SECOND HARVEST COMMUNITY FOOD BANK

Overhead costs and payroll are not appropriately allocated amongst the activities of Second Harvest. Instead, costs such as utilities, phone, lawn service, repairs and maintenance are 100% allocated to TEFAP.

Second Harvest considers procurement procedures for routine vendors based on individual invoices, rather than based on total contract expenditures. As such, not all vendors were evaluated in accordance with Second Harvest’s procurement policy.

Expenditures reported on the SEFA for meal reimbursement programs, including Summer Food Service Program (SFSP) and Child & Adult Food Care Program (CACFP), are less than the federal funding received as the Organization does not track and allocate expenditures in sufficient detail to identify program specific costs. The Organization asserts that expenditures are sufficient to excess the funding received, but documentation to support this assertion is not available.

Second Harvest values inventory based on historical Feeding America rates applied to the weight of the food received from TEFAP. This estimation of value is recorded to be the actual value of donated product as report by the states of Missouri and Kansas using an entry to record differences to inventory adjustment accounts. The subledger, Primarius, is not reconciled to the actual values of donated product as reported to Second Harvest by the states of Missouri and Kansas in sufficient detail to ensure the ongoing completeness and accuracy of the subledger.

Overhead costs and payroll are not appropriately allocated amongst the activities of Second Harvest. Instead, costs such as utilities, phone, lawn service, repairs and maintenance and payroll are 100% allocated to TEFAP. Additionally, timesheet support for payroll allocated to the federal program was not maintaind in sufficient detail to support the allocation.

Second Harvest considers procurement procedures for vendors based on individual invoices, rather than based on total contract expenditures. As such, not all vendors were evaluated in accordance with Second Harvest’s procurement policy.

Expenditures reported on the SEFA for meal reimbursement programs, including Summer Food service program (SFSP) and Child and Adult Food Care program (CACFP), are less than the federal funding received as the Organization does not track and allocate expenditures in sufficient detail to identify program specific costs. The Organization asserts that expenditures are sufficient to exceed the funding received, but documentation to support this assertion is not available.

Second Harvest values inventory based on historical Feeding America rates applied to the weight of the food received from TEFAP. This estimation of value is not reconciled to the actual values of donated product as reported to Second Harvest by the states of Missouri and Kansas. An audit adjustment of $178,812 (12.82% of commodities received) was recorded to adjust the SEFA to state reporting.

Overhead costs and payroll are not appropriately allocated amongst the activities of Second Harvest. Instead, costs such as utilities, phone, lawn service, repairs and maintenance and payroll are 100% allocated to TEFAP.

Second Harvest considers procurement procedures for vendors based on individual invoices, rather than based on total contract expenditures. As such, not all vendors were evaluated in accordance with Second Harvest’s procurement policy.

Expenditures reported on the SEFA for meal reimbursement programs, including Summer Food service program (SFSP) and Child and Adult Food Care program (CACFP), are less than the federal funding received as the Organization does not track and allocate expenditures in sufficient detail to identify program specific costs. The Organization asserts that expenditures are sufficient to exceed the funding received, but documentation to support this assertion is not available.

Five federally funded programs were excluded from the SEFA as they were not identified by Second Harvest.

Allowable costs - U.S. Department of Agriculture, Department of Social Services, The Emergency Food Assistance (Food Distribution Cluster), Assistance Listing # 10.565, 10.568 & 10.569, June 30, 2022 Award Year, pass-through State of Missouri Department of Health and Senior Services. Criteria: The Administrative cost grant can only be used for activities intrinsic to the processing, transportation and distribution of the Emergency Food Assistance Program (?TEFAP?) commodities, costs associated with determination of eligibility, costs of recordkeeping, auditing or other administrative procedure required for program participation, or costs involved in publishing announcements of times and locations of distribution. Under 2 CFR 200.403, costs must not be included as a cost or used to meet cost sharing or matching requirements of any other federal financed program in either the current or prior period. Under 2 CFR 200.334, non-federal entities are required to retain financial records and supporting documentation for a three-year period from the date of financial reporting to the pass-through entity. Condition: Administrative costs are submitted to the state monthly for reimbursement on the Record of Expenditures under the TEFAP Financial Assistance form (?FD-32D?). The State reimburses the Organization for administrative costs as determined by the state on a monthly basis. Typically, the monthly reimbursement amount is significantly less than the actual amount of allowed administrative expenses incurred by the Organization. During our procedures, we noted that certain expenditures, amounting to approximately $3,290, which were included on the FD-32D of which supporting documentation the Organization is required to retain under 2 CFR part 200 was lacking. As such, we could verify these costs related to activities allowed for reimbursement under 2 CFR part 200. Questioned Costs: None. The monthly reimbursement requests for administrative costs submitted by the Organization exceed the amounts reimbursed by the State and therefore these amounts are not considered to be reimbursed but should not have been included in the monthly submittal as the supporting documentation was unavailable to ensure that the related costs were allowable. Context: Employees with reporting duties for the program are including expenditures that are not substantiated by receipts demonstrating they are allowed under the terms of the grant. Effect: Costs which are possibly unallowable, due to the lack of supporting documentation, are being improperly included on the monthly reporting to the State. It was noted that after excluding these costs from the monthly reports, the actual allowed administrative costs incurred and submitted by the Organization to the State remained greater than the amount reimbursed by the State. Cause: The employees responsible for the preparation of the report did not have the proper information, training and knowledge of the program to ensure that only allowable costs are included on the report. Recommendation: The Organization should review its accounting and reporting policies to ensure that steps are added to include a review for unallowable costs. Identification as a Repeat Finding: This is a repeat of finding 2021-002. Views of Responsible Officials and Corrective Actions See Corrective Action Plan

Finding 2021-001 Criteria: Segregation of duties in the internal control system should be in place to provide reasonable assurance that assets are safeguarded. Condition: Due to limited staffing and funding constraints, the Organization does not have proper segregation of duties in the accounting system. Context: There are not an adequate number of employees with financial responsibilities to properly segregate duties. Effect: While management has implemented mitigating controls to supplement the lack of segregation of duties, a failure in those controls could result in misappropriation of assets. Areas of overlap include cash receipts, cash disbursements, payroll, and posting of journal entries. Cause: Funding constraints have limited the ability of the Organization to employ staff and structure responsibilities to provide for complete segregation of duties. Recommendation: Management should evaluate internal controls to consider how duties can be further segregated. Views of Responsible Officials and Corrective Actions See Corrective Action Plan.

Finding 2021-002 Allowable costs - U.S. Department of Agriculture, Department of Social Services, The Emergency Food Assistance (Food Distribution Cluster), CFDA 10.565, 10.568 & 10.569, June 30, 2021 Award Year, pass-through State of Missouri Department of Health and Senior Services. Criteria: The Administrative cost grant can only be used for activities intrinsic to the processing, transportation and distribution of the Emergency Food Assistance Program (?TEFAP?) commodities, costs associated with determination of eligibility, costs of recordkeeping, auditing or other administrative procedure required for program participation, or costs involved in publishing announcements of times and locations of distribution. Under 2 CFR 200.403, costs must not be included as a cost or used to meet cost sharing or matching requirements of any other federal financed program in either the current or prior period. Condition: Administrative costs are submitted to the state monthly for reimbursement on the Record of Expenditures under the TEFAP Financial Assistance form (?FD-32D?). The State reimburses the Organization for administrative costs as determined by the state on a monthly basis. Typically, the monthly reimbursement amount is significantly less than the actual amount of allowed administrative expenses incurred by the Organization. During our procedures, we noted that certain expenditures, amounting to approximately $3,500, which were included on the FD-32D of which related to activities not allowed for reimbursement under 2 CFR part 200. Questioned Costs: None. The monthly reimbursement requests for administrative costs submitted by the Organization exceed the amounts reimbursed by the State and therefore these amounts are not considered to be reimbursed, but should not have been included in the monthly submittal. Context: Employees with reporting duties for the program are including expenditures that are not allowed under the terms of the grant. Effect: Unallowable costs are being improperly included on the monthly reporting to the State. It was noted that after excluding the unallowable costs from the monthly reports, the actual allowed administrative costs incurred and submitted by the Organization to the State remained greater than the amount reimbursed by the State. Cause: The employees responsible for the preparation of the report do not have the proper information, training and knowledge of the program to ensure that only allowable costs are included on the report. Recommendation: The Organization should review its accounting and reporting policies to ensure that steps are added to include a review for unallowable costs. Identification as a Repeat Finding: This is a repeat of finding 2020-003. Views of Responsible Officials and Corrective Actions See Corrective Action Plan.

Allowable costs - U.S. Department of Agriculture, Department of Social Services, The Emergency Food Assistance (Food Distribution Cluster), CFDA 10.565, 10.568 & 10.569, June 30, 2020 Award Year, pass-through State of Missouri Department of Health and Senior Services. Criteria: The Administrative cost grant can only be used for activities intrinsic to the processing, transportation and distribution of the Emergency Food Assistance Program (TEFAP) commodities, costs associated with determination of eligibility, costs of recordkeeping, auditing or other administrative procedure required for program participation, or costs involved in publishing announcements of times and locations of distribution. Under 2 CFR 200.403, costs must not be included as a cost or used to meet cost sharing or matching requirements of any other federal financed program in either the current or prior period. Condition: Administrative costs are submitted to the state monthly for reimbursement on the Record of Expenditures under the TEFAP Financial Assistance form (FD-32D). The State reimburses the Organization for administrative costs as determined by the state on a monthly basis. Typically, the monthly reimbursement amount is significantly less than the actual amount of allowed administrative expenses incurred by the Organization. During our procedures, we noted that certain expenditures, amounting to approximately $35,000, which were included on the FD-32D of which related to activities not allowed for reimbursement under 2 CFR part 200. Questioned Costs: None. The monthly reimbursement requests for administrative costs submitted by the Organization exceed the amounts reimbursed by the State and therefore these amounts are not considered to be reimbursed, but should not have been included in the monthly submittal. Context: Employees with reporting duties for the program are including expenditures that are not allowed under the terms of the grant. Effect: Unallowable costs are being improperly included on the monthly reporting to the State. It was noted that after excluding the unallowable costs from the monthly reports, the actual allowed administrative costs incurred and submitted by the Organization to the State remained greater than the amount reimbursed by the State. Cause: The employees responsible for the preparation of the report do not have the proper information, training and knowledge of the program to ensure that only allowable costs are included on the report. Recommendation: The Organization should review its accounting and reporting policies to ensure that steps are added to include a review for unallowable costs. Identification as a Repeat Finding: This is a repeat of finding 2019-003. Views of Responsible Officials and Corrective Actions See Corrective Action Plan.

Reporting - U.S. Department of Agriculture, Department of Social Services, Commodity Supplemental Food Program (Food Distribution Cluster), CFDA 10.565, 10.568 & 10.569, June 30, 2020 Award Year, pass-through State of Kansas Department of Children and Families. Criteria: Inventory management and reporting requirements are set by both the pass through award agreement and the USDA. Under 7 CFR section 250.16 and 250.19(a), failure to maintain records required by the awards is considered prima facie evidence of improper distribution or loss, and the agency processor or entity is liable for the value of the food or replacement of the food in kind. Condition: During the first quarter of Second Harvest?s 2020 operating year, the State of Kansas noted multiple instances where reports were submitted and were subsequently revised (sometimes repeatedly) due to issues with the Inventory management and tracking of the Organization. Questioned Costs: Unknown Context: Per the State of Kansas CSFP award agreement, the Organization is required to submit monthly reports which include the value of the CSFP inventory at month end, along with the receipt of use of these items. Effect: The Organization?s systems and controls failed to accurately monitor and report CSFP inventory received and used, resulting in incorrect inventory reports which were submitted for multiple reporting periods. Cause: In addition to the failure of controls related to the processing of inventory receipt and usage, there was a failure of communication between the staff preparing the reports and the warehouse staff to ensure the amounts where correct. Recommendation: The Organization should review its policies and procedures to ensure that accurate inventory counts are being transmitted for all awards and that monthly reconciliations of the reports are being performed by someone outside the reporting process to ensure accuracy. Identification as a Repeat Finding: This is a repeat of finding 2019-004. Views of Responsible Officials and Corrective Actions See Corrective Action Plan.

Subrecipient Monitoring - U.S. Department of Agriculture, Department of Social Services, Commodity Supplemental Food Program (Food Distribution Cluster), CFDA 10.565, 10.568 & 10.569, June 30, 2020 Award Year, pass-through State of Kansas Department of Children and Families. Criteria: The Organization did not monitor subrecipients to ensure that eligibility determinations made on its behalf were correct. The local agency certifies households as eligible to receive CFSP food packages by applying categorical and income eligibility criteria as defined 7 CFR section 247.9(a), 247.9(c), and 247.9(f). Condition: During the first quarter of Second Harvest?s 2020 operating year, the State of Kansas noted in its monitoring of Second Harvest that the determination of eligibility, made by sub-recipients of Second Harvest, was not being verified by the Organization, and therefore some participants were not verified as eligible by the Organization, or its sub-recipient, in some instances. Questioned Costs: Unknown Context: Per the CSFP award requirements, individuals who meet the income and other requirements (seniors, disabled, etc.) can be signed up to receive monthly food distributions as part of the KS and MO CSFP programs. Effect: The Organization may have distributed food to sub-recipients which ultimately could have been provided to ineligible recipients. Cause: The Organization's controls over the monitoring and review of sub-recipients failed to detect and correct the errors in program enrollment. The Organization?s staff were not requesting and reviewing the eligibility determinations made by its sub-recipients. Recommendation: The Organization should review its policies and procedures to ensure that training and oversite of sub-recipients is adequate related to program intake, and that adequate monitoring and oversite is being conducted at least annually. Identification as a Repeat Finding: This is a repeat of finding 2019-005. Views of Responsible Officials and Corrective Actions See Corrective Action Plan.

Special Tests and Provisions ? Accountability for USDA Foods - U.S. Department of Agriculture, Department of Social Services, Commodity Supplemental Food Program (Food Distribution Cluster), CFDA 10.565, 10.568 & 10.569, June 30, 2020 Award Year, pass-through State of Kansas Department of Children and Families. Criteria: Inventory management and reporting requirements are set by both the pass through award agreement and the USDA. The Organization's controls over inventory may have failed to detect and correct errors in the usage of specifically identified inventories. Under 7 CFR section 250.16 and 250.19(a), failure to maintain records required by the awards is considered prima facie evidence of improper distribution or loss, and the agency processor or entity is liable for the value of the food or replacement of the food in kind. Condition: During the first quarter of Second Harvest?s 2020 operating year, the State of Kansas noted in its monitoring of Second Harvest that the Organization may have been incorrectly using restricted inventory from one program to meet the needs of another, without requesting approval of either entity. Questioned Costs: Unknown Context: Per the Kansas and Missouri CSP agreements, the foods provided to Second Harvest are to be used/distributed for eligible entities/individuals within the boundaries (State and Counties) set forth in those agreements. Effect: The Organization may have used goods restricted for a specific state/region goods to meet the needs of an unrelated program. Cause: The Organization's controls over the use, reporting, and monitoring of inventory failed to detect and correct the incorrect use of the restricted items. Recommendation: The Organization should review its policies and procedures to ensure that accurate inventory counts are being transmitted for all awards and that monthly reconciliations of the reports are being performed by someone outside the reporting process to ensure accuracy. And that any transfers between Programs are requested and approved before the actual inventory is used. Identification as a Repeat Finding: This is a repeat of finding 2019-006. Views of Responsible Officials and Corrective Actions See Corrective Action Plan.

Allowable costs - U.S. Department of Agriculture, Department of Social Services, The EmergencyFood Assistance (Food Distribution Cluster), CFDA 10.565, 10.568 & 10.569, June 30, 2019 Award Year, pass-through State of Missouri Department of Health and Senior Services.Criteria:The Administrative cost grant can only be used for activities intrinsic to the processing,transportation and distribution of the Emergency Food Assistance Program (TEFAP) commodities,costs associated with determination of eligibility, costs of recordkeeping, auditing or other administrative procedure required for program participation, or costs involved in publishing announcements of times and locations of distribution. Condition: Administrative costs are submitted to the state monthly for reimbursement on the Record of Expenditures under the TEFAP Financial Assistance form (FD-32D). The State reimburses the Organization for administrative costs as determined by the state on a monthly basis. Typically, the monthly reimbursement amount is significantly less than the actual amount of allowed administrative expenses incurred by the Organization. During our procedures, we noted that certain expenditures, amounted to $731, which were included on the FD-32D of which related to activities not allowed for reimbursement under 2 CFR part 200. Questioned Costs:None Context:Employees with reporting duties for the program are including expenditures that are not allowed under the terms of the grant. Effect:Unallowable costs are being improperly included on the monthly reporting to the State. It was noted that after excluding the unallowable costs from the monthly reports, the actual allowed administrative costs incurred and submitted by the Organization to the State remained greater than the amount reimbursed by the State. Cause:The employees responsible for the preparation of the report do not have the proper information,training and knowledge of the program to ensure that only allowable costs are included on the report. Identification as a Repeat Finding:This is a repeat of finding 2018-002. Recommendation:The organization should review its accounting and reporting policies to ensure that steps are added to include a review for unallowable costs. Views of Responsible Officials and Corrective Actions: See Corrective Action Plan.

Reporting - U.S. Department of Agriculture, Department of Social Services, Commodity Supplemental Food Program (Food Distribution Cluster), CFDA 10.565, 10.568 & 10.569, June 30, 2019 Award Year, pass-through State of Kansas Department of Children and Families. Criteria:Inventory management and reporting requirements are set by both the pass through award agreement and the USDA. Condition:During 2019, the State of Kansas noted multiple instances where these reports were submitted and were subsequently revised (sometimes repeatedly) due to issues with the Inventory management and tracking of the Organization. Questioned Costs:Unknown Context:Per the State of Kansas CSFP award agreement, the Organization is required to submit monthly reports which include the value of the CSFP inventory at month end, along with the receipt of use of these items. Effect:The Organization?s systems and controls failed to accurately monitor and report CSFP inventory received and used, resulting in incorrect inventory reports which were submitted for multiple reporting periods. Cause:In addition to the failure of controls related to the processing of inventory receipt and usage, there was a failure of communication between the staff preparing the reports and the warehouse staff to ensure the amounts where correct. Recommendation:The organization should review its policies and procedures to ensure that accurate inventory counts are being transmitted for all awards and that monthly reconciliations of the reports are being performed by someone outside the reporting process to ensure accuracy. Identification as a Repeat Finding:This is not a repeat finding. Views of Responsible Officials and Corrective Actions: See Corrective Action Plan.

Subrecipient Monitoring - U.S. Department of Agriculture, Department of Social Services, Commodity Supplemental Food Program (Food Distribution Cluster), CFDA 10.565, 10.568 & 10.569, June 30,2019 Award Year, pass-through State of Kansas Department of Children and Families. Criteria:The Organization did not monitor subrecipients to ensure that eligibility determinations made on its behalf were correct. Condition:During 2019, the State of Kansas noted in its monitoring of Second Harvest that the determination of eligibility, made by sub-recipients of Second Harvest, was not being verified by the Organization, and therefore some participants were not verified as eligible by the Organization, or its subrecipient, in some instances. Questioned Costs:Unknown Context:Per the CSFP award requirements, individuals who meet the income and other requirements (seniors, disabled, etc.) can be signed up to receive monthly food distributions as part of the KS and MO CSFP programs. Effect:The Organization may have distributed food to sub-recipients which ultimately could have been provided to ineligible recipients. Cause:The Organization's controls over the monitoring and review of sub-recipients failed to detect and correct the errors in program enrollment. The Organization?s staff were not requesting and reviewing the eligibility determinations made by its sub-recipients. Recommendation:The Organization should review its policies and procedures to ensure that training and oversite of sub-recipients is adequate related to program intake, and that adequate monitoring and oversite is being conducted at least annually. Identification as a Repeat Finding:This is not a repeat finding. Views of Responsible Officials and Corrective Actions: See Corrective Action Plan.

Special Tests and Provisions ? Accountability for USDA Foods - U.S. Department of Agriculture,Department of Social Services, Commodity Supplemental Food Program (Food Distribution Cluster),CFDA 10.565, 10.568 & 10.569, June 30, 2019 Award Year, pass-through State of Kansas Department of Children and Families. Criteria:The Organization's controls over inventory may have failed to detect and correct errors in the usage of specifically identified inventories. Condition:During 2019, the State of Kansas noted in its monitoring of Second Harvest that the Organization may have been incorrectly using restricted inventory from one program to meet the needs of another, without requesting approval of either entity. Questioned Costs:Unknown Context:Per the Kansas and Missouri CSP agreements, the foods provided to Second Harvest are to be used/distributed for eligible entities/individuals within the boundaries (State and Counties) set forth in those agreements. Effect:The Organization may have used goods restricted for a specific state/region goods to meet the needs of an unrelated program. Cause:The Organization's controls over the use, reporting, and monitoring of inventory failed to detect and correct the incorrect use of the restricted items. Recommendation:The organization should review its policies and procedures to ensure that accurate inventory counts are being transmitted for all awards and that monthly reconciliations of the reports are being performed by someone outside the reporting process to ensure accuracy. And that any transfers between Programs are requested and approved before the actual inventory is used. Identification as a Repeat Finding:This is not a repeat finding. Views of Responsible Officials and Corrective Actions:See Corrective Action Plan.

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