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Audits, Record Retention, & Closeout Procedures

Audits

Records Retention

Compliance

Closeout Procedures

 

Audits

Financial Audit Requirement

Federal law requires that all non-federal entities that expend $750,000 or more in federal awards have an annual audit or single (organization-wide) audit or a program specific audit each year as described in the Audit, Program Specific Audit subsection in this section. All audits must be conducted in accordance with Generally Accepted Accounting Auditing Standards (GAAS).

Because the rules and regulations applying to sudits are highly technical, and different auditing requirements apply by type of entity and amount of funds received, this subsection only provides an overview for the audit requirements for SFAs administering NSLP or SBP. See Information Box 1 for additional information on federal resources on audits.

Records Reviewed in an Audit

At a minimum, auditors will review the following records:

General Accounting Documentation

  • Records (receipts, ledgers, files) of food, milk, nonfood items and purchased equipment 
  • Bank statements
  • Procurement documentation, including receipt of credits, discounts, and rebates as well as the value of USDA foods

[NOTE: When procurement relates to a major program in an audit, the scope of the audit must include determining whether these transactions are in compliance with federal statutes, regulations, and the terms and conditions of the federal award.]

Staff Cost Documentation

  • Labor costs, including fringe benefits, for all staff involved in food service

Food Production Documentation

  • Food service equipment depreciation schedules, if claiming depreciation
  • Records of reimbursements including claim forms and worksheets
  • Records describing the value of USDA foods
  • Records accounting for food sold as part of the meal program-a la carte, milk, and reimbursable meals, catering, or other food services
  • Records describing food and nonfood inventories

Program Participation Documentation

  • Records providing participant data

Financial Audit Due Date. NYSED must receive an acceptable audit within nine months of the last day of the SFA’s accounting fiscal year if the SFA is required to submit an annual audit. Each SFA must use the accounting fiscal year that its organization follows to determine the audit due date.

For Example:

Audit Calendar - Calendar Year Jan 1 - Dec 1; NSLP Fiscal Year July 1 - June 30; Federal Fiscal Year Oct 1 - Sept 30

[NOTE: SFAs should review and accept the audit report before sending it to NYSED. NYSED requires only the final draft of the audit report.]

Financial Audit, Program Specific Audit

A SFA that receives more than $750,000 may elect to have a program specific audit. To be elegible for a program specific audit, the SFA must meet two conditions.

  1. The federal program's laws, regulations, or grant agreement must allow the CE to conduct a program specific audit.
  2. The SFA must administer only one federal award program as defined by the following criteria:

Audits for Federal Awards

For example: A SFA administers NSLP and SBP as well as receives USDA Foods. All of these programs share the same CFDA number. In this case, the SFA can perform a program specific audit. A SFA administers NSLP and SBP, receives USDA Foods, and administers a Head Start program. Some of the programs have CFDA numbers; others do not. While the NSLP, SBP, and USDA Foods may be treated as one program under the criteria, the Head Start is funded through a different federal agency and has a different purpose. In this case, the SFA cannot perform a program specific audit.

If a program specific audit is conducted, the audit report must be sent to NYSED as described in the Financial Audit Due Date subsection on this page or to USDA upon request.

Other Audits

NYSED retains the right to conduct additional audits as necessary.

Federal Audits Clearinghouse Requirement for Single Audits

SFAs must their final single audit to the Federal Audit Clearinghouse each year. All fiscal year audits must include the standard audit finding reference number format and must be submitted in an unlocked, unencrypted, and text-searchable PDF format. The Federal Audit Clearinghouse provides detailed information on the new requirements and how to upload a single audit at:

https://harvester.census.gov/facides/(S(jp5xqdd1nxejdzgdbkrijrtp))/account/login.aspx

[NOTE: Public and charter schools are not required to submit an audit or submit their audits to the Federal Audit Clearinghouse unless they participate in CACFP and expend $500,000 [$750,000 for audits of fiscal years beginning on or after December 26, 2014] for new or modified awards] or more in federal funds.]

SFA Response to Audit Findings, Corrective Action Plan

The SFA is responsible for follow-up to the audit and creation of a corrective action plan to address all audit findings. When SFAs develop their corrective action plan for addressing audit findings, the plan must span audit findings for multiple years. This allows the SFA and anyone reviewing the audit plan to address any issues that carry forward over multiple years. Moreover, the corrective action plan must describe how the SFA will prevent further violations for all audit findings.

60 Calendar Day Claim Rule - When there is an audit finding and the SFA must adjust prior claims upward or downward, the 60-Calendar day claim rule is suspended. The SFA must prepare the following documentation as part of its corrective action plan to address audit findings:

  1. Audit Summary Schedule or Work Plan for Prior Audit Findings That Have Not Been Corrected - the summary work plan must include the following information:
    • Reference number and the year for each audit finding
    • Explanation of the status of actions to address each finding
    • Planned corrective action for any finding that has not been corrected as well as any partial corrective action described in the summary work plan for previous audit
    • Explanation of why a finding, as applicable, is no longer valid or does not warrant further action.
  2. Audit Corrective Action Plan for the Current Year's Audit Findings - the corrective action plan must include the following:
    • List of all findings by assigned number
    • Description of corrective action to be taken for each finding
    • Name of contact person responsible for each corrective action
    • Anticipated completion date for each corrective action
    • Explanation of why the SFA does not agree with any findings submitted by the auditor and why corrective action is not needed
    • Submission of amended claims if audit findings determine submitted claims are incorrect.

The SFA's response to the audit findings must be retained onsite as described in the Records Retention subsection on this page and available for review on request.

Record Retention

The SFA is required to maintain an organized system of accounting and financial records retention that is accessible to appropriate SFA staff members and federal or state reviewers. SFAs have the option to maintain records on paper or electronically.

All documentation or records must be kept on file for a minimum of five years for public and charter schools or three years for private schools, nonprofit organizations, and residential child care institutions (RCCIs) after the end of the fiscal year to which they pertain. If audit findings have not been resolved, the records must be maintained as long as required for the resolution of the issues raised by the audit.

CNPA may request financial documentation for both offsite and onsite administrative review processes.

SFAs must be able to produce the following documentation in relation to its financial management of foodservice account funds:

Employees

  • Activity reports, and all related documentation, for all SNP employees

Excess Fund Balance (Net Cash Resources)

  • Forms demonstrating the SFA’s efforts to address an excessive fund balance (net cash resources), if applicable

Financial Management

  • Records of financial transfers into and out of the SNP account
  • Audit reports and related documentation
  • Documentation related to corrective action taken as a result of an audit

Income and Costs

  • Daily  and  cumulative  monthly  records  of  income  received  for  meal  service  including reduced-price and paid meals and milk, a la carte, and adult meals served
  • Daily and cumulative monthly records for cost and income from all sources, federal and non- federal with the ability to report income and cost by program
  • Daily and cumulative monthly records for program and nonprogram expenses and revenue
  • Invoices,  payment  stubs,  and  any  record  documenting  expenses  paid  out  of  the  SNP foodservice account

[NOTE: Expenditures, no matter the method of payment, must be documented by itemized receipts, invoices, and/or cancelled checks. If an invoice is split between more than one program, there must be a method to document the charge to each program.]

Indirect Rate

  • Documentation indicating the approved indirect cost rate, if applicable

Locally Purchased Food

When a SFA purchases food items from local farm stands, farmer’s markets, community supported agriculture programs or farms, a handwritten receipt is acceptable as long as the receipt includes the following information:

  • Amount purchased
  • Date of purchase
  • Item cost
  • Name of the vendor or farmer
  • Total cost of the food items purchased

Pass-Through Entities

When a SFA passes funds to another entity (contractor, vendor, supplier, processor, organization, etc.) to act on behalf of or assist the SFA in operating one of the child nutrition programs, the entity receiving the funds is expected to meet the terms and conditions established by the SFA and operate in compliance with all program requirements, including all financial requirements. In order for the SFA to ensure that all terms and conditions are met and that the entity acting on behalf of the SFA is in compliance with financial requirements, the SFA must have access to the following documentation:

  • All records and financial statements necessary to demonstrate compliance with all program regulations
  • All records and financial statements that are necessary to evaluate the recipient’s risk of noncompliance with federal statutes, regulations, and terms and conditions of the award
  • All records and financial statements that are necessary for audits
  • All records that demonstrate that credits, discounts, and rebates and value of USDA Food have been accurately awarded to the SFA

Compliance

NYSED may take appropriate fiscal action or terminate the Single Permanent Agreement for any SFA that is not in compliance with the accounting and financial requirements, including corrective action related to audits. Any lack of action to appropriately address an audit finding that requires amended claims may result in fiscal action.

Additionally, NYSED will assess compliance with the accounting and financial requirements based on the documentation that SFA has submitted throughout the year as well as documentation submitted for offsite and onsite administrative review processes.

Obligations of the School Food Authority (SFA) to Report Fraud, Bribery, and Gratuity Violations

SFA’s must report, in writing, all violations of federal criminal law—fraud, bribery, or gratuity.

The non‐Federal entity or applicant for a Federal award must disclose, in a timely manner, in writing to the Federal awarding agency or pass‐through entity all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award. Failure to make required disclosures can result in any of the remedies described in § 200.338 Remedies for noncompliance, including suspension or debarment. (2 CFR 200. 113; 31 U.S.C. 3321).

Criminal Penalties Associated with Mishandling of Funds

The following statement from the NSLP regulations describes the penalties for the misuse or fraudulent use of program funds:

Whoever embezzles, willfully misapplies, steals or obtains by fraud any funds, assets or property provided under the National School Lunch Program and/or School Breakfast Program whether received directly or indirectly, shall if such funds, assets, or property are of a value of $100 or more, be fined no more than $25,000 or imprisoned not more than 5 years or both; or if such funds, assets or property are of a value of less than $100, be fined not more than $1,000 or imprisoned not more than 1 year or both. Whoever receives, conceals, or retains for personal use or gain, funds, assets or property provided under the National School Lunch Program and School Breakfast Program, whether received directly or indirectly, knowing such funds, assets or property have been embezzled, willfully misapplied, stolen or obtained by fraud, shall be subject to the same penalties.

Termination of the Permanent Agreement for Financial Fraud or Misuse of Funds - If serious deficiencies, such as fraud or misuse of funds, occur, and corrective action is not practical, NYSED will amend the Single Permanent Agreement to terminate the SFA’s participation in the SNP. In this case, NYSED may also refer the matter to the appropriate local, state, and/or federal authorities.

Termination of the Permanent Agreement for Noncompliance with Audit Requirements - NYSED may terminate the Single Permanent Agreement effective the first day of the month following the month in which the audit was due for any of the following reasons: 

  1. NYSED does not receive the audit by the specified due date.
  2. The SFA submits an audit that does not meet audit requirements as defined in USDA regulations.
  3. The SFA requests but is not granted an extension of the audit due date and does not submit an acceptable audit as required.
  4. The SFA requests and is granted an extension of the due date but fails to submit an acceptable audit by the extended due date.

Unacceptable Audit Notification - NYSED will notify the SFA in writing that the audit is unacceptable. The SFA must submit an acceptable audit within 30 calendar days of the date of the notice.

Extenuating Cirumstances - If NYSED determines that extenuating circumstances resulted in the SFA’s inability to submit an acceptable audit, SED may conduct an additional audit or have an additional audit conducted through a third-party contract. The SFA must pay all costs associated with such an audit. The SFA does not have the right to appeal this decision.

Unacceptable SFA Response to Audit Findings - As described in the SFA Response to Audit Findings—Corrective Action Plan subsection in this section, if the audit findings indicate that the SFA has submitted claims for reimbursement that are incorrect, the SFA must amend the impacted claims and take corrective action to prevent further violations. If the SFA does not amend its claims and/or take appropriate corrective action, SED may take fiscal action for any violations found during an audit.

Once the SFA’s Single Permanent Agreement has been terminated for failure to comply with the audit requirement, the SFA must provide an acceptable audit for any outstanding audit year(s) and comply with audit requirement to be eligible to administer the program in the future.

Closeout Procedures

When Child Nutrition Program Administration (CNPA) terminates a School Food Authority (SFA) from any Child Nutrition program either voluntarily or involuntarily, CNPA will close-out the federal award when it determines that all applicable administrative actions and all required work of the Federal award have been completed by the SFA. The following steps must be taken by the SFA:

  1. The SFA must submit, no later than 90 calendar days after the termination date, copies of:
    1. The final financial statement of the nonprofit food service account showing any remaining funds in the nonprofit food service account.
    2. For furniture and equipment – a site-specific listing describing each item purchased using Child Nutrition funds, the location at that site (i.e., room number), the cost of the item, school year of acquisition and the amount depreciated.
    3. For consumable supplies and materials (including food) purchased with Child Nutrition funds – a site specific listing grouped in categories (such as food, paper goods) with the total quantity of items in that group, the location of the items within that site and the market value of each group of items.
  2. The SFA must promptly return any balances of unobligated cash in the nonprofit food service account to CNPA.
  3. CNPA will review the documentation submitted by the SFA and provide directive on disposition of any assets.

The closeout of a School Food Authority does not affect any of the following:

  1. The right of CNPA to disallow costs and recover funds based on a later audit or other review.
  2. The obligation of the SFA to return any funds due as a result of later refunds, corrections, or other transactions including final indirect cost rate adjustments.
  3. Audit requirements in 2 CFR 200, Subpart F—Audit Requirements.
  4. Property management and disposition requirements in 2 CFR 200, Subpart D—Post Federal Award Requirements.
  5. Records retention as required in 2 CFR 200, Subpart D—Post Federal Award Requirements, §200.333 Retention requirements for records through §200.337 Restrictions on public access to records.

 

Back to the Nonprofit Food Service Account page

USDA Nondiscrimination Statement

In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA programs are prohibited from discriminating based on race, color, national origin, sex, disability, age, or reprisal or retaliation for prior civil rights activity in any program or activity conducted or funded by USDA. 

Persons with disabilities who require alternative means of communication for program information (e.g. Braille, large print, audiotape, American Sign Language, etc.), should contact the Agency (State or local) where they applied for benefits. Individuals who are deaf, hard of hearing or have speech disabilities may contact USDA through the Federal Relay Service at (800) 877-8339.  Additionally, program information may be made available in languages other than English.

To file a program complaint of discrimination, complete the USDA Program Discrimination Complaint Form, (AD-3027) found online at: http://www.ascr.usda.gov/complaint_filing_cust.html, and at any USDA office, or write a letter addressed to USDA and provide in the letter all of the information requested in the form. To request a copy of the complaint form, call (866) 632-9992. Submit your completed form or letter to USDA by:

(1)     mail: U.S. Department of Agriculture
         Office of the Assistant Secretary for Civil Rights
         1400 Independence Avenue, SW
         Washington, D.C. 20250-9410;

(2)     fax: (202) 690-7442; or

(3)     email: program.intake@usda.gov.

This institution is an equal opportunity provider.

 

For Nondiscrimination Statement translations, click here.

Los demás programas de asistencia nutricional del FNS, las agencias estatales y locales, y sus beneficiarios secundarios, deben publicar el siguiente Aviso de No Discriminación:

De conformidad con la Ley Federal de Derechos Civiles y los reglamentos y políticas de derechos civiles del Departamento de Agricultura de los EE. UU. (USDA, por sus siglas en ingles), se prohíbe que el USDA, sus agencias, oficinas, empleados e instituciones que participan o administran programas del USDA discriminen sobre la base de raza, color, nacionalidad, sexo, discapacidad, edad, o en represalia o venganza por actividades previas de derechos civiles en algún programa o actividad realizados o financiados por el USDA.

Las personas con discapacidades que necesiten medios alternativos para la comunicación de la información del programa (por ejemplo, sistema Braille, letras grandes, cintas de audio, lenguaje de seas americano, etc.), deben ponerse en contacto con la agencia (estatal o local) en la que solicitaron los beneficios. Las personas sordas, con dificultades de audición o discapacidades del habla pueden comunicarse con el USDA por medio del Federal Relay Service [Servicio Federal de Retransmisión] al (800) 877-8339. Además, la información del programa se puede proporcionar en otros idiomas.

Para presentar una denuncia de discriminación, complete el Formulario de Denuncia de Discriminación del Programa del USDA, (AD-3027) que está disponible en linea en:http://www.ocio.usda.gov/sites/default/files/docs/2012/Spanish_Form_508_Compliant_6_8_12_0.pdf. y en cualquier oficina del USDA, o bien escriba una carta dirigida al USDA e incluya en la carta toda la información solicitada en el formulario. Para solicitar una copia del formulario de denuncia, llame al (866) 632-9992. Haga llegar su formulario lleno o carta al USDA por:

(1)     correo: U.S. Department of Agriculture
         Office of the Assistant Secretary for Civil Rights
         1400 Independence Avenue, SW
         Washington, D.C. 20250-9410;

(2)     fax: (202) 690-7442; o

(3)     correo electrónicoprogram.intake@usda.gov.

Esta institución es un proveedor que ofrece igualdad de oportunidades.

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