Manson School District No. 19

The District did not have adequate controls in place to ensure compliance with federal child nutrition program verification requirements. CFDA Number and Title: 10.553 School Breakfast Program 10.555 National School Lunch Program 10.559 Summer Food Service Program for Children Federal Grantor Name: United States Department of Agriculture (USDA) Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI) Pass-through Award/Contract Number: 04-019 Questioned Cost Amount: $0 Background During fiscal year 2019, the District received $342,036 in funding for the Federal Child Nutrition program. The program provides funding for free and reduced-price meals for eligible low-income students whose households meet specific income requirements set by the U.S. Department of Agriculture. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Each year, districts must select a sample of household applications and verify that family income information reported to the District is correct. The Office of Superintendent of Public Instruction (OSPI) instructs school districts how to verify program eligibility, including the number of applications that districts must verify. Districts must review selected applicants? income documentation and confirm students are receiving correct benefits of free or reduced-price meals. Otherwise, the student is not eligible and must pay for meals at full price. Description of Condition Though the District did have a process in place to perform the annual verification, internal controls were not effective to ensure it completed this process accurately. The District needed to verify three applications using the 3 percent random sampling method. However, the District verified only two applications. Further, the District did not use recent income support to complete verification of one application. The District must use income documentation from any time between the month before it received the application and the time the household is asked to provide income documentation. However, the District used income support from October and November 2016 to verify the application, which was dated September 2018. We consider this deficiency in internal controls to be a material weakness. The issue was not reported as a finding in the prior audit. Cause of Condition The District did not follow written instructions provided by OSPI in its verification tool for the 3 percent random sampling method to determine the number of applications to verify. The District employee responsible for obtaining income documentation to verify the application did not confirm that documentation was within the allowable period. Further, the District?s review of the verified application and income documentation was not adequate to identify the discrepancy. Effect of Condition and Questioned Costs Lack of proper internal controls over the verification process increases the risk that the District might provide free or reduced-priced meals to children who are not eligible to receive them. The District could receive funding for households that did not qualify for free and reduced-priced meals. Further, lack of improper internal controls increases the risk that the District did not report to OSPI the correct rate of households from which it did not obtain verification documentation. In future school years, this might result in the District not using the 3 percent focused sampling method that is required when the non-response rate is 20 percent or greater. Recommendations We recommend the District follow written guidance provided by OSPI when determining the number of applications to verify. In addition, we recommend the District establish an adequate review of income documentation obtained during the verification process to confirm documentation is within the allowable period. District?s Response We have reviewed the process and have made sure staff are aware of the requirements. We plan to provide additional oversight over the process in subsequent years. Given our previous multiple years of satisfactory audits on this program by the State Auditor?s office and OSPI, we view this issue as a minor occurrence and not worthy of a finding. We understand the State Auditor?s Office has interpreted federal audit guidance as requiring a finding vs. a management letter or recommendation which we feel would be more appropriate given the minor nature of these procedural mistakes. Going forward the District will: ? Follow written directives from OSPI (versus verbal) on the number of families to verify (in this instance we should have verified three vs. two families). ? The Food Service Director will verify accuracy of source documents and the Business Manager will oversee the verification process. Auditor?s Remarks We appreciate the District?s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the condition during our next audit. Applicable Laws and Regulations 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 516, Audit findings, establishes reporting requirements for audit findings. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 303 Internal controls, describes requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 7 CFR, Part 245, Determining Eligibility For Free and Reduced Price Meals and Free Milk in Schools, Section 6a, Verification requirements, sets forth the verification requirements for eligibility of children for free and reduced price meal benefits.

Finding ref number: 2019-001 Finding caption: The District did not have adequate controls in place to ensure compliance with federal child nutrition program verification requirements. Name, address, and telephone of District contact person: Scott Renick, Business Manager P.O. Box A, Manson, WA 98831 (509) 687-3140 Corrective action the auditee plans to take in response to the finding: 1. Follow written directives from OSPI on number of families to verify (vs. verbal). 2. Food Service Director verify accuracy of source documents after clerk?s initial verification process. 3. Business Manager oversee verification requirements process. Anticipated date to complete the corrective action: September 30, 2020