Finding Text
FINDING 2023-008
Subject: Child Nutrition Cluster - Special Tests and Provisions - Verification
of Free and Reduced Price Applications (NSLP)
Federal Agency: Department of Agriculture
Federal Program: National School Lunch Program
Assistance Listings Number: 10.555
Federal Award Number and Year (or Other Identifying Number): FY23
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Verification of Free
and Reduced Price Applications (NSLP)
Audit Findings: Material Weakness, Other Matters
Repeat Finding
This is a repeat finding from the prior audit report. The prior audit finding number was 2021-003.
Condition and Context
By November 15 of each school year, the local educational agencies (LEA) must verify the current
free and reduced price eligibility of households selected from a sample of applications that it has approved
for free and reduced price meals, unless the LEA is otherwise exempt from the verification requirement.
The verification sample size is based on the total number of approved applications on file on October 1.
As instructed, the LEAs must select a sample of applications to be verified utilizing one of the
following methods:
a. Standard sample size - The lesser of three percent or 3,000 of the approved applications
on file as of October 1, selected from error-prone applications. For this purpose, error prone
applications are those showing household incomes within $100 monthly or $1,200 annually of
the income eligibility guidelines for free and reduced price meals.
INDIANA STATE BOARD OF ACCOUNTS 27
RUSH COUNTY SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
b. Alternative sample sizes - 1) The lesser of 3 percent or 3,000 applications selected at
random from approved applications on file as of October 1 of the school year, or (2) The sum
of (a) the lesser of 1 percent of all applications identified as error-prone or 1,000 error-prone
applications, and (b) the lesser of 1/2 of 1 percent of, or 500, approved applications in which
the household provided, in lieu of income information, a case number showing participation in
the SNAP, TANF, or FDPIR.
In accordance with the above guidance, the School Corporation selected a sample of verifications
based on the alternative sample size. As such, the School Corporation was required to review the lesser
of 3 percent or 3,000 applications selected at random from approved applications on file as of October 1 of
the 2022-2023 school year. On October 1, the School Corporation had 180 applications on file and
determined that 6 applications were required to be verified.
Although one employee was responsible for performing the required verification of the 6 free and
reduced-price applications and another employee reviewed the applications, the internal control was not
effective and did not prevent, or detect and correct, errors. There was no documentation of an oversight,
review, or approval process to ensure that the verifications were properly performed.
All 6 of the required verifications were selected for testing. There were 2 of the 6 verified
applications that were calculated incorrectly resulting in improper eligibility status changes.
The lack of effective internal controls and noncompliance were isolated to 2022-2023.
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). . . ."
7 CFR 245.6a states in part:
". . . (f) Verification procedures and assistance for households . . .
(7) Eligibility changes. Based on the verification activities, the local educational agency
shall make appropriate modifications to the eligibility determinations made initially. The
local educational agency must notify the household of any change. Households must
be notified of any reduction in benefits in accordance with paragraph (j) of this section.
Households with reduced benefits or that are longer eligible for free or reduced price
meals must be notified of their right to reapply at any time with documentation of
income or participation in one of the eligible programs in paragraph (a)(1) of this
section. . . ."
INDIANA STATE BOARD OF ACCOUNTS 28
RUSH COUNTY SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
A proper system of internal controls was not implemented by management of the School
Corporation, which would include segregation of key functions. 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, verifications for free and reduced price applications were not appropriately
changed.
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 verifications for free and reduced price
applications are appropriately changed.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.