Finding Text
FINDING 2023-003
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): FY 2022/2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Special Tests and Provisions - Verification of
Free and Reduced Price Applications (NSLP)
Audit Finding: Material Weakness
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 with the Special Tests and Provisions - Verification of Free and
Reduced Price Applications (NSLP) compliance requirement.
INDIANA STATE BOARD OF ACCOUNTS
21
TELL CITY-TROY TOWNSHIP SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The School Corporation designed a control that one employee would determine the number of
applications required to be verified, select the required applications, request the income verification
documentation for each application, and finally perform the verifications to determine if changes in eligibility
status were warranted. A second employee would then review the verifications performed to ensure that
the determinations were accurate prior to submission of the Verification Summary Report.
In order to substantiate that the internal control was properly implemented and operating effectively,
the three applications required to be verified by the School Corporation for fiscal year 2022-2023 were
selected for testing. None of the applications contained evidence to indicate that the identified internal
control was implemented as designed.
The lack of internal controls was 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). . . ."
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 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.
INDIANA STATE BOARD OF ACCOUNTS 22
TELL CITY-TROY TOWNSHIP SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.