Kettering City School District

7 C.F.R. ? 245.3(c) states, in part, each School Food Authority shall serve free and reduced price meals or free milk in the respective programs to children eligible under its eligibility criteria. 42 U.S.C. ? 1758 (b)(1)(A) states, in part, the income guidelines for determining eligibility for free lunches shall be 130 percent of the applicable family size income levels contained in the nonfarm income poverty guidelines prescribed by the Office of Management and Budget, as adjusted annually in accordance with subparagraph (B). The income guidelines for determining eligibility for reduced price lunches for any school year shall be 185 percent of the applicable family size income levels contained in the nonfarm income poverty guidelines prescribed by the Office of Management and Budget, as adjusted annually in accordance with subparagraph (B). Due to a failure of internal controls, based on income eligibility guidelines, one out of sixty applications tested (1.7%) received free meals when they did not qualify for free or reduced meals. The District should establish and implement policies and procedures to verify that only students supported by an accurate, approved application receive free and reduced lunch benefits. Failure to do so could result in students receiving benefits they are not entitled to and loss of future grant funding.

2 C.F.R. ? 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. ? 200.313(d)(1) which states, in part, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal Award Identification Number (FAIN)), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. 2 C.F.R. ? 3474.1 gives regulatory effect to the Department of Education for 2 C.F.R. ? 200.313(d)(2) which states, a physical inventory of the property must be taken and the results reconciled with the property records at least once every 2 years. Due to a failure of internal controls, the District's capital asset records for assets acquired under the Special Education Cluster did not contain the FAIN, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, or the use or condition of the property. Additionally, due to a failure of internal controls, there was no indication that a physical inventory of the property acquired under the Special Education Cluster had been performed within the preceding two years and one of four (25%) assets purchased under the Special Education Cluster selected for physical inspection was included in the capital asset records; however, the asset was no longer owned by the District. The District should establish and implement policies and procedures to properly track and dispose of equipment purchased with Federal funds in accordance with 2 C.F.R. ? 200.313(d). Failure to do so could result in the District tracking an incorrect number and/or amount of assets and misuse going undetected in a timely manner. Additionally, physical inventories should be performed, at a minimum, once every two years to verify that assets held per the capital asset listing actually exist. This will help detect errors, fraud, theft or omissions.