2024 - 004 2. THIS FINDING IS: X New Repeat from Prior year?
Year originally reported?
3. Federal Program Name and Year: Child Nutrition Cluster - PY 2024 and PY 2023
4. Project No.: 24-4220-00, 24-4210-00, 24-4240-24, 23-4220-00, 23-4210-00 5. AL No.: 10.553, 10.555, 10.582
6. Passed Through: Illinois State Board of Education
7. Federal Agency: Department of Education
8. Criteria or specific requirement (including statutory, regulatory, or other citation)
Expenditures made under the Child Nutrition Cluster are required to be for allowable activities and conform with the Basic Guidelines prescribed in 2 CFR Part 200.402 through .408 (be necessary and reasonable, be accorded conssitent treatment, be adequately documented, etc.)
9. Condition
The District has a contract with Open Kitchens for serving meals under the Child Nutrition Cluster. In early fiscal year 2024, the District received notice that the method of payment to this vendor was to change to ACH. After further correspondence, the District remitted an ACH payment for three months of services for $936,828. The District subsequently discovered that the ACH was remitted to a fraudulent vendor.
10. Questioned Costs
Questioned costs related to the finding $936,828.
11. Context
Based upon the testing procedures performed this appears to be an isolated instance.
12. Effect
The District remmitted $936,828 to an unknown and fraudulent vendor. The District was not able to recover these funds.
13. Cause
The District's internal controls failed to detect that the vendor was fraudulent.
14. Recommendation
We recommend that the District implement stronger internal controls around vendor payment approvals, such as a change in payment method, to ensure that process of approving new forms of payment for vendors is not occurring with outside parties.
15. Management's response
The district’s plan is any request through ACH will first get a call to the accounts receivable department at the company to ensure this is the proper way of making payment. The district will also follow up with a second call to our account rep to verify that the information is correct. The original payment to the vendor will be a small portion of the payment to verify the information. After this payment, a call will be made to accounts receivable to ensure payment.