FINDING 2023-003
Subject: Child Nutrition Cluster - Eligibility, Special Tests and Provisions - Verification
of Free and Reduced Price Applications (NSLP)
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): 2022-2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Eligibility, Special Tests and Provisions - Verification
of Free and Reduced Price Applications (NSLP)
Audit Finding: Material Weakness
Repeat Finding
This is a repeat finding from the prior audit report regarding Eligibility. The prior audit finding
number was 2021-003.
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
and to the verification of free and reduced price applications.
Eligibility
Any child enrolled in a participating school who meets the applicable program's definition of
"child," may receive meals under the applicable program. In the case of the National School
Lunch Program and the School Breakfast Program, children belonging to households meeting
nationwide income eligibility requirements may receive meals at no charge or at reduced price.
Children who have been determined ineligible for free or reduced-price school meals pay the
full price, set by the School Food Authority, for their meals. Children attending SFSP meal
service sites receive their meals at no charge. As a general rule, a child's eligibility for free or
reduced-price meals under a Child Nutrition Cluster program may be established by the
submission of an annual application or statement which furnishes such information as family
income and family size. Local educational agencies, institutions, and sponsors then determine
eligibility by comparing the data reported by the child's household to published income eligibility
guidelines. Additionally, a child may be direct certified. For a direct certification, annual
eligibility determinations are based on the child's household receiving benefits under SNAP,
FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF
program (ALN 93.558). A household may furnish documentation of its participation in one of
these programs; or the school, institution, or sponsor may obtain the information directly from
the state or local agency that administers these 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 system parameters, including income guidelines, were entered by the software vendor
without a documented review or oversight process by the School Corporation to ensure the
parameters entered were accurate.
INDIANA STATE BOARD OF ACCOUNTS 20
LINTON-STOCKTON SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
In addition, the Director of Food Service and the Student Data Coordinator were responsible
for processing on-line and paper application eligibility in the School Corporation's software
system (Harmony). The Director of School Finance was responsible for randomly reviewing
the eligibility status of on-line and paper applications; however, documentation of which
applications were reviewed was not maintained. Therefore, we could not determine if there
was an oversight, review, or approval process to ensure that eligibility determinations were
correct.
Finally, the Student Data Coordinator was responsible for generating and inputting the Direct
Certification Reports into the School Corporation's software system (Harmony). There was no
evidence of an oversight, review, or approval process to ensure that the Direct Certification
Reports were generated and input into the system.
Special Tests and Provisions - Verifications of Free and Reduced Price
Applications (NSLP) (Applies to National School Lunch Program only)
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.
If the LEA performs the verification function it must be in accordance with instructions provided
by the state agency. The LEA must follow up on children whose eligibility status has changed
as the result of verification activities to put them in the correct category.
The Student Data Coordinator was responsible for performing the required verification of three
free and reduced price applications. There was no documentation of an oversight, review, or
approval process to ensure that the verifications were properly performed.
The lack of internal controls was isolated to fiscal year 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). . . ."
Cause
A proper system of internal controls, which would include segregation of key functions, was not
implemented 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.
INDIANA STATE BOARD OF ACCOUNTS 21
LINTON-STOCKTON SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Effect
Without the proper design or implementation of the components of a system of internal controls,
including policies and procedures that provide segregation of duties and additional oversight as needed,
the internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.