FINDING 2023-002
Subject: Child Nutrition Cluster - Eligibility
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Assistance Listings Numbers: 10.553, 10.555
Federal Award Number and Year (or Other Identifying Number): SY22-23
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Eligibility
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the prior audit report. The prior audit finding number was 2021-004.
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals.
Any child enrolled in a participating school or summer camp, who meets the applicable program's
definition of "child," may receive meals under applicable programs. A child belonging to households
meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price.
Children that have been determined ineligible for free or reduced-price meals pay the full price for their
meals. A child's eligibility for free and reduced-priced meals under a Child Nutrition Cluster program may
be established by the submission of an annual application or statement which furnished such information
as family income and family size. The School Corporation determines eligibility by comparing the data
reported by the child's household to published income eligibility guidelines. Annual eligibility determinations
may also be based on the child's household receiving benefits under SNAP, FDPIR, the Head Start
Program, or, under most circumstances, the TANF program. A household may furnish documentation if its
participation in one of those programs, or the School Corporation may obtain the information directly from
the State or local agency that administers those 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 child nutrition program software company, Skyward, automatically
imported the eligibility parameters into the system. There was no evidence of an oversight, review, or
approval process to ensure that the eligibility parameters entered into the Skyward system were accurate
and that eligibility statuses were being correctly determined.
A sample of forty students receiving free or reduced priced lunches was selected for testing. The
following issues were noted with the first fourteen students tested:
1. Six of the fourteen students' eligibility determinations were incorrect. Errors noted were:
a. Three students had an eligibility determination of free; however, their eligibility determination
should have been reduced.
b. One student had an eligibility determination of reduced; however, the eligibility determination
should have been paid.
c. Two students were determined to be reduced; however, their eligibility determination
should have been free.
2. One of the fourteen students did not have a completed application on file; thus, a determination
of eligibility could not be made.
3. Two students were direct certified; however, the School Corporation did not retain the monthly
direct certification reports ran to support this determination, nor could the reports be recreated.
Due to the number and magnitude of exceptions, per auditor judgement, we concluded it would not
be appropriate to examine the remaining twenty-six students.
The lack of internal controls and noncompliance were isolated to the 2022-2023 school year.
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). . . ."
2 CFR 200.334 states in part:
"Financial records, supporting documents, statistical records, and all other non-Federal entity
records pertinent to a Federal award must be retained for a period of three years from the date
of submission of the final expenditure report or, for Federal awards that are renewed quarterly
or annually, from the date of the submission of the quarterly or annual financial report,
respectively, as reported to the Federal awarding agency or pass-through entity in the case of
a subrecipient. . . ."
7 CFR 245.6(c)(4) states:
"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."
7 CFR 245.6(e) states:
"Recordkeeping. The local educational agency must maintain documentation substantiating
eligibility determinations on file for 3 years after the date of the fiscal year to which they pertain,
except that if audit findings have not been resolved, the documentation must be maintained as
long as required for resolution of the issues raised by the audit."
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 provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure student eligibility for free or reduced price
lunches is accurately determined and that all documentation is retained.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.