Finding Text
FINDING 2023-003
Information on the federal program:
Subject: Child Nutrition Cluster - Internal Controls
Federal Agency: Department of Agriculture
Federal Program: School Breakfast Program, National School Lunch Program
Assistance Listing Number: 10.553, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY 21-22, FY 22-23
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions – Verification of Free and Reduced-Price
Applications
Audit Finding: Material Weakness
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards 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). . . ."
7 CFR 245.6(a) sates in part:
The local educational agency must verify eligibility of children in a sample of household applications
approved for free and reduced price meal benefits for that school year.
(ii) An application must be approved if it contains the essential documentation specified in the definition of
Documentation in § 245.2 and, if applicable, the household meets the income eligibility criteria for free or
reduced price benefits. Verification efforts must not delay the approval of applications.
Condition: An effective internal control system was not in place at the School Corporation in order to
ensure compliance with requirements related to the grant agreement and the Verification compliance
requirements.
Cause: The School Corporation's management had not developed a system of internal controls to ensure
compliance with the Special Tests and Provisions – Verification of Free and Reduced-Price Applications
requirements.
Effect: The failure to establish an effective internal control system placed the School Corporation at risk of
noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties
within an internal control system could have also allowed noncompliance with the compliance requirements
and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight,
reviews, and approvals over the activities of the programs.
Questioned Costs: There were no questioned costs identified.
Context: During the testing of the one student selected for verification sample testing, we noted the student
was incorrectly verified as qualifying for reduced lunch when they should have been change to paid lunch
based on the income eligibility criteria. The appropriate supporting documentation was provided by the
parent, however the reduced lunch status was incorrectly applied to the student.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommended that the School Corporation's management establish a system of
internal controls related to the grant agreement and verification compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.