Finding Text
Finding 2023-001: Special Tests and Provisions - Material Weakness in Internal Control Over Compliance
and Instance of Noncompliance
Federal Program: The Emergency Food Assistance Program (TEFAP) (Assistance Listing #10.569)
Federal Agency: U.S. Department of Agriculture
Award Year: 2022–2023
Criteria: Management is responsible for establishing and maintaining an effective control over compliance. A
strong internal control system ensures that compliance requirements are met.
Condition: Management is required to maintain an appropriate accounting for USDA Foods, provide an annual
physical inventory and reconcile the inventory annually. During audit inquiries, management disclosed there is not an inventory management system in place until February 2023. During our audit procedures over food receipts, management was unable to provide receipt requisition forms for the first 4 of 40 samples selected. We stopped testing on remaining food receipts samples selected. During our audit procedures we noted that in addition to food recipients picking up food at MRCC’s distribution site that MRCC delivers food to various locations with eligible food recipients. Management was unable to provide distribution supports for the first 4 of 40 distributions sampled. We stopped testing on remaining distribution samples selected.
Cause: Management did not have a food inventory system to record food receipt requisitions and food distributions for the entire year. Management does not perform reconciliation of changes in inventory using food receipt requisitions and food distributions.
Effect: Failure to maintain a food inventory system to monitor and record food inventory in accounting records
could allow for misappropriation of food inventory to occur.
Context: Management does not have internal controls over inventory management as required by TEFAP.
Questioned costs: $0
Repeat Finding: 2022-001
Recommendation: We recommend management to implement an inventory management system and establish
oversight controls to ensure compliance requirements are met.
Views of responsible officials: The impact of COVID on the Mercy Brown Bag program's execution and associated
inventory documentation was significant. It necessitated the restructuring of historical food distribution practices with recipients and the increase in food provided through the TEFAP program. Priority was given to distributing food to recipients, despite limited staffing caused by the increased operational workload and social distancing requirements.
Starting in FY23, the program management initiated semi-annual inventory counts, which will continue into FY24 and beyond. Additionally, an Inventory Management System was implemented at the end of FY23 and will be used throughout FY24, starting on July 1, 2023.