Finding Text
Finding 2022-001
Federal Agency: Department of Agriculture
Federal Program: Food Distribution Cluster
CFDA: #10.568, 10.569
Compliance Requirement: Eligibility for Subrecipients
Type of Finding: Significant Deficiency in Internal Controls over Compliance
Repeat Finding: Yes – 2021-001
Criteria:
7 CFR §251.3(d) and §251.5(a) – Eligibility for Subrecipients
Prior to making commodities available, eligible recipient agencies to which the state agency has delegated responsibility for the distribution of The Emergency Food Assistance Program (“TEFAP”) commodities must
ensure that an organization applying for participation in the program meets the definition of an “eligible recipient agency”. An eligible recipient agency means an organization which is either public, or is private,
possessing tax exempt status. Private organizations possessing tax exempt status must (i) be currently operating another federal program requiring tax-exempt status under the Internal Revenue Code (“IRC”), or
(ii) possess documentation from the Internal Revenue Service (“IRS”) recognizing tax-exempt status under the IRC, or (iii) if not in possession of such documentation, be automatically tax exempt as “organized or
operated exclusively for religious purposes” under the IRC.
Condition:
From a sample of twenty-five (25) agencies who distributed TEFAP products during the fiscal year, the following exception was noted:
* One (1) agency did not have a FY21-22 TEFAP agreement on file.
Question Costs:
N/A
Context:
The Organization has a policy whereby an agency’s eligibility status is checked by either reviewing the IRS website to ensure an entity’s tax-exempt status, or obtaining documentation from an entity verifying the
entity is automatically tax-exempt by being an organization organized or operated exclusively for religious purposes. The entity in question was noted as a church.
Cause:
Controls were not in place to ensure eligibility status is documented and filed with the subrecipient’s file prior to distribution.
Effects:
Ineligible subrecipients may receive TEFAP products. Recommendations:
We recommend controls be strengthened to ensure eligibility status is confirmed and support is maintained verifying a subrecipient is eligible to received TEFAP products each year during recertification and when
new subrecipients are added during the year. In order for a subrecipient to be eligible to receive TEFAP products, the subrecipient must be tagged as such in the inventory system. We recommend the
Organization strengthen its internal controls to include maintaining a checklist to be included in each distributing agency’s file which includes the check for documentation supporting the agency’s eligibility
including each required document. The forms should be reviewed to ensure proper verification was made and all contracts are signed and dated by both the agency and the Organization. A check could also be
made that the agency was properly set up and eligible qualifiers checked 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.
Management’s Response:
Management concurs with the finding.