KENAI PENINSULA FOOD BANK, INC.Non-Profit

Federal Agency: U.S. Department of Agriculture, passed through the State of Alaska, Department of Education and Early Development Federal Program: Food Distribution Cluster ALN Number: 10.569 Award Number: None Award Year: 2021 Type of Finding: Material weakness in internal control over compliance and material noncompliance over special test and provisions. Criteria: Accurate and complete records must be maintained with respect to the receipt distribution/use, and inventory of USDA Foods consistent with 7 CFR section 250.19. Condition/Context: Sufficient internal controls requiring supporting documentation were lacking surrounding the distribution of USDA commodities and acceptance of USDA commodities at the Kenai Peninsula Food Bank. Received commodities were not maintained in a sufficient inventory system to track pounds received or units consistently. We substantively reviewed all provided delivery receipts, and noted there were cases where it appears weights were documented at the full shipping weight, a per unit weight, or a per case weight which led to variances in the reconciliation between beginning inventory and outgoing inventory. As a result of these inconsistencies, the commodities were not tracked in the same way through the inventory system, which also leads to questions of the completeness of the audit population received. Furthermore, there appears to be insufficient internal controls surrounding the documentation of incoming commodity units/weight as the intake of commodities appears to be documented by one individual with insufficient reviews to ensure that weights are consistently and accurately recorded. We sampled 25 distributions to third parties over the course of the year. In reviewing these distributions, we noted that there appears to be a lack of internal controls surrounding distributions of commodities from inventory to ensure the appropriate amount of goods are distributed and losses, if any, are accounted for appropriately. While we noted that it does appear that detailed documentation is maintained regarding the overall goods and units distributed via prepared meals and through distributed daily pounds reported to individual households, there does not appear to be sufficient internal controls over the monitoring of those counts to ensure that the individual preparing said schedules is appropriately accounting for all commodities and discrepancies. The individual distributions sampled all appear to be to eligible households, however as a result of the lack of internal controls surrounding the daily distribution logs and prepared meals, we were unable to verify the completeness or accuracy of the population provided. A detailed log of all inventory transactions was not available and as a result we were unable to verify whether the sampled distributions agreed to the weight leaving the storage facility. While recalculating the mathematical accuracy of Kenai Peninsula Food Bank?s inventory records from beginning inventory to ending inventory, we identified a variation of 49,304 pounds less lower than what was observed at year end for the program. As a result of the previously noted internal control issues above, we were unable to verify whether this discrepancy was a result of inventory issues within the beginning of inventory, the population of distributed commodities, or the incoming commodities, and thus we were also unable to verify any of these populations were complete. Cause: Lack of internal controls over accurate and complete records of USDA Foods. Effect: Noncompliance with program requirements. Variances in inventory amounts from the Kenai Peninsula Food Bank and recipients could go undetected if not properly monitored. Insufficient internal controls over commodities could result in improper classification of goods, distributions to recipients, or undocumented losses. Questioned Costs: While 49,304 pounds of recalculation variances were noted which would equate to an estimated fair value of $88,254, the ending inventory count was higher than the total recalculated amount. As we were unable to verify the completeness of our populations as noted above, and because it appears there are ongoing/accumulated discrepancies over multiple years we are unable to estimate the extent of questioned cost. Repeat Finding: No. Recommendation: We recommend that the entity strengthen internal controls over all inventory transactions of the entity. Management?s Response: Management agrees with this finding. See Corrective Action Plan

Condition- The Organization has inadequate design of internal control over the preparation of financial statements, by not having an effective process in place to ensure all accounting procedures are accounted for during the year. The Organization did not have an effective year-end procedural check-list to ensure all adjusting entries were recorded prior to the start of our audit. Criteria: The Uniform Guidance (2 CFR ? 200.303) states the Organization must establish and maintain effective internal control over the Federal awards to ensure compliance with Federal statutes, regulations and terms and conditions of the Federal Award. As part of the establishing cohesive internal controls, the Committee of Sponsoring Organization of the Treadway Commission (COSO) recommends written policies and procedures to exist that outline processes and control activities for costs coded to federal awards for allowable costs and recognizing the costs in the period of performance. Organization year-end procedures were not fully implemented before the audit field work began for the audit Cause: The Organization has an unwritten and incomplete financial policy for identifying and recording all financial statements activity including revenue and expenses that are incurred at the Organization. As a result of our inquiry during the audit, the Organization was able to reconcile and adjust for accrued expenses, refundable advances and deferred grant revenue. In addition to reconciling the statements of financial position accounts, the Organization was able to provide a summary of the revenue and other support received and expended during the year. Effect- The preliminary trial balance received for audit was incorrectly stated and various adjustments were recorded to reconcile the areas identified above. Recommendation- We recommend that management establish written procedures to ensure all accounting activity are properly recorded in the general ledger. Views of Responsible Officials and Planned Corrective Action: Management concurs with the finds. See the attached unaudited corrective action plan, which explains additional review and reconciliation procedures to be performed.