FINDING 2023-005
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Findings: Material Weakness, Other Matters
Repeat Finding
This is a repeat finding from the prior audit report. The prior audit finding number was 2021-002.
Condition and Context
The School Corporation had not established effective internal controls that would likely be effective
in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child
receiving meals.
INDIANA STATE BOARD OF ACCOUNTS
21
SHENANDOAH SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Any child enrolled in a participating school or summer camp, or attending a Summer Food Service
Program (SFSP) meal service site, who meets the applicable program's definition of "child," may receive
meals under the applicable program. In the case of the National School Lunch Program and School
Breakfast Program, children belonging to households meeting nationwide income eligibility requirements
may receive meals at no charge or at reduced price. Children who have been determined ineligible for free
or reduced-price school meals pay the full price, set by the School Food Authority, for their meals. Children
attending SFSP meal service sites receive their meals at no charge. As a general rule, a child's eligibility
for free or reduced-price meals under a Child Nutrition Cluster program may be established by the
submission of an annual application or statement which furnishes such information as family income and
family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing
the data reported by the child's household to published income eligibility guidelines. Additionally, a child
may be direct certified. For a direct certification, annual eligibility determinations are based on the child's
household receiving benefits under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most
circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its
participation in one of these programs; or the school, institution, or sponsor may obtain the information
directly from the State or local agency that administers these 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's process for determining student eligibility was that the Assistant Food
Service Director make the initial eligibility determination and the Food Service Director review the
determination made. Per the School Corporation, all free or reduced priced applications received were
subject to this process.
A sample of 40 free or reduced priced applications were selected for testing to determine if the
identified internal control was in place and operating. Of the 40 free and reduced priced applications
selected for testing, 12 did not have the identified internal control in place. For these 12 applications, the
Assistant Food Service Director made the initial eligibility determination, but there was no evidence that the
Food Service Director reviewed the determination.
In addition, a sample of 40 free or reduced priced applications were selected for testing to determine
whether required eligibility determinations were made, participants were determined to be eligible, and that
only eligible individuals participated in the program. Of the 40 free and reduced priced applications selected
for testing, 3 were determined to have the incorrect eligibility status in the system software when compared
to supporting documentation.
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 22
SHENANDOAH SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
7 CFR 245.6 states in part:
". . . (b) Direct certification. In lieu of requiring a household to complete the free and reduced
price meal or free milk application, as specified in paragraph (a) of this section, the local
educational agency must certify children as eligible for free meals or free milk in accordance
with paragraph (b)(1)(i) of this section or may certify children as eligible for free meals or free
milk in accordance with paragraph (b)(2) of this section. If a household also submits an
application for directly certified children, the direct certification eligibility determination will take
precedence. . . .
(5) Direct certification documentation.
(i) The required documentation for direct certification is provided in paragraph (2) of
the definition of Documentation in § 245.2.
(ii)
(A) Beginning in School Year 2012–2013, direct certification with SNAP shall be
conducted using a data matching technique only. Letters to households 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 2011–2012. While such notices cannot be the primary method used by a
state to document receipt of SNAP, the local educational agency shall accept such
a letter if presented by a household.
(B) Letters or other documents may be used as the primary method for direct
certification to document receipt of FDPIR or TANF benefits.
(iii) Individual notices from officials of eligible programs for a Foster child, a Homeless
child, a Migrant child, a Runaway child, or a Head Start child, as defined in § 245.2,
may continue to be used. These notices are provided to school officials who must
certify these children as eligible for free meals or free milk, as applicable, without
further application, upon receipt of such notice. . . .
(c) Determination of Eligibility . . .
(2) Use of prior year's eligibility status. Prior to the processing of applications or the
completion of direct certification procedures for the current school year, children from
households with approved applications or documentation of direct certification on file
from the preceding year, shall be offered reimbursable free and reduced price meals
or free milk, as appropriate. The local educational agency must extend eligibility to
newly enrolled children when other children in their household (as defined in § 245.2)
were approved for benefits the previous year. However, applications and documentation
of direct certification from the preceding year shall be used only to determine
eligibility for the first 30 operating days following the first operating day at the beginning
of the school year, or until a new eligibility determination is made in the current school
year, whichever comes first. At the State agency's discretion, students who, in the
preceding school year, attended a school operating a special assistance certification
and reimbursement alternative (as permitted in § 245.9)) may be offered free
reimbursable meals for up to 30 operating days or until a new eligibility determination
is made in the current school year, whichever comes first. . . .
INDIANA STATE BOARD OF ACCOUNTS
23
SHENANDOAH SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(4) Calculating income. The local educational agency must use the income information
provided by the household on the application to calculate the household's total current
income. When a household submits an application containing complete documentation,
as defined in § 245.2, and the household's total current income is at or below
the eligibility limits specified in the Income Eligibility Guidelines as defined in § 245.2,
the children in that household must be approved for free or reduced price benefits, as
applicable. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
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 implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, a student's eligibility for free or reduced-price meals was incorrectly determined.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of future federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended the School Corporation's management establish a proper system of internal
controls and develop policies and procedures to ensure only eligible students receive benefits.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.