Harris County Board of EducationLocal Government

FA 2022-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Award Number: 225GA324N1199 (Year: 2022) Questioned Costs: $21,440 Description: A review of expenditures charged to the Child Nutrition Cluster revealed that the School District’s internal control procedures were not operating appropriately to ensure that the School District’s procurement procedures were followed. Background: The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential child care institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities. CNC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture. GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $2,662,705 were expended and reported on the Harris County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2022. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations and… (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Condition: A sample of 28 procurement transactions was randomly selected for testing using a non-statistical sampling approach. These transactions were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For three expenditures, evidence of review and approval was not reflected within the voucher package. • The appropriate procurement method was not used for the dollar amount and conditions associated with one procurement transaction that should have been considered a simplified acquisition transaction. Therefore, the School District could not provide evidence that an adequate number of sealed bids were sought and obtained from qualified sources. Questioned Costs: Upon testing a sample of $130,284 in procurement transactions, known questioned costs of $21,440 were identified for expenditures that did not follow the School District’s procurement procedures. Using the total sample population of $518,395 in procurement transactions, we project the likely questioned costs to be approximately $85,310. The following Assistance Listing Numbers were affected by known and likely questioned costs: 10.553 and 10.555. Cause: The School District did not follow its policies and procedures that govern the procurement process for federal programs. Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to appropriately implement procedures to address procurement compliance requirements exposes the School District to unnecessary risk of error and misuse of federal funds and could result in the expenditure of federal funds with unqualified vendors. In addition, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should evaluate and improve internal control procedures to ensure that required procurement methods are properly identified and followed and required procurement documentation is properly safeguarded and retained. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: We concur with the finding.

FA 2020-001 Improve Controls over Verification Compliance Requirement: Special Tests and Provisions Internal Control Impact: Significant Deficiency Compliance Impact: Significant Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education CFDA Numbers and Title: Child Nutrition Cluster (CFDA 10.553 and 10.555) Federal Award Numbers: 205GA324N1099 ? School Breakfast Program 205GA324N1099 ? National School Lunch Program Likely Questioned Costs: None Identified Repeat of Prior Year Findings: FA 2019-001, FA 2018-001 Description: A review of the verification process for free and reduced meal applications related to the Child Nutrition Cluster (CFDA 10.553 and 10.555) revealed that the School District?s internal control procedures were not operating appropriately to ensure that reviews and approvals occurred and proper verification standards were applied. Criteria: 7 CFR 245.6(c)(1) states in part that ?the local educational agency must determine household eligibility for free or reduced price meals either through direct certification or the application process at or about the beginning of the school year.? In addition, 7 CFR 245.6(c)(4) states in part that when determining initial eligibility and calculating income ?the local education agency must use the income information provided by the household on the application to calculate the household?s total current income.? 7 CFR 245.6a(f)(2) states in part that ?households selected and notified of their selection for verification must provide documentation of income. The documentation must indicate the source, amount and frequency of all income and can be for any point in time between the month prior to application for school meal benefits and the time the household is requested to provide income documentation.? 7 CFR 245.6a(h) states in part that ?each local education agency must report information related to its annual statutorily required verification activity? to the State agency? Local educational agencies shall retain copies of the information reported under this section and all supporting documents for a minimum of 3 years. All verified applications must be readily retrievable on an individual school basis and include all documents submitted by the household for the purpose of confirming eligibility, reproductions of those documents, or annotations made by the determining official which indicate which documents were submitted by the household and the date of submission. All relevant correspondence between the households selected for verification and the school or local educational agency must be retained.? Furthermore, 2 CFR 200.303(a) states in part that the ?non-Federal entity must: (a) Establish and maintain effective internal controls 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? (c) Evaluate and monitor the non-Federal entity?s compliance with statutes, regulations and the terms and conditions of Federal awards.? Condition: The 20 free and reduced meal applications selected for verification were reviewed to ensure that the School District performed verification procedures properly and made appropriate changes to each student?s eligibility status based on supporting documentation obtained. The following deficiencies were noted: ? The initial eligibility determination was incorrect for one of the applications reviewed. ? Evidence of review and approval of the initial determination for free and reduced meals was not reflected for two of the applications reviewed. ? The initial determination for free and reduced meals and approval of this determination was performed by the same individual for one of the applications reviewed. ? Evidence of review and approval of the final eligibility determination for free and reduced meals was not reflected for one of the applications reviewed. ? The detailed verification documentation reviewed by auditors did not agree to the summary verification results reported by the School District to the Georgia Department of Education. Cause: In discussing this deficiency with the School District, they indicated this was a repeat of prior year issues due to timing. The School Nutrition personnel have worked to strengthen internal controls over the verification process and anticipate these issues to be resolved in fiscal year 2021. Effect or Potential Effect: Failure to make accurate eligibility determinations and perform supervisory reviews of eligibility determinations exposes the School District to unnecessary risk of error and misuse of Federal Funds. Additionally, the School District is not in compliance with the Uniform Guidance and Georgia Department of Education guidance. Recommendation: The School District should review current internal control procedures related to the verification of free and reduced meal applications. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all verification procedures are performed appropriately. Furthermore, management should develop and implement a monitoring process to ensure that controls are functioning properly. Views of Responsible Officials: We concur with this finding.

FA 2019-001 Improve Controls over Verification Compliance Requirement: Special Tests and Provisions Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education CFDA Number and Title: Child Nutrition Cluster (CFDA 10.553 and 10.555) Federal Award Number: 195GA324N1099 ? School Breakfast Program 195GA324N1100 ? National School Lunch Program Likely Questioned Costs: $2,492.40 Repeat of Prior Year Finding: FA 2018-001 Description: A review of the verification process for free and reduced meal applications related to the Child Nutrition Cluster (CFDA 10.553 and 10.555) revealed that the School District?s internal control procedures were not operating appropriately to ensure that reviews and approvals occurred, proper verification standards were applied, and adequate documentation was maintained. Criteria: 7 CFR 245.6(c)(1) states in part that ?the local educational agency must determine household eligibility for free or reduced price meals either through direct certification or the application process at or about the beginning of the school year.? In addition, 7 CFR 245.6(c)(4) states in part that when determining initial eligibility and calculating income ?the local education agency must use the income information provided by the household on the application to calculate the household?s total current income.? 7 CFR 245.6a(f)(2) states in part that ?households selected and notified of their selection for verification must provide documentation of income. The documentation must indicate the source, amount and frequency of all income and can be for any point in time between the month prior to application for school meal benefits and the time the household is requested to provide income documentation.? 7 CFR 245.6a(h) states in part that ?each local education agency must report information related to its annual statutorily required verification activity? to the State agency? Local educational agencies shall retain copies of the information reported under this section and all supporting documents for a minimum of 3 years. All verified applications must be readily retrievable on an individual school basis and include all documents submitted by the household for the purpose of confirming eligibility, reproductions of those documents, or annotations made by the determining official which indicate which documents were submitted by the household and the date of submission. All relevant correspondence between the households selected for verification and the school or local educational agency must be retained.? Furthermore, 2 CFR 200.303(a) states in part that the ?non-Federal entity must: (a) Establish and maintain effective internal controls 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? (c) Evaluate and monitor the non-Federal entity?s compliance with statutes, regulations and the terms and conditions of Federal awards.? Condition: The 21 free and reduced meal applications selected for verification were reviewed to ensure that the School District performed verification procedures properly and made appropriate changes to each student?s eligibility status based on supporting documentation obtained. The following deficiencies were noted: ? Evidence of review and approval of the final eligibility determination for free and reduced meals was not reflected for any of the applications reviewed. ? The initial eligibility determination was incorrect for two of the applications reviewed. ? Appropriate documentation was not obtained to verify income for three of the applications reviewed; therefore, auditors were unable to determine the correct free and reduced eligibility status. ? The detailed verification documentation reviewed by auditors did not agree to the summary verification results reported by the School District to the Georgia Department of Education. Questioned Cost: Likely questioned costs of $2,492.40 were identified for incorrect or undocumented eligibility determinations associated with free and reduced meals received by students selected for verification. Cause: In discussing this deficiency with the School District, they indicated that inexperienced staff completed the review process for the free and reduced meal applications selected for verification, and the issues noted by auditors during the previous fiscal year?s audit were not corrected due to timing. Effect or Potential Effect: Failure to make accurate eligibility determinations, maintain required documentation of eligibility determinations, and perform supervisory reviews of eligibility determinations exposes the School District to unnecessary risk of error and misuse of Federal Funds. Additionally, the School District is not in compliance with the Uniform Guidance and Georgia Department of Education guidance. Recommendation: The School District should review current internal control procedures related to the verification of free and reduced meal applications. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all verification procedures are performed appropriately and adequate documentation is maintained on-file according to the School District?s record retention policy. Furthermore, management should develop and implement a monitoring process to ensure that controls are functioning appropriately. Views of Responsible Officials: We concur with this finding.

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