oversight

California's Controls Over Summer Food Service Program

Published by the Department of Agriculture, Office of Inspector General on 2018-11-08.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

        United States Department of Agriculture




  California's Controls Over Summer
  Food Service Program




Audit Report 27004-0001-41
                                                  OFFICE OF INSPECTOR GENERAL
November 2018
                                   IMPORTANT NOTICE
This audit report contains sensitive information that has been redacted for public release, due to privacy
concerns.
California’s Controls Over Summer Food Service
Program

Audit Report 27004-0001-41
We reviewed the California State agency’s controls for operating under SFSP
requirements and sponsor and site compliance with those requirements. We
have reported our separate findings in an interim report dated September 2017
and this final report.

OBJECTIVE                            WHAT OIG FOUND
Our audit objective was to           The Summer Food Service Program (SFSP) provides
determine whether California         nutritious meals for children in low-income areas when
had adequate controls in place       school is not in session. The California Department of
to reasonably ensure that SFSP
                                     Education (the State agency) reimburses sponsors for
was operating under program
requirements. Specifically, our
                                     serving SFSP meals. In California during fiscal year
objective was to (1) evaluate the    (FY) 2016, SFSP provided more than $20.5 million to
adequacy of the State agency’s       serve approximately 8.5 million meals and snacks to
controls over SFSP sponsors and      needy children at more than 2,600 sites.
(2) determine if selected sponsors
and sites were in compliance         During our review of five California SFSP sponsors, we
with program requirements.           found that the State agency did not adequately assess
                                     sponsor eligibility or monitor sponsor compliance with
                                     program requirements. We found that two of the five
                                     sponsors were potentially ineligible to participate in
                                     SFSP. We also identified nine noncompliance issues for
REVIEWED                             the five sponsors we reviewed, including the purchase
We reviewed the State agency’s       of cars with SFSP funds. This occurred because
administration of SFSP from          the State agency lacked key SFSP application and
FYs 2014–2016. We                    review procedures that would help identify sponsor
non-statistically selected           noncompliance. Also, we found that sponsors did not
five sponsors for review and         ensure their sites complied with regulatory or outreach
conducted 13 site visits during      requirements. Specifically, sites improperly counted
the SFSP meal service in 2017.       119 meals for reimbursement on the day of our site visits.
                                     Further, 10 of 13 SFSP meal sites we visited improperly
                                     restricted public access, posted public notices that
                                     appeared to limit SFSP participation, and did not display
RECOMMENDS                           the required nondiscrimination posters. This occurred
                                     because SFSP sponsors either lacked sufficient outreach
We recommended that FNS
direct the State agency to           oversight or issued unclear public notices.
develop and implement
application and administrative       As a result of our findings, critical SFSP resources to
review procedures to identify and    support nutritious meals for children from
address sponsor noncompliance,       low-income California households and/or areas could
confirm and recover unallowable      not be used as intended. FNS generally agreed with our
costs, and direct identified         recommendations and we accepted management decision
sponsors to provide additional       on 27 of the 29 recommendations.
training and monitoring to their
sites.
                           United States Department of Agriculture
                                  Office of Inspector General
                                    Washington, D.C. 20250



DATE:          November 5, 2018

AUDIT
NUMBER:        27004-0001-41

TO:            Brandon Lipps
               Administrator
               Food and Nutrition Service

ATTN:          Mark Porter
               Director
               Office of Internal Controls, Audits and Investigations

FROM:          Gil H. Harden
               Assistant Inspector General for Audit

SUBJECT:       California Controls Over Summer Food Service Program


This report presents the results of the subject review. Your written response to the official draft
is included in its entirety at the end of the report. We have incorporated excerpts from your
response, and the Office of Inspector General’s (OIG) position, into the relevant sections of the
report. Based on your written response, we are accepting management decision on
Recommendations 2 thru 8, and 10 thru 29. Please follow your internal agency procedures in
forwarding final action correspondence to the Office of the Chief Financial Officer (OCFO).

Based on your written response, management decision has not been reached on
Recommendations 1 and 9. The information needed to reach management decision on the
recommendations is set forth in the OIG Position section following each recommendation. In
accordance with Departmental Regulation 1720-1, please furnish a reply within 60 days
describing the corrective actions taken or planned, and timeframes for implementing the
recommendations for which management decisions have not been reached. Please note that the
regulation requires management decision to be reached on all recommendations within 6 months
from report issuance, and final action to be taken within 1 year of each management decision to
prevent being listed in the Department’s annual Agency Financial Report.

We appreciate the courtesies and cooperation extended to us by members of your staff during our
audit fieldwork and subsequent discussions. This report contains publicly available information
and will be posted in its entirety to our website (http://www.usda.gov/oig) in the near future.
Table of Contents
Background and Objectives ................................................................................... 1
Section 1: State Controls ....................................................................................... 3
Finding 1: California State Agency Needs to Improve its Application Review
Process for SFSP ..................................................................................................... 3
         Recommendation 1 ........................................................................................7
         Recommendation 2 ........................................................................................8
         Recommendation 3 ........................................................................................8
         Recommendation 4 ........................................................................................9
         Recommendation 5 ........................................................................................9
         Recommendation 6 ......................................................................................10
         Recommendation 7 ......................................................................................10
         Recommendation 8 ......................................................................................11
         Recommendation 9 ......................................................................................11
         Recommendation 10 ....................................................................................12
Finding 2: California State Agency Needs to Improve its Administrative
Review Process for SFSP ...................................................................................... 13
         Recommendation 11 ....................................................................................17
         Recommendation 12 ....................................................................................18
         Recommendation 13 ....................................................................................18
         Recommendation 14 ....................................................................................19
         Recommendation 15 ....................................................................................19
         Recommendation 16 ....................................................................................20
         Recommendation 17 ....................................................................................20
         Recommendation 18 ....................................................................................21
         Recommendation 19 ....................................................................................21
         Recommendation 20 ....................................................................................22
Section 2: SFSP Sponsor Controls ..................................................................... 23
Finding 3: SFSP Sponsors Should Improve Training and Monitoring of SFSP
Operations.............................................................................................................. 23
         Recommendation 21 ....................................................................................26
         Recommendation 22 ....................................................................................26
         Recommendation 23 ....................................................................................27
         Recommendation 24 ....................................................................................27
         Recommendation 25 ....................................................................................27
Finding 4: SFSP Sponsors Should Improve Outreach Efforts ........................ 29
         Recommendation 26 ....................................................................................31
         Recommendation 27 ....................................................................................31
         Recommendation 28 ....................................................................................32
         Recommendation 29 ....................................................................................32
Scope and Methodology ........................................................................................ 33
Abbreviations ........................................................................................................ 35
Exhibit A: Summary of Monetary Results ........................................................ 36
Exhibit B: Audit Sites Visited ............................................................................. 37
Exhibit C: Sponsor Noncompliance Issues ........................................................ 38
Exhibit D: Site Noncompliance Issues ............................................................... 39
FNS’ Response ....................................................................................................... 41
Background and Objectives
Background
The National School Lunch Act authorized the Summer Food Service Program (SFSP) to
provide free meals to children in needy areas when school is not in session. 1 In fiscal year (FY)
2016, SFSP provided roughly $472 million to serve approximately 153 million meals and snacks
to needy children at nearly 48,000 sites. In FY 2016, 220 sponsors participated in California’s
SFSP. These sponsors operated 2,622 sites and received more than $20 million of the 2016
SFSP reimbursements, making it the fourth largest State in terms of SFSP funding—just behind
New York, Florida, and Texas.

The Food and Nutrition Service (FNS) and State agencies administer SFSP. FNS awards SFSP
funding to State agencies and provides oversight to ensure that States properly administer and
monitor the program. According to Federal regulations and FNS instructions, the State agencies
are then responsible for multiple activities such as:

    •   performing adequate outreach to ensure communities are aware of SFSP;
    •   disseminating State and Federal policy for SFSP administration;
    •   establishing a financial management system;
    •   reviewing and approving sponsor applications;
    •   reimbursing sponsors for meals served to children at approved sites;
    •   monitoring sponsors and sites by conducting administrative reviews at least once every 3
        years; and
    •   providing sufficient technical assistance and guidance to sponsors.

In California, the California Department of Education (CDE) is responsible for these activities.
The State agency reimburses sponsors for serving SFSP meals (breakfast, lunch, supper, or
snacks) that meet program meal requirements. 2 The reimbursements are based on the number of
eligible served meals multiplied by a designated rate. 3

SFSP sponsors manage sites that provide the meals to children. Sponsors include school food
authorities or public or private nonprofit organizations (such as schools and community centers)



1
  In 1946, Congress signed into law the National School Lunch Act, now the Richard B. Russell National School
Lunch Act (NSLA), which first established the National School Lunch Program. NSLA has been amended several
times, most recently in 2018. In 1968, section 13 of the NSLA was amended to pilot SFSP, which became a
separate, permanent program in 1975.
2
  The program regulations establish minimum food component requirements for meals served to children in SFSP.
There are four categories of food components: (1) vegetables and fruits, (2) bread and bread alternates, (3) milk,
and (4) meat and meat alternates. Not all components are required for all meal types. The regulations also include a
few exceptions to and variations from the meal pattern. 7 C.F.R. § 225.16 (d-f).
3
  The designated rate is set each year by the Richard B. Russell National School Lunch Act, which incorporates the
Consumer Price Index. The rates for rural and self-preparation sites are higher than for other types of sites.
Additionally, the rates for sites in Alaska and Hawaii are higher than for sites in the continental United States.

                                                                            AUDIT REPORT 27004-0001-41             1
that could manage multiple State-approved sites. Sponsors must operate their food service in
accordance with Federal and State SFSP requirements, including:

    •    properly accounting for program funds and ensuring program costs are allowable;
    •    maintaining accurate records that justify all costs and meals claimed for 3 years;
    •    only claiming SFSP meals for reimbursements that meet program requirements;
    •    monitoring site compliance with program requirements;
    •    meeting training requirements for their administrative and site personnel;
    •    maintaining proper sanitation and health standards in accordance with State and local
         laws;
    •    retaining financial and administrative responsibility for their program operations; and
    •    meeting program outreach requirements.

Ultimately, the sponsors’ sites provide SFSP meals free to children. Sites are eligible to
participate in the program if they are located in low-income areas or serve children who meet
eligibility requirements. 4 Most sites are categorized as either open, with meals available to all
children in the area; restricted open, when attendance is limited for safety or control reasons; or
closed enrolled, when only specified groups of children are served.

Objectives
Our audit objective was to determine whether California had adequate controls in place to
reasonably ensure that SFSP was operating under program requirements. Specifically, our
objective was to (1) evaluate the adequacy of the State agency’s controls over SFSP sponsors
and (2) determine if selected sponsors and sites were in compliance with program requirements.

This audit was one in a series of recent audits related to SFSP. It was performed in conjunction
with similar reviews of the States of Florida, New York, and Texas. During the course of these
State reviews, interim reports were issued to provide results regarding sponsor compliance with
SFSP regulations and policies related to State and local food safety requirements. 5 Additionally,
we performed an audit of FNS to determine whether FNS had adequate controls in place to
reasonably ensure SFSP was complying with program regulations and other requirements. 6
Upon completion of the State audits, we will consider the results with the issues we identified in
our FNS audit and provide an assessment of the overall program in the final rollup SFSP audit
for this series.


4
  “Low-income area” means the attendance area of a school or other geographic area where at least 50 percent of the
enrolled children have been determined eligible for free or reduced-price school meals under the National School
Lunch Program and the School Breakfast Program. This determination may be made with school data, recent
available Census data, information provided from a department of welfare or zoning commission, or other approved
sources.
5
  California’s Controls Over Summer Food Service Program Interim Report (Audit Report 27004-0001-41(1), Sept.
2017); Florida’s Controls Over Summer Food Service Program Interim Report (Audit Report 27004-0001-31(1),
Sept. 2017); New York’s Controls Over Summer Food Service Program Interim Report (Audit Report 27004-0001-
23(1), Nov. 2017).
6
  FNS’ Controls Over Summer Food Service Program (Audit Report 27601-0004-41, Mar. 2018).

2       AUDIT REPORT 27004-0001-41
Section 1: State Controls
Finding 1: California State Agency Needs to Improve its Application Review
Process for SFSP
During our review of five California sponsors, 7 we found that the State agency did not
adequately assess sponsors’ eligibility nor confirm other program requirements prior to
approving their applications. This occurred because the State agency lacked key SFSP
application review and approval procedures that would help identify ineligible applicants and
therefore prevent sponsor noncompliance. As a result, four of the five sponsors we reviewed had
program deficiencies, including two sponsors that may not have been eligible to participate in the
program. Also, an additional sponsor was able to claim higher reimbursements than it was
entitled to receive.

SFSP regulations require State agencies to review and assess sponsors’ SFSP applications and
approve applicants who comply with the program’s participation and eligibility requirements.
The SFSP statute requires sponsors to demonstrate financial and management capabilities as a
prerequisite for participation. State agencies must assess the applicants’ financial and
administrative capability for program operations, including their ability to properly account for
SFSP funds. In 2013, FNS emphasized that the States’ careful selection of applicants was a
critical program control. 8

In 2016, the State agency approved 220 SFSP sponsors to participate in SFSP. 9 We reviewed
five of those sponsors and determined that four had deficiencies that the State agency should
have identified during its application review process. Ultimately, we determined the State
agency lacked key SFSP application review and approval procedures needed to identify these
financial and administrative sponsor deficiencies during its application review process, as
explained below.

    The State Agency Did Not Ensure Applicant Sponsors Met Financial Management
    Requirements

    SFSP statute and regulations state that “no applicant sponsor shall be eligible to participate in
    the program unless it demonstrates financial and administrative capability for program
    operations…” 10 Accordingly, sponsor applicants must have financial management systems
    that provide effective control over all funds to ensure the funds are used solely for authorized
    purposes. This includes accounting records supported by source documentation. Further,
    FNS has issued regulatory guidance that requires State agencies to develop financial
    management standards and annually communicate those standards as participation
    requirements to every SFSP applicant.

7
  The sample was non-statistically chosen after we considered certain parameters (as described in our Scope and
Methodology section).
8
  FNS Proposed Rule, Federal Register Vol. 78, No. 134 (July 12, 2013). FNS published the final rule on June 1,
2018.
9
  These sponsors managed 2,622 State agency-approved sites that provided SFSP meal services to children.
10
   7 C.F.R. §225.14, and 42 U.S.C. §1761.

                                                                           AUDIT REPORT 27004-0001-41             3
     However, we found that the State agency had no system to assess applicants’ financial
     capabilities during the SFSP application process, and did not assess the applicants’
     capabilities to separately track SFSP funds and support SFSP costs. 11 Rather, the State
     agency only reviewed the applicants’ submitted budgets to identify whether they appeared to
     have enough projected income to cover their estimated expenses. This assessment did not
     ensure applicants could properly account for SFSP funds in compliance with Federal
     requirements. For example, the State agency approved a sponsor even though the sponsor’s
     financial management system could not properly account for its SFSP funds. 12 The sponsor
     operated multiple child nutrition programs (CNP) and improperly assigned costs to SFSP by
     date, rather than separately identifying and documenting SFSP costs. 13 It is important to
     separately identify SFSP costs because costs for equipment such as refrigerators or stoves
     that may be allowable for other CNPs are not allowable for SFSP. 14 In this case, the sponsor
     included the cost of equipment for SFSP and stated it assumed costs were allowable for SFSP
     if the costs were allowable for the other CNPs.

     The State agency also did not develop its own financial management standards for SFSP nor
     adequately communicate Federal financial management requirements to sponsors as
     required. 15 As a result, sponsors may not be aware of the SFSP requirements and, as a result,
     may comingle SFSP funds or improperly support their SFSP costs. State agency staff
     explained that they did not think it was necessary for the State agency to develop its own
     standards because it referenced Federal financial management requirements in its SFSP
     training and State sponsor agreements. However, under the current system, the State agency
     had no assurance that sponsors received training about the Federal financial requirements. 16
     Additionally, the State agency’s State sponsor agreements with the reviewed sponsors did not
     include the current Federal financial management requirements as the State contended.

     The State Agency Did Not Incorporate Prior Sponsor Reviews into Its Application Review
     Process

     The majority of SFSP sponsors are returning sponsors that had been subject to the State
     agency’s administrative reviews. These reviews could include useful information for the
     State agency to use during the sponsors’ application process. As will be discussed in
     Finding 2, the State agency conducts administrative reviews of sponsors to monitor their
     compliance with program requirements, then issues reports that include noncompliance

11
   FNS has not issued guidance regarding how States should assess SFSP applicants’ financial capabilities; however,
Federal regulations and SFSP guidance require sponsors to have procedures that ensure fiscal accountability of
SFSP funds, including separately tracking and supporting SFSP expenditures.
12
   Sponsor E.
13
   Federal regulations require recipients of Federal awards to maintain records that identify the source and
application of funds for Federally-funded activities, which must be supported by source documentation. 2 C.F.R.
§200.302(b)(3).
14
   FNS guidance states that SFSP funds may not be used for the direct capital expenditures of nonexpendable
equipment of any kind, nor for other capital assets including vehicles.
15
   7 C.F.R. 225.7(f).
16
   The State agency authorizes each sponsor to access its online SFSP training modules, but does not track which
sponsor’s staff take the training nor measure their understanding of the training content.

4     AUDIT REPORT 27004-0001-41
     findings and the sponsors’ plans for corrective action. The State agency can choose to deny
     sponsors’ applications if sponsors have not implemented the prior year’s corrective actions. 17

     However, the State agency had no process to include its prior administrative review findings
     into its current SFSP application review. The State agency’s program specialists were
     responsible for reviewing and approving SFSP applications while a different unit, the State
     agency’s Field Services staff, were responsible for conducting administrative reviews. The
     Field Services staff did not communicate the results of their sponsor administrative reviews
     to the program specialists who reviewed and approved SFSP applications. Consequently, the
     program specialists were unaware of sponsors with operational deficiencies and may
     inadvertently approve their applications. However, subsequent to our fieldwork, the State
     agency shared it had established a cross-division communication and accountability
     workgroup to increase coordination between the two units to ensure the results of the State
     agency’s administrative review findings are shared.

     The State Agency Lacked Procedures to Independently Verify Sponsor-Provided Information

     SFSP regulations (1) require State agencies to verify sponsor-provided information for new
     sponsor applicants and new sponsor sites and (2) authorize State agencies to verify the
     sponsor site information provided by the returning sponsors if the State agency elects to do
     so. 18 The sponsor’s site information includes data such as whether sites are in a rural or
     urban location, or whether the sites’ food is self-prepared or provided by a vendor. When the
     food is prepared by the sponsor, the site can be classified as “self-prep.” If the food served at
     the site is provided by a vendor, the site is classified as “vended.” This type of information
     affects the amount of reimbursements the sponsors will receive. 19

     The State agency’s application review process, however, did not adequately verify sponsor-
     provided application information. For example, two of the five sponsors we reviewed
     misclassified one of their sites as self-prep or rural even though the sites were vended or
     urban, and four of the five reviewed sponsors provided incorrect estimates of program costs
     and site attendance that inflated their SFSP budgets. 20 As stated above, the State agency uses
     the applicants’ budgets to assess their financial viability; however, this assessment is not
     reliable because it is based on unverified and inaccurate sponsor information. Further, by not
     verifying key sponsor-provided information (such as site classifications), sponsors may
     receive higher reimbursements than they are entitled to receive. 21


17
   2016 Summer Food Service Program State Agency Monitor Guide, Part 8, “Corrective Action, Serious
Deficiencies, and Termination.”
18
   7 C.F.R. § 225.6(c)(3).
19
   7 C.F.R. § 225.9(d)(8)(iii) specifies that sites designated as rural and as self-prepared receive higher SFSP meal
reimbursements.
20
   Sponsors B and C misclassified sites, and Sponsors B, C, D, and E provided incorrect estimates of program costs
and site attendance. We determined the sponsors provided incorrect estimates by comparing the sponsors’ prior year
SFSP reimbursement claims and SFSP costs with the sponsors’ estimates included on the SFSP applications for the
current year.
21
   SFSP reimbursement rates are higher for “self-prep” and rural sites than the reimbursement rates for other site
types.

                                                                            AUDIT REPORT 27004-0001-41             5
     The State Agency Did Not Properly Approve Sites

     SFSP regulations require State agencies to ensure that applicants’ proposed SFSP sites do not
     serve the same children in the same area as other SFSP sites. 22 The State agency generally
     requires SFSP sites to be at least one quarter of a mile apart to prevent duplication of
     services. 23

     The State agency, however, did not have a process to ensure sites did not serve the same
     children in the same area. We found the State approved 30 sites for 4 of the sponsors we
     reviewed that were within 0.25 miles of other SFSP sites providing the same meal service,
     without any assurance that these sites served different children. 24 State agency staff
     explained that some of the sponsor sites approved by the State agency will be operated by the
     sponsors, while others will not. Further, according to State agency staff, some of these sites
     may have legitimate reasons for the close proximity and may in fact serve different children;
     State agency staff said they did not think it would be appropriate to deny applicants’ potential
     sites based on proximity restrictions. However, State agency staff acknowledged they did
     not confirm whether these sites served different children and met the regulatory requirements
     and, therefore, did not ensure there was not duplication of services.

As discussed above, the State agency lacked key SFSP application review and approval
procedures that would help identify ineligible applicants. This was further complicated by the
fact that the State agency did not document the basis of its application review determinations and
conclusions for the five reviewed sponsors. For example, the State agency staff inserted a
checkmark that they discussed financial systems with the sponsors and that they determined the
sponsors had systems to properly account for SFSP funds. However, as stated above, the State
agency does not assess SFSP applicants’ financial management systems during the application
process, so it is not clear how the State agency made these determinations.

State agency staff stated that they believed the State agency complied with SFSP regulations, but
agreed that its SFSP application review and approval process could be improved. The State
agency staff said they thought additional guidance from FNS regarding the State’s specific
responsibilities would be helpful and agreed that its program staff would benefit from additional
training on any new application procedures. As a result, the State agency’s SFSP application
process may enable ineligible sponsors to participate in the program that cannot properly account
for SFSP funds, thus compromising the program’s integrity and reducing its effectiveness in
delivering meals to children in low-income areas. Careful, accurate assessments of sponsors’
eligibility to participate in SFSP is a critical component of program integrity.

To improve the State agency’s application process, FNS should direct the State agency to
strengthen how it assesses applicants’ financial management systems and ensure sponsors
demonstrate financial and management capabilities for program operations. FNS should also

22
   7 CFR §225.6(d).
23
   Federal regulations do not define exact proximity limitations on summer meal sites. The State agency established
an internal policy of a 0.25 mile limitation on the location of meal sites in an attempt to provide clarity in the
absence of specific FNS regulatory guidance.
24
   Sponsors B, C, D, and E.

6     AUDIT REPORT 27004-0001-41
direct the State agency to develop and adequately communicate the required SFSP financial
management standards to SFSP sponsors. Additionally, FNS should confirm the State agency
developed and implemented procedures that incorporate the results of its prior administrative
reviews into its SFSP application assessments. Similarly, FNS should ensure the State agency’s
staff verify key SFSP sponsor-provided application information and document the basis for their
application approval determinations. FNS should also direct the State agency to ensure its
program staff are sufficiently trained on the new application procedures. Further, FNS should
direct the State agency to implement procedures to ensure sites do not serve the same children in
the same area.

FNS should also direct the State agency to reevaluate two of the sponsors’ eligibility since these
sponsors lacked adequate financial management systems; in addition, FNS should direct the
State agency to document the basis of its determinations. 25 Lastly, FNS should direct the State
agency to confirm and recover unallowable SFSP reimbursements paid to Sponsors B and C
resulting from increased reimbursement rates due to their site misclassifications.

Recommendation 1

Direct the State agency to develop and implement procedures to assess the adequacy of SFSP
applicants’ financial management capabilities to separately track SFSP funds and support SFSP
costs during the application process, and ensure sponsors demonstrate financial and management
capabilities for program operations.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to institute internal procedures to
more closely review the SFSP budgets for sponsors that are operating multiple Child Nutrition
Programs (CNPs) in order to ensure they are correctly prorating costs among the multiple CNPs.
Additionally, FNS will provide onsite technical assistance focused on budget review.

FNS provided an estimated completion date of May 1, 2019, for this action.

OIG Position
We do not accept FNS’ management decision for this recommendation because FNS’ decision
does not sufficiently address OIG’s recommendation. Procedures to more closely review SFSP
budgets during the application process can provide information about the general types of costs a
SFSP sponsor expects to incur (e.g., food, supplies, personnel, etc.), but the procedure to review
only the budget will not provide a determination for the adequacy of applicants’ financial
management capabilities to separately track SFSP funds and properly support SFSP costs. In
order to reach management decision, FNS needs to direct the State agency to develop and
implement procedures to assess the adequacy of SFSP applicants’ financial management

25
     Sponsors B and E.

                                                                 AUDIT REPORT 27004-0001-41      7
capabilities to separately track SFSP funds and support SFSP costs, and ensure sponsors
demonstrate financial and management capabilities for program operations; this direction needs
to be applicable to both sponsors that operate multiple CNPs and sponsors that operate only
SFSP.


Recommendation 2

Direct the State agency to develop the financial management standards as required by SFSP
regulations and specified in FNS Instruction 796-4.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation, noting that CDE already has financial management
standards for all Public School Districts (PSDs) and County Offices of Education (COEs)
approved to operate the SFSP as they are required to follow the financial management standards
described in the California School Accounting Manual (CSAM). FNS will direct CDE to
provide financial management standards to all remaining SFSP sponsors.

FNS provided an estimated completion date of May 1, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 3

Direct the State agency to communicate its financial management standards (developed in
Recommendation 2) and the current Federal financial management requirements to SFSP
sponsors in its State sponsor agreements.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to communicate the standards and
the financial management requirements to affected SFSP sponsors via a Listserv and
management bulletin, as well as incorporate the recommendations in the State-sponsor
agreement by applicable management bulletin reference. Additionally, FNS will direct CDE to
incorporate the financial management standards/requirements in the annual SFSP sponsor
training as well as analyze compliance with standards during the sponsor application process.

FNS provided an estimated completion date of May 1, 2019, for this action.

8    AUDIT REPORT 27004-0001-41
OIG Position
We accept FNS’ management decision on this recommendation.


Recommendation 4

Confirm the State agency developed and implemented procedures to include the use of the State
agency’s sponsor administrative review results as part of the application assessment.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation and had directed CDE to incorporate review results
accordingly during our FY 2017 SFSP Management Evaluation (ME). CDE has since
established (beginning June 2018) a Cross-Division Communication and Accountability Group.
One of the first focus areas being addressed by the accountability group is the communication of
review findings from the Field Services Unit (FSU) to the program units. This communication
will equip staff, including those in SMU [Summer Meals Unit], with the information required to
deny the application of sponsors that have been declared seriously deficient and eliminate the
vulnerability of sponsors with operational problems identified during administrative reviews
being approved for additional meal sites in subsequent program years.

FNS provided an estimated completion date of May 1, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 5

Direct the State agency to develop and implement procedures to ensure its staff verify key SFSP
sponsor-provided application information (such as site classifications) that affects SFSP
reimbursements and site eligibility.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to develop procedures to
comprehensively validate application information, including area eligibility as well as
rural-urban and food-preparation designations.


                                                               AUDIT REPORT 27004-0001-41      9
FNS provided an estimated completion date of March 1, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 6

Direct the State agency to develop and implement procedures to document the State agency’s
assessment of SFSP sponsors’ applications and the basis for the State agency’s
conclusions/approvals.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to document the SA’s [State
Agency’s] assessment of SFSP sponsor applications and the basis for the SA’s conclusions,
including possibly utilizing their current automated system’s comment function to note items for
further follow up. While CDE’s Child Nutrition Information and Payment System (CNIPS) has
some documentation functionality, it is currently limited to what the SMU analyst can upload to
the database. Thus, CDE will assess the cost and time necessary to update CNIPS in order to
determine if sufficient resources are available for this modification. If no electronic solution is
available, then the SMU analyst will print a hard copy of the documentation and have it saved to
the program operator’s permanent file.

FNS provided an estimated completion date of May 1, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 7

Direct the State agency to ensure the State agency staff are sufficiently trained on the new
application procedures (in Recommendations 1 through 6).

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to ensure staff are trained on
procedures for running the program in accordance with 7 CFR 225.6.

FNS provided an estimated completion date of April 1, 2019, for this action.

10    AUDIT REPORT 27004-0001-41
OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 8

Direct the State agency to implement procedures that ensure sites do not serve the same children
in the same area.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to independently verify the
relative location of approved summer meal sites to one another to ensure that the area is not
already served by another site that is serving the same eligible children.

FNS provided an estimated completion date of May 1, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 9

Direct the State agency to carefully evaluate the eligibility of the two sponsors that lacked
adequate financial management capabilities (Sponsors B and E) if they choose to return to the
program, and document the basis of its determinations to ensure the weaknesses identified by
OIG have been corrected.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE, prior to approval, to ensure the
financial management portion of the two sponsors’ application packets receive extensive review,
including focused review of the each sponsor’s budget and management plan to determine if
items of cost are reasonable and allowable.

FNS provided an estimated completion date of June 30, 2019, for this action.

OIG Position



                                                                AUDIT REPORT 27004-0001-41      11
We do not accept FNS’ management decision for this recommendation. FNS’ management
decision does not sufficiently address OIG’s recommendation. In addition, a determination of
Sponsor B and E’s financial management capabilities cannot be accomplished by a review of the
two sponsors’ application packets. In order to reach management decision, FNS needs to direct
the State agency to carefully evaluate the eligibility of the two sponsors that lacked adequate
financial management capabilities (Sponsors B and E) if they chose to return to the program and
document the basis of its determinations to ensure the weaknesses identified by OIG have been
corrected.

Recommendation 10

Direct the State agency to calculate and recover any unallowable reimbursements paid to
Sponsors B and C resulting from their site misclassifications.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS will work with the State agency to clarify SFSP Sponsor B and C’s classifications as self-
preparation or rural. FNS will direct CDE to develop and provide additional training and
guidance to sponsors, as well as CDE staff on site classification, and incorporate the appropriate
review of systems in their monitoring. If reimbursements received by the sponsors are
confirmed to be unallowable, CDE will begin recovery from the SFSP sponsors including appeal
rights.

FNS provided an estimated completion date of June 30, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.




12    AUDIT REPORT 27004-0001-41
Finding 2: California State Agency Needs to Improve its Administrative
Review Process for SFSP

During our review of five California sponsors, we found that the State agency did not sufficiently
monitor the sponsors’ compliance with program requirements. This occurred because the State
agency lacked key administrative review procedures that would help identify and correct sponsor
noncompliance issues. As a result, this compromised the program’s integrity and enabled these
sponsors to include more than $214,441 in questionable costs and $100,500 in unsupported costs
for SFSP as well as claim more than $18,900 in questionable reimbursements and $42,800 in
unsupported reimbursements for SFSP in 2016. 26 Consequently, financial resources that could
have been spent on the quality and quantity of the nutritious meals for children from low-income
households and areas may have been reduced.

In 2013, FNS emphasized that State agency monitoring of program operations was critical under
SFSP’s simplified cost accounting procedures. 27 Accordingly, States must properly monitor
sponsors and sites to ensure program integrity is maintained. The State agency conducts SFSP
administrative reviews for each sponsor at least once every 3 years to monitor sponsor and site
compliance with program requirements. 28 These administrative reviews include onsite visits and
an examination of sponsor SFSP costs, meal count records, and other documentation for a single
month of review. 29 Ultimately, the State agency issues sponsor and site reports to document its
administrative review findings that include any identified areas of noncompliance and required
corrective actions.

During the State agency’s most recent administrative reviews conducted from 2014–2017, the
State agency did not identify five of the nine noncompliance issues we found nor ensure
sponsors corrected the remaining four issues when identified. The noncompliance issues we
identified included program violations such as unallowable SFSP costs and reimbursements.
Examples of unallowable SFSP costs we found included nonexistent expenses as well as direct
expenses for items such as cars.

Examples of questionable reimbursements we found included meal claims missing either the
required meal components or the required documentation. Other noncompliance issues involved
sponsors that did not maintain a nonprofit food service as required. 30 (See Exhibit C for a
summary of the sponsor noncompliance issues we found.)


26
   Four selected sponsors (Sponsors A, B, C, and E) had unsupported and questionable SFSP costs in 2016, which
included prohibited expenditures and costs that lacked supporting documentation. Two of the selected sponsors
(Sponsors B and E) also had unsupported and questionable SFSP claims for reimbursement in July 2016, which
included non-reimbursable claims and claims that lacked supporting documentation.
27
   FNS Proposed Rule, Federal Register Vol. 78, No. 134 (July 12, 2013). FNS published the final rule on June 1,
2018.
28
   The administrative reviews include a review of at least one site or 10 percent of the sponsor’s sites, whichever is
greater.
29
   The State agency selects the month of review based on the sponsor’s most recent claim for SFSP reimbursement.
30
   We found that two of the five reviewed sponsors did not operate a nonprofit food service as defined by FNS.
According to FNS policy, “a sponsor is operating a nonprofit food service if the food service operations are
principally for the benefit of participating children and all of the program reimbursement funds are used solely for

                                                                             AUDIT REPORT 27004-0001-41             13
We analyzed the differences between our sponsor administrative reviews for the 2016 program
year and the State agency’s most recent sponsor administrative reviews from 2014–2017. 31
Essentially, we determined the State agency lacked several key review procedures that would
improve its ability to monitor the sponsors’ compliance with program requirements:

     The State Agency Did Not Obtain Sufficient Documentation for Its Reviews

     FNS guidance requires States to review sufficient records to determine whether sponsors
     complied with program requirements. 32 While the State agency complied with FNS’
     suggested guidance and reviewed 1 month of sponsor records for the current program year, it
     did not expand the reviews to verify whether sponsors operated a nonprofit food service and
     complied with program requirements as allowed by FNS guidance. 33

     We identified each of the nine noncompliance issues by expanding our review beyond the
     1-month period and obtaining more documentation. For example, we were able to determine
     that more than $44,000 of one single sponsor’s costs were unallowable because the sponsor
     (1) altered invoices to artificially inflate its SFSP expenditures and (2) included and double
     counted the costs of original receipts and copies of those receipts. 34 These unallowable costs
     occurred throughout the summer months (June through August).

     However, the State agency’s 2015 administrative review of this sponsor did not identify any
     unallowable costs. The State agency complied with FNS guidance and only reviewed the
     sponsor’s SFSP costs and supporting documents for July. We concluded it is not likely that
     the State agency’s review would be able to identify altered invoices and duplicated costs that
     occurred throughout the summer by only reviewing 1 month of the sponsor’s records.

     We also found that two of the five sponsors we reviewed did not have milk receipts to
     support meals claimed in 2016. 35 Generally, sponsors should have milk receipts that support
     the total number of claims for meals requiring a milk food component (for instance,
     breakfast, lunch, and supper). 36 While the State agency’s most recent administrative review
     for these sponsors identified some meal claim issues for the two sites (such as improperly
     counting meals that lacked all of the required food components for reimbursement), the State
     agency did not expand the scope of its review or conduct a similar milk analysis to identify

the operation or improvement of such food service.” FNS Policy Memo SFSP 05-2017, Summer Food Service
Program Questions and Answers (Dec. 1, 2016).
31
   While the State agency’s administrative reviews did not always cover the same period we reviewed, we either
confirmed or concluded the sponsors’ inadequate processes existed at the time of the State agency review.
32
   USDA FNS, FNS State Agency Monitor Guide, Summer Food Service Program (2016). The guidance suggests
reviewing sponsor records for the most recent month based on the SFSP claim for reimbursement, but it also allows
States to expand the reviews to verify sponsors are operating a nonprofit food service and determine the extent of
any noncompliance.
33
   USDA FNS, FNS State Agency Monitor Guide, Summer Food Service Program (2016).
34
   Sponsor E.
35
   Sponsors B and E.
36
   The “Offer Versus Serve” policy allows a child to decline one required food item at breakfast and up to two
required food items for lunch or supper. Sponsors that do not use the “offer versus serve” policy should have milk
receipts that support the total number of meals claimed.

14      AUDIT REPORT 27004-0001-41
     the larger problem. We therefore determined that expanding the administrative review would
     improve the State agency’s effectiveness in monitoring the sponsors’ compliance with
     program requirements.

     The State Agency Did Not Ensure Effectiveness of Sponsors’ Corrective Actions

     FNS guidance requires sponsors to provide written corrective action plans in response to
     State administrative review findings. The State agency must review these plans and evaluate
     whether the corrective actions are sufficient to ensure the problems do not reoccur and
     sponsors fully and permanently correct the deficiencies. If the State agency receives the
     plans after the sponsors’ summer program operations have ended, FNS recommends that the
     State re-evaluate the plans the following year before approving the sponsors’ SFSP
     applications to ensure the sponsors implemented the corrective actions.

     The State agency’s most recent administrative reviews of the sponsors we reviewed
     identified four of the nine noncompliance issues we found and directed the sponsors to take
     corrective actions. However, we determined the sponsors’ corrective actions that the State
     agency approved were not sufficient to resolve these four noncompliance issues. For
     example, the State agency approved corrective action for a repeat administrative review
     finding that did not resolve the noncompliance issue the first time it was identified.
     Consequently, the State agency approved corrective actions that did not address the
     underlying cause of the noncompliance issues.

     The State Agency Did Not Adequately Train Staff to Review Sponsors

     Federal regulations require State agencies to provide sufficient, qualified personnel to
     administer the program and monitor performance, including compliance with fiscal
     accountability requirements. 37 The State agency reviewers, however, were primarily
     nutritionists who had varying levels of fiscal accountability experience and knowledge
     needed to identify SFSP sponsors’ fiscal noncompliance issues.

     We concluded that providing fiscal training to reviewers would improve the State agency’s
     effectiveness in monitoring the sponsors’ compliance with program requirements because we
     identified seven of the nine noncompliance issues based on our knowledge of accounting
     principles and financial regulatory requirements. We spoke with the State agency staff and
     determined that some of the reviewers were unfamiliar with SFSP’s fiscal accountability
     requirements. We also determined that some of the reviewers did not understand how to
     analyze the sponsors’ financial documentation to ensure compliance with program
     requirements. For example, the reviewers accepted mileage expense for a sponsor even
     though the sponsor also included actual vehicle maintenance and gasoline costs for SFSP.
     The reviewer did not realize that this may have represented a duplicated cost (since sponsors
     should claim mileage expense in lieu of actual car expenses) and therefore improperly
     allowed both types of expenses. 38

37
  7 C.F.R. §225.6(a).
38
  We could not determine the dollar impact for the month the State agency reviewed in 2015; however, the dollar
impact for the 2016 program year (the period we reviewed) was $2,245. The reviewer acknowledged there was

                                                                         AUDIT REPORT 27004-0001-41           15
     The State Agency’s Review Determinations Cannot be Verified

     FNS guidance requires State agencies to develop a monitoring system that includes forms to
     collect data. To complete the review forms, State agency reviewers must collect applicable
     information covering all the required review areas (such as sponsor training records, cost
     records, meal count records, etc.) from sponsors. Further, State agency reviewers may
     request this documentation before the onsite reviews.

     The State agency completed the required administrative sponsor and site review forms by
     indicating—via a checkmark—whether or not the sponsors/sites complied with each of the
     SFSP requirements. However, the State agency reviewers did not maintain copies of the
     sponsor records they reviewed to make their assessments, or document the basis for their
     determinations. Further, the State agency did not have a process to verify the reviewers’
     determinations. Consequently, the State agency managers and other third parties could not
     confirm whether the reviewers’ determinations were accurate.

     We found that four of the five sponsors we reviewed included nearly $315,000 in
     questionable and unsupported SFSP costs in 2016—yet the State agency’s most recent
     administrative reviews for each of these sponsors indicated via checkmarks that all the
     sponsors’ costs were allowable. 39 The State agency’s reviewers did not maintain copies of
     the sponsors’ financial records for State agency managers or external reviewers to validate
     and assess their review determinations. Also, the State agency reviewers neither documented
     nor explained what they reviewed and how they made their determinations on the review
     forms. State agency reviewers said the sponsors’ support was adequate since there were no
     findings, but this would not be correct given that the sponsors’ records for the month of
     review included the same unallowable costs we identified.

In total, we identified nine noncompliance issues for these five sponsors in 2016. We found that
four of these sponsors 40 had nearly $315,000 in questionable and unsupported SFSP costs that
included nonexistent expenditures and prohibited SFSP costs such as direct expenses for cars. In
addition, we found that two of these sponsors 41 claimed over $61,000 in questionable and
unsupported SFSP reimbursements 42 based on meal counts in July 2016, which included claims
for more meals than actually served. These sponsors may also be seriously deficient in their
operation of SFSP because they did not maintain adequate records nor document that they used
their SFSP reimbursements for allowable costs such as food for free SFSP meals provided to
children, as required by SFSP regulations and FNS.




mileage expense and did not realize it may have been a duplicate cost with the actual automobile expense, but there
is no record of the dollar impact in 2015 since the State agency does not maintain documentation.
39
   Sponsors A, B, C, and E. These costs included $214,441 in questionable costs and $100,536 in unsupported costs.
40
   Sponsors A, B, C, and E.
41
   Sponsors B and E.
42
   These reimbursements included $18,923 in questionable reimbursements and $42,860 in unsupported
reimbursements.

16      AUDIT REPORT 27004-0001-41
We discussed these issues with State agency officials, who generally agreed with our findings.
State agency officials emphasized that they complied with minimum program requirements, but
agreed the agency could make improvements. For example, the State agency may not be able to
expand the administrative reviews beyond 1 month, but it could possibly review sponsors’ prior
year costs overall and select 1 month from the previous period to fully review. This would help
prevent sponsors from selecting which costs the State agency would review, since the previous
program period is closed and sponsors would not know which month the State agency would
select. The State agency also agreed to provide reviewers with more fiscal accountability
training. While the State agency was opposed to maintaining supporting documentation for its
reviews because staff thought it would be too burdensome, they agreed the State agency could
develop a process to periodically verify the reviewers’ determinations. Also, the State agency
agreed to recover the unallowable costs from the sponsors.

To improve its ability to identify and monitor sponsor noncompliance issues, the State agency
should expand its administrative review process and obtain sufficient information to evaluate
SFSP sponsors’ compliance. Further, the State agency should ensure corrective actions
adequately address the underlying cause of sponsor noncompliance and follow up to ensure the
corrective actions are effective. Additionally, the State agency should provide its staff with
training on the sponsors’ SFSP fiscal accountability requirements as well as maintain fiscal
supporting documentation and document the basis of their administrative review determinations.

The State agency should also confirm the questionable and unsupported costs and
reimbursements we identified, and recover the disallowed amounts. Further, the State agency
should determine whether Sponsors B and E are seriously deficient. If the State agency
determines these sponsors are seriously deficient, it should initiate the seriously deficient process
based on FNS guidance. 43 Finally, the State agency should confirm each of the other OIG-
identified sponsor noncompliance issues and take corrective action.

Recommendation 11

Advise the State agency of best practice to expand administrative review under certain
circumstances in which the State believes it is necessary to obtain sufficient information to
ensure SFSP sponsors’ compliance with program requirements.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS acknowledges that CDE’s current administrative
review procedures meet the outlined regulatory requirements; however, FNS will encourage the
State agency, as a best practice, to develop procedures to expand the administrative review in
circumstances where the reviewer has determined that it is necessary to ensure SFSP sponsors’


43
  7 C.F.R. § 225.11(c) prohibits State agencies from entering into any agreement with any applicant sponsor
identifiable through its corporate organization, officers, employees, or otherwise, as an institution which participated
in any Federal CNP and was seriously deficient in its operation of any such program.

                                                                             AUDIT REPORT 27004-0001-41              17
compliance with program requirements. FNS will also encourage CDE to provide reviewers
with updated training that reflects the procedures developed to expand the administrative review
in certain circumstances.

FNS provided an estimated completion date of May 1, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 12

Direct the State agency to develop and implement procedures to ensure SFSP sponsors’
corrective actions adequately address the underlying cause of sponsors’ noncompliance, and
follow up to ensure the corrective actions are effective.

Agency Response

In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to ask for detailed, step-by-step
procedures that will address the underlying cause for each review finding, as well as training
documents showing that sponsor staff are trained on those detailed procedures as part of the
sponsor’s corrective action. If the sponsoring organization participates the following summer,
the agency will be reviewed to verify corrective action.

FNS provided an estimated completion date of June 15, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 13

Direct the State agency to provide its staff responsible for conducting SFSP administrative
reviews with training that is focused on the sponsors’ SFSP fiscal accountability requirements.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to ensure staff are trained on
procedures for running the program in accordance with 7 CFR 225.6. FNS will also encourage
CDE to provide training focused on the sponsor’s SFSP fiscal accountability requirements.


18    AUDIT REPORT 27004-0001-41
FNS provided an estimated completion date of March 30, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.


Recommendation 14

Direct the State agency to develop and implement procedures to periodically verify the
reviewers’ determinations (for example, requiring the State agency reviewers to maintain fiscal
supporting documentation for review).

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to maintain documentation
supporting fiscal findings, as well as, develop and implement review procedures that include
periodic verification of reviewers’ determinations for the fiscal portion of the SFSP review.

FNS provided an estimated completion date of August 31, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 15

Direct the State agency to confirm the sponsor questionable costs totaling $214,441 identified by
OIG, and recover any disallowed costs from the SFSP sponsors.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS to
follow-up on OIG identified unallowable costs for which recently provided OIG work papers
clearly identify the costs in question. If unallowable costs are confirmed, CDE will follow-up
accordingly to include appeal rights provided to the SFSP sponsor and attempt to recover the
unallowable costs.

FNS provided an estimated completion date of June 30, 2019, for this action.




                                                               AUDIT REPORT 27004-0001-41        19
OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 16

Direct the State agency to confirm the sponsor unsupported costs totaling $100,536 identified by
OIG, and recover any disallowed costs from the SFSP sponsors.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS to
follow-up on OIG-identified unsupported costs as delineated in the recently-provided OIG
workpapers. If unsupported costs are confirmed, CDE will follow-up accordingly to include
providing appeal rights to the SFSP sponsor and requesting that sponsors replenish any
unsupported costs to their nonprofit food service account.

FNS provided an estimated completion date of June 30, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 17

Direct the State agency to confirm the sponsor questionable meal claims totaling $18,923
identified by OIG, and recover any disallowed SFSP reimbursements from the sponsors.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS to
follow-up on OIG identified questionable meal claims on as delineated in the recently-provided
OIG workpapers. If any portion of the sponsors’ claims are determined to be unallowable
following the procedures outlined in 7 CFR 225.12, CDE will follow-up accordingly to include
providing appeal rights to the SFSP sponsors and attempting to recover the unallowable
reimbursements.

FNS provided an estimated completion date of June 30, 2019, for this action.




20     AUDIT REPORT 27004-0001-41
OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 18

Direct the State agency to confirm the sponsor unsupported meal claims totaling $42,860
identified by OIG, and recover any disallowed SFSP reimbursements from the sponsors.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS to
follow-up on OIG identified unsupported meal claims as delineated in the recently-provided OIG
workpapers. If any portion of the sponsors’ claims are determined to be unallowable following
the procedures outlined in 7 CFR 225.12, CDE will follow-up accordingly to include providing
appeal rights to the SFSP sponsors and attempting to recover the unallowable reimbursements.

FNS provided an estimated completion date of June 30, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 19

Direct the State agency to determine whether Sponsors B and E are seriously deficient. If the
State agency determines these sponsors are seriously deficient, it should initiate the seriously
deficient process.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to evaluate whether or not
Sponsors B and E should be determined seriously deficient based their review of the workpapers
recently provided by OIG. If CDE deems the sponsors seriously deficient, it will follow State
agency procedures to initiate the seriously deficient process.

FNS provided an estimated completion date of June 30, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

                                                                AUDIT REPORT 27004-0001-41         21
Recommendation 20

Direct the State agency to confirm each of the OIG-identified sponsor noncompliance issues and
ensure identified sponsors correct the deficiencies.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to follow up on all documented
non-compliance issues, including ensuring appropriate corrective actions are implemented, as
applicable, utilizing the workpapers recently provided by OIG.

FNS provided an estimated completion date of June 30, 2019, for this action.

OIG Position

We accept FNS’ management decision on this recommendation.




22     AUDIT REPORT 27004-0001-41
Section 2: SFSP Sponsor Controls
Finding 3: SFSP Sponsors Should Improve Training and Monitoring of SFSP
Operations
The State agency reimburses SFSP sponsors, who may operate several sites based solely on the
sponsors’ site meal counts. During our site visits, we found that four of the five SFSP sponsors
we reviewed did not operate some of their sites in accordance with SFSP regulations and
requirements. Specifically, we counted 119 ineligible meals that sponsors’ site staff recorded as
reimbursable. This occurred because sponsors did not adequately train site staff or monitor site
operations. As a result, the State agency reimbursed the four sponsors approximately $430 in
questionable SFSP reimbursements—18 percent of the sites’ meals served on a single day.
Therefore, the issues we identified could potentially represent significant deficiencies for these
sites.

For SFSP meals to be reimbursable, sponsors must ensure sites count only eligible SFSP meals
served to children in accordance with program requirements. 44 These reimbursement
requirements include regulatory provisions as well as FNS instructions. 45 Additionally, FNS
guidance outlines specific procedures to help ensure sponsors comply with reimbursement
requirements. 46

We observed program noncompliance issues at 10 of the 13 sites we visited for the reviewed
sponsors. 47 In total, we identified 25 instances of program noncompliance that included meals
missing required components, meals consumed offsite, and improper documentation. 48 Three of
these noncompliance issues contributed to the $430 in questionable reimbursements we found.
These noncompliance examples are described below. For more details on each of the examples,
see Exhibit D at the end of this report.

     Meals Missing Required Components

     SFSP regulations require SFSP meals to include specific food components such as fruits and
     vegetables, milk, and meat. 49 During our site visits, we observed that 6 of the 13 sites served
     incomplete meals that did not include all the required food components. For example, one


44
   7 C.F.R. § 225.6(e)(7), 7 C.F.R. § 225.6(c)(L), 7 C.F.R. § 225.14(d)(4)(iii); FNS, Summer Meal Program Meal
Service Requirements Q&As—Revised, Policy Memo No. SFSP 05-2015 (v.2) (Jan. 12, 2015).
45
   7 C.F.R. § 225.9(d); FNS, Nationwide Expansion of Summer Food Service Program Simplified Cost Accounting
Procedures, Policy Memo No. SFSP 01-2008 (Jan. 2, 2008).
46
   USDA FNS, Administration Guide, Summer Food Service Program, Chapter 9, “Program Costs and
Reimbursements” (Mar. 2016).
47
   We visited 16 sites, but only observed SFSP meal services at 13 sites, which included 9 complete site visits
(where we observed the sites’ complete meal service), and 4 limited site visits (where we observed a portion of the
sites’ meal service). In total, these sponsors had 73 sites in 2016.
48
   The noncompliance issues also included food safety violations reported in California’s Controls Over Summer
Food Service Program Interim Report (Audit Report 27004-0001-41(1), Sept. 2017).
49
   Reimbursable SFSP meals must generally contain specific food components: (1) vegetables and fruits; (2) bread
and bread alternates; (3) milk; and (4) meat and meat alternates.

                                                                          AUDIT REPORT 27004-0001-41             23
     site did not provide children with fruit unless the children specifically requested it. 50
     Consequently, the children at these sites did not receive nutritious and well-balanced meals
     as intended by the program. Despite this, we found that these sites counted such meals as
     reimbursable. In total, these sites improperly counted 99 questionable meals that represented
     approximately $379 of the $430 in questionable SFSP reimbursements we found.

     Incorrect Meal Count Forms

     FNS guidance requires meal count forms to be completed based on the actual meal counts
     performed during meal services. 51 During our site visits, one sponsor provided inaccurate
     meal count records for 3 of the 13 sites. 52 The sponsor provided us with meal count forms
     that did not reflect the meal count forms we observed the day of our site visits. For example,
     we observed that one sponsor delivered meals to a site with no site staff to serve or record the
     meals on the meal count form, and no children were present during the entire meal service
     time. However, the sponsor subsequently provided a meal count form for this day that
     recorded eight meals (i.e., eight meals more than we observed onsite). Consequently, the
     sponsor’s meal count form did not reflect the actual meal counts performed during meal
     service, as required. In total, for the day of our site visits, the sponsor provided inaccurate
     meal count forms for several sites that included 13 questionable, nonreimbursable meals,
     which represented about $29, a portion of the entire $430 in questionable SFSP
     reimbursements.

     Meals Consumed Offsite

     SFSP regulations require children to consume SFSP meals onsite. 53 During our site visits,
     we observed that 1 of the 13 sites improperly counted seven meals that were not consumed
     by children onsite for reimbursement that day. Consequently, the site had no assurance that
     eligible children consumed the meal or that the safety and quality of the meal was maintained
     as required. This represented the remainder that contributed to the $430 in questionable
     SFSP reimbursements—approximately $22.

The site noncompliance issues we identified occurred, in part, because the sponsors did not
ensure site staff were knowledgeable of program requirements and able to carry out program
responsibilities. 54 In 2016, three of the sponsors we reviewed did not ensure that 31 of their
72 sites had trained supervisors as required. 55 Additionally, site staff at four of the sites stated
they did not receive any SFSP training from their two sponsors. At another four sites that
received SFSP training, we determined the training was inadequate because the site personnel
were not aware of basic program requirements.

50
   This site did not operate under FNS’ “Offer vs. Serve” policy, so it was required to serve the fruit component with
the meal.
51
   USDA FNS, Administration Guide, Summer Food Service Program, Chapter 10, “Administrative Records” (Mar.
2016).
52
   Sponsor E.
53
   7 C.F.R. § 225.6(e)(15).
54
   7 C.F.R. § 225.15(d)(1).
55
   Federal regulations require sponsors to provide training to site personnel and FNS guidance specifies that the
training must include site supervisors as well as food service personnel.

24      AUDIT REPORT 27004-0001-41
The site noncompliance issues also occurred because sponsors did not adequately monitor site
operations. Sponsors employed monitors to conduct site reviews and complete reports to ensure
sites complied with SFSP requirements. However, some sponsors did not adequately train site
monitors to assess site operations. For example, we observed a monitor assisting site staff where
both parties were improperly serving SFSP meals that were missing milk (a required food
component) and counting these questionable meals for reimbursement. Additionally, we
reviewed sponsors’ monitor reports and found that some of the monitors did not accurately
identify noncompliance issues. For example, one site monitor inaccurately reported that the site
supervisor received SFSP training even though the supervisor did not. Consequently, the
monitors did not understand program rules nor ensure sites complied with SFSP requirements.

Additionally, some sponsors did not ensure sites corrected noncompliance issues when
identified. For example, one monitor identified a noncompliant issue in 2016 (i.e., the site
served SFSP meals outside of the approved meal service times and improperly counted the meals
for reimbursement), yet we found the same issue during our site visit in 2017. According to the
site’s sponsor, it had difficulty ensuring sites complied with program requirements because the
sponsor did not have direct operational control over the sites. 56 Consequently, the sponsor may
identify noncompliance issues and emphasize SFSP requirements, but the sponsor did not feel it
could enforce the requirements. In total, two of the five sponsors we reviewed lacked direct
operational control over all their sites. 57 This may have contributed to the sites’ noncompliance
issues.

Finally, sponsors did not monitor sites as frequently as required. Federal regulations require
sponsors to conduct at least one monitoring review during “the first four weeks of operation” and
then maintain a reasonable level of site monitoring throughout the program operation. 58
However, four of the reviewed sponsors only conducted formal monitoring reviews of their sites
once during the 2017 program year, and two of these sponsors did not conduct all of their site
reviews within the sites’ first 4 weeks of operation. These sponsors did not maintain a
reasonable level of site monitoring nor ensure sites complied with program requirements, as
evidenced by 25 noncompliance issues we identified at 10 of the 13 sites we visited.

We discussed these issues with State agency officials who generally agreed with our findings.
To improve sponsor oversight of SFSP operations, the State agency should direct the identified
sponsors to provide: (1) additional, enhanced SFSP training to site personnel; (2) specialized
SFSP training to monitors; and (3) more frequent, formally-documented monitoring reviews.
The State agency should also monitor and assess the identified sponsors’ additional SFSP
training for their sites and monitors as well as the sponsors’ increased level of site monitoring to
ensure compliance. Further, the State agency should confirm whether the identified sponsors
claimed any of the questionable, nonreimbursable meals we observed during our site visits, and
recover these amounts from the sponsors if claimed.



56
   Sponsor E.
57
   Sponsors B and E.
58
   7 C.F.R. § 225.15(d)(3)).

                                                                AUDIT REPORT 27004-0001-41        25
Recommendation 21
Require the State agency to direct identified sponsors to provide additional, enhanced SFSP
training to site staff to ensure staff have sufficient knowledge of program requirements when
operating sites and serving meals.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to ensure affected sponsors are
providing training to site staff in accordance with 7 CFR 225.15(d), which outlines sponsor
responsibilities for training and monitoring site personnel and operations. In addition, FNS will
direct CDE to require affected sponsors to provide additional, enhanced training to site staff to
ensure compliance with meal service times, meal patterns, and congregate feeding.

FNS provided an estimated completion date of August 31, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 22

Direct the State agency to direct identified sponsors to provide specialized training that includes
monitors’ duties and responsibilities—as prescribed by the FNS Sponsor Monitor’s Guide—to
site monitors that visit and monitor site operations.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to ensure affected sponsors are
providing training to site staff in accordance with 7 CFR 225.15(d), which outlines sponsor
responsibilities for training and monitoring site personnel and operations. In addition, FNS will
direct CDE to require affected sponsors to provide specialized training for site monitors to ensure
duties are performed as prescribed by the FNS Sponsor Monitor’s Guide.

FNS provided an estimated completion date of August 31, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.




26     AUDIT REPORT 27004-0001-41
Recommendation 23
Direct the State agency to direct identified sponsors to conduct formal, documented site reviews
more frequently than once during the sites’ operations.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will work with CDE to ensure that their sponsors
are meeting the sponsor monitoring requirements outlined in 7 CFR 225.15(d)(3). FNS will
encourage CDE to require sponsors perform site reviews as federally required including
additional reviews as necessary to ensure ongoing compliance throughout program operation.

FNS provided an estimated completion date of August 31, 2019, for this action.

OIG Position

We accept FNS’ management decision on this recommendation.

Recommendation 24
Direct the State agency to monitor and assess the identified sponsors’ enhanced site training,
specialized site monitor training, and increased level of site monitoring to ensure the identified
sponsors’ compliance.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. While there is no regulatory requirement to do so, FNS
will encourage CDE to monitor and assess affected sponsors’ implementation of enhanced site
and monitor trainings as well as increased site monitoring.

FNS provided an estimated completion date of August 31, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 25
Direct the State agency to confirm whether the sponsors claimed any of the OIG-identified
questionable, non-reimbursable meals counted by the sites. If the sponsor claimed these meals,
direct the State agency to recover the $430 in questionable meal claims.

                                                                AUDIT REPORT 27004-0001-41       27
Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS to
follow-up on OIG identified questionable, non-reimbursable meals as delineated in the recently-
provided OIG workpapers. If any portion of the sponsors’ claims are determined to be
unallowable following the procedures outlined in 7 CFR 225.12, CDE will follow-up
accordingly to include providing appeal rights to the SFSP sponsors and attempting to recover
the unallowable reimbursements.

FNS provided an estimated completion date of June 30, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.




28     AUDIT REPORT 27004-0001-41
Finding 4: SFSP Sponsors Should Improve Outreach Efforts
SFSP sponsors include school food authorities or public or private nonprofit organizations such
as schools and community centers that may manage multiple State-approved sites. In 2016,
California’s State agency had 220 sponsors participate in SFSP. These sponsors operated
2,622 sites. We found three of the five sponsors we reviewed did not ensure some of their sites
complied with SFSP outreach requirements. 59 Specifically, we found that 10 of the 13 sites
improperly restricted public access, posted public notices that appeared to limit SFSP
participation, and did not display the required nondiscrimination posters. 60 This occurred
because sponsors lacked sufficient monitoring of site outreach efforts, or issued unclear public
notices. Therefore, the public would likely rely on the sponsors’ inaccurate advertisements. As
a result, the public may not have been aware of the availability of SFSP services or the public’s
rights under the program. Consequently, program outreach noncompliance may adversely affect
children’s equal access to nutritious meals during the summer months.

Sponsors and sites must comply with program outreach requirements to increase participation
and ensure children from low-income areas and/or low-income households have equal access to
SFSP meal services and receive nutritious meals when school is not in session. Sites are eligible
to participate in the program if they are located in low-income areas or if they serve children who
meet eligibility requirements. Most sites are categorized as either open, with meals available to
all children in the area, restricted open, when attendance is limited for safety or control reasons,
or closed enrolled, where only specified groups of children are served. FNS guidance requires
open sites to make SFSP meals available to all children in the area on a first-come, first-serve
basis. 61 Further, these sites should have no barriers (such as locked doors) that prevent children
from receiving the SFSP meals. 62 SFSP regulations also require sponsors to issue a media
release each year that announces the availability of free meals in the area. 63 Similarly, FNS
encourages open sites to display banners that publicize that SFSP meal services are open to the
public. 64 Additionally, sponsors’ sites must prominently display the USDA nondiscrimination
poster “And Justice for All” that states SFSP meals are available to all children regardless of
race, color, national origin, sex, age, or disability. 65, 66

Sponsors advertise “open” (meals available to all children in the area) sites in their public
notices, and sites are also advertised on SFSP meal finder services so the public will know where
children can obtain free SFSP meals during the summer. However, three of the five sponsors we
reviewed did not ensure some of their sites complied with these outreach requirements. 67
Specifically, one sponsor issued a media release regarding its open sites that incorrectly

59
   The State agency approved these three sponsors to operate 61 sites in 2017.
60
   We conducted 16 site visits, which included 9 complete site visits (where we observed the sites’ complete meal
service), 4 limited site visits (where we observed a portion of the sites' meal service), and 3 other site visits (where
we did not observe the sites’ meal service).
61
   USDA FNS, FNS Administrative Guide, Summer Food Service Program (2016).
62
   USDA FNS, FNS State Agency Monitor Guide, Summer Food Service Program (2016).
63
   7 C.F.R. § 225.15 (e).
64
   FNS Policy Memo SFSP 05-2017, Summer Food Service Program Questions and Answers (Dec. 1, 2016).
65
   Sites may also display an FNS-approved substitute poster.
66
   USDA FNS, FNS Site Supervisor’s Guide, Summer Food Service Program (2016).
67
   Sponsors B, C, and E.

                                                                              AUDIT REPORT 27004-0001-41              29
suggested children had to be enrolled members to receive SFSP meals. 68 The other two sponsors
inaccurately advertised some of their sites as open. We visited 10 of these sponsors’ open sites
and found that 2 of these sites were located in secure apartment buildings behind locked gates
and 4 sites only permitted enrolled children (children enrolled in the site’s non-SFSP activities)
on the premises. Furthermore, the sponsors told us that several of the sites they advertised as
open were not actually operational and did not provide any SFSP meal service at all. 69 The
public is likely to have relied on the sponsors’ inaccurate advertisements and to have gone to
sites that were not actually open to the public. Consequently, children would not have been able
to receive SFSP meals.

We also found that these sponsors did not ensure their sites properly displayed notices. 70 For
example, 3 of the 10 sites we visited did not display the “And Justice for All” poster in a
prominent place as required to inform parents, site staff, and the public that institutions
participating in SFSP are prohibited from discriminating based on race, color, national origin,
sex, religious creed, disability, age, or political beliefs. Some sites also did not post SFSP signs
onsite that made it clear that free SFSP meals were available to all children in the area. 71
Without these notices, the sponsors did not make the public aware of their rights under the
program or that SFSP sites existed in their neighborhoods.

Table 1 summarizes the outreach noncompliance issues we identified.

Table 1: Sponsor/Site Outreach Noncompliance Issues
                                Sponsor B      Sponsor C                       Sponsor E
 Noncompliance Issue            Site Site      Site Site       Site    Site    Site Site       Site    Site    Total
                                B1 B2          C1    C2        E1      E2      E3    E4        E5      E6
 Restricted Public Access                                       X       X       X     X         X       X           6
 Unclear Public Notices          X      X       X       X               X       X     X         X       X           9
 Non-Discrimination                     X                                       X               X                   3
 Posters Not Displayed
                    Total        1       2      1       1       1       2       3       2       3       2       18

The outreach noncompliance issues identified above occurred because sponsors did not have
sufficient monitoring of their site outreach efforts. Specifically, the sponsors did not adequately
train their site monitors to assess and identify program outreach noncompliance. Several of the
sponsors’ 2017 site monitoring reports did not identify the noncompliance issues we found
during our site visits. The sponsors also did not timely address site changes or ensure their
public notices were clear.


68
   The media release stated the sponsor offered a variety of “affordable” non-SFSP programs and activities to
children 5–18 years old, and that SFSP meals would be available to “all attending children.” These combined
statements could wrongly imply that the sites were closed and only enrolled children “attending” the non-SFSP
programs and activities could receive SFSP meals.
69
   These sponsors inaccurately advertised 11 of 51 sites (nearly 22 percent) as open that were not operational in
2017.
70
   Sponsors B, C, and E.
71
   Display of SFSP banners at feeding sites is a suggested FNS best practice; it is not an FNS requirement.


30      AUDIT REPORT 27004-0001-41
In order to improve sponsor outreach efforts, FNS should direct the State agency to require that
identified sponsors develop and implement specialized training for site monitors to ensure they
properly identify program outreach noncompliance issues. FNS should also direct the State
agency to require that identified sponsors develop and implement procedures to properly classify
open and closed sites and timely update the status of non-operational sites in the State agency
system. Further, FNS should direct the State agency to require that the identified sponsor revise
its media release to ensure the release clearly communicates that free meals are available to the
public and not restricted to enrolled members. Lastly, FNS should direct the State agency to
confirm the identified sponsors implemented these actions.

Recommendation 26
Direct the State agency to require identified sponsors to develop and implement specialized
training for site monitors to ensure they properly identify program outreach noncompliance
issues.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. While there is no regulatory requirement to do so, FNS
will encourage CDE to require affected sponsors to provide specialized training for site monitors,
to ensure they properly identify program outreach noncompliance. This action will be taken
once CDE completely reviews all the workpapers and associated documentation from OIG
supporting this finding.

FNS provided an estimated completion date of June 30, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 27

Direct the State agency to require identified sponsors to develop and implement procedures to
properly classify sites, and update the status of non-operational sites timely in the State system.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. FNS will direct CDE to work with affected sponsors to
implement procedures to properly classify sites (as open, restricted open, closed enrolled, or
camp), and make timely updates within CNIPS on non-operational status.

FNS provided an estimated completion date of June 15, 2019, for this action.

                                                                 AUDIT REPORT 27004-0001-41       31
OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 28
Direct the State agency to consult with FNS to ensure Sponsor C’s future media releases clearly
communicate that free meals are available to the public and not restricted to enrolled members,
and ensure the revised media releases are adequate prior to approving the sponsor’s application.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. While Sponsor C’s media release and website is fully
compliant with Program regulations, FNS agrees that the language used may have been unclear.
FNS will advise the State agency to ensure Sponsor C removes the word “attending” from all
materials containing the phrase “all attending children” to ensure clear communication that free
meals are available to the public.

FNS completed this action on August 30, 2018.

OIG Position
We accept FNS’ management decision on this recommendation.

Recommendation 29
Direct the State agency to confirm the identified sponsors implemented the additional monitoring
from Recommendations 26, 27, and 28.

Agency Response
In its September 26, 2018, response, FNS stated:

FNS concurs with the recommendation. While there is no regulatory requirement to do so, FNS
will encourage CDE to confirm affected sponsors have implemented all required additional
monitoring per Recommendations 26, 27, and 28.

FNS provided an estimated completion date of August 31, 2019, for this action.

OIG Position
We accept FNS’ management decision on this recommendation.

32     AUDIT REPORT 27004-0001-41
Scope and Methodology
We conducted an audit of the State of California’s administration of SFSP. The scope of our
audit work covered program activities from FYs 2014 through 2016 and site observations from
June through August 2017. We began fieldwork in California in May 2017. To accomplish our
objective, we performed fieldwork at the State agency (the California Department of Education)
office in Sacramento and at 16 non-statistically selected sites (operated by five non-statistically
selected sponsors). Of the 16 site visits, 9 were complete announced and 7 were confirmation
site visits. 72, 73

We non-statistically selected 5 of California’s 220 sponsors in 2016, based on SFSP
reimbursement amounts, sponsor types, site types, site locations, and food service operations.
Ultimately, we randomly selected one sponsor from each of the following categories:

     •   a sponsor that was a school food authority (Sponsor A);
     •   a non-profit sponsor that had rural, open sites (Sponsor B);
     •   a non-profit sponsor that had urban, open sites (Sponsor C);
     •   a non-profit sponsor that had vended, open sites (Sponsor D); and
     •   a non-profit sponsor that had self-prep, open sites (Sponsor E).

We also non-statistically selected two sites for each sponsor based on SFSP reimbursement
amounts and the corresponding site location and food service characteristics, if possible. For
example, for Sponsor B, we selected two rural sites that had the highest SFSP reimbursements in
2016. If a selected site was not operational at the time of our visit, we selected an alternative site
with similar characteristics, if possible. 74 If there was no alternative site with similar
characteristics, then we selected a site based on the highest SFSP reimbursement. During our
fieldwork, one of our five sponsors selected for review only had one operational site.
Consequently, we conducted 9 site visits in all instead of 10.

For our selected sponsors, we also conducted additional site confirmation visits based on sites
that were operational at the time of our fieldwork and within the time/distance parameters of our
selected sites, which was approximately a 10-mile or 10-minute travel radius. In total, we
conducted seven confirmation site visits for three of the five sponsors selected for review. Four
of these confirmation site visits occurred during SFSP meal service, and the remaining three
confirmation site visits did not occur during SFSP meal service.

In developing the findings for this report, we:

     •   Reviewed applicable laws, regulations, and Federal and State policies and procedures
         concerning SFSP.

72
   For a list of sampled sponsor locations, see Exhibit B.
73
   “Complete announced visits” means site visits where auditors observed the sites’ complete meal service and
where sponsors and site supervisors were notified of the date and time of our visits. “Confirmation site visit” means
site visits where auditors conducted limited site visits to confirm if the sites are operational.
74
   Selected sites may not have been operational due to the timing of our fieldwork and the site’s period of operations
or the sponsor may not operate the selected site in 2017.

                                                                           AUDIT REPORT 27004-0001-41             33
     •   Developed three checklists that included specific procedures to assess State
         administration and sponsor and site compliance with program guidelines.
     •   Interviewed the State agency officials regarding their administration of SFSP and
         oversight of sponsors and sites.
     •   Reviewed and assessed State records and supporting documentation such as sponsor/site
         SFSP applications and State SFSP administrative reviews for selected sponsors.
     •   Interviewed selected sponsors’ staff regarding their administration and oversight of
         SFSP.
     •   Visited sponsor central kitchens and observed SFSP meal preparations.
     •   Conducted site visits and observed onsite SFSP meal services.
     •   Interviewed selected sites’ staff regarding their administration of SFSP meal services.
     •   Reviewed and assessed sampled sponsors’ records and supporting documentation such as
         financial statements, receipts, and meal count sheets to evaluate the permissibility of
         sponsor costs, accuracy of claims submitted, and sponsor and site compliance with SFSP
         regulations and requirements.

During the course of our audit, we did not solely rely on information from any agency
information systems. While we conducted limited verification of information generated by the
State agency’s computer system, we make no representation regarding the adequacy of this
system or the information generated from it because evaluating the effectiveness of the
information system (or information technology controls) was not part of the audit objective.

We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe the evidence we obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives.




34       AUDIT REPORT 27004-0001-41
Abbreviations
CDE........................................California Department of Education
CNIPS ....................................California Nutrition Information and Payment System
CSAM ....................................California School Accounting Manual
CNP ........................................Child Nutrition Program
C.F.R. .....................................Code of Federal Regulations
COE........................................County Office of Education
FSU ........................................Field Services Unit
FNS ........................................Food and Nutrition Service
FY ..........................................fiscal year
ME..........................................Management Evaluation
NSLA .....................................Richard B. Russell National School Lunch Act
OIG ........................................Office of Inspector General
PSD ........................................Public School District
SA ..........................................State Agency
SFSP.......................................Summer Food Service Program
SMU .......................................Summer Meals Unit
USDA.....................................United States Department of Agriculture




                                                                     AUDIT REPORT 27004-0001-41   35
Exhibit A: Summary of Monetary Results
Exhibit A summarizes the monetary results for our audit report by finding and recommendation
number. The table displays questioned costs resulting from our audit work.

 Finding     Recommendation              Description             Category          Amount

                                                             Questioned Costs,
     2               15          Questionable SFSP Costs        Recovery            $214,441
                                                              Recommended

                                                            Unsupported Costs,
     2               16          Unsupported SFSP Costs         Recovery            $100,536
                                                             Recommended

                                                             Questioned Costs,
                                      Questionable SFSP
     2               17                                         Recovery             $18,923
                                       Reimbursements
                                                              Recommended

                                                            Unsupported Costs,
                                      Unsupported SFSP
     2               18                                         Recovery             $42,860
                                       Reimbursements
                                                             Recommended

                                                             Questioned Costs,
                                      Questionable SFSP
     3               25                                         Recovery                $430
                                       Reimbursements
                                                              Recommended

 Total Monetary Results                                                            $377,190




36       AUDIT REPORT 27004-0001-41
Exhibit B: Audit Sites Visited
Exhibit B lists the name and location of the State office and all sponsors and sites visited.

                    NAME                                            LOCATION

 California Department of Education               Sacramento, CA

 Sponsor A
 Site A1
 Sponsor B
 Site B1
 Site B2
 Site B3
 Sponsor C
 Site C1
 Site C2
 Sponsor D
 Site D1
 Site D2
 Site D3
 Site D4
 Sponsor E
 Site E1
 Site E2
 Site E3
 Site E4
 Site E5
 Site E6




                                                                 AUDIT REPORT 27004-0001-41     37
Exhibit C: Sponsor Noncompliance Issues
Exhibit C summarizes the sponsor noncompliance issues we identified.

 No.    Issue                                Sponsor        Sponsor        Sponsor       Sponsor        Sponsor
                                                A              B              C             D              E
 1      Questionable/Unsupported
                                                 X              X             X                             X
        Costs
 2      Questionable/Unsupported
                                                                X                                           X
        Reimbursements
 3      Did Not Maintain Non-Profit
                                                                X                                           X
        Food Service*
 4      Overestimated Budgets                                   X             X              X              X
 5      Overestimated Site
                                                                X             X              X              X
        Attendance
 6      Misclassified Sites                                     X             X
 7      Site Training Deficiencies                              X             X              X              X
 8      Unused Reimbursements Not
                                                 X              X                                           X
        Properly Tracked
 9      No SFSP Inventory
                                                 X              X                                           X
        Maintained
 * According to FNS policy, “a sponsor is operating a nonprofit food service if the food service operations are
 principally for the benefit of participating children and all of the program reimbursement funds are used solely
 for the operation or improvement of such food service.” FNS Policy Memo SFSP 05-2017, Summer Food
 Service Program Questions and Answers, Dec. 1, 2016.




38      AUDIT REPORT 27004-0001-41
Exhibit D: Site Noncompliance Issues
Exhibit D summarizes the site noncompliance issues we observed during our site visits.

 Noncompliance Issue              Sponsor A      Sponsor B      Sponsor C     Sponsor D      Sponsor E      Total
 Meals missing required food
 components (such as milk,                            1              2                            3            6
 or fruits and vegetables)
 Inaccurate meal count forms                                                                      3            3
 Meals consumed offsite                 1                                                                      1
 Meals served outside of
                                                                     1                            3            4
 approved meal service times
 Food safety violations*                                             1                                         1
 No site personnel present                                                                         1           1
 Meals improperly counted                                            1                             3           4
 Inaccurate delivery receipts                                        1                             4           5
 Total                                  1             1              6              0             17          25
 * This noncompliance issue was reported in Audit Report 27004-0001-41(1), California’s Controls Over Summer Food
 Service Program Interim Report, Sept. 2017.




                                                                     AUDIT REPORT 27004-0001-41          39
40   AUDIT REPORT 27004-0001-41
FNS’ Response




                  FNS’
        RESPONSE TO AUDIT REPORT




                        AUDIT REPORT 27004-0001-41   41
United States    DATE:         September 26, 2018
Department of
Agriculture
                 AUDIT
Food and         NUMBER:        27004-0001-41
Nutrition
Service
                 TO:            Gil H. Harden
3101 Park                       Assistant Inspector General for Audit
Center Drive

Alexandria, VA   FROM:          Brandon Lipps /s/
22302-1500                      Administrator
                                Food and Nutrition Service

                 SUBJECT:       California’s Controls over Summer Food Service Program

                 This letter responds to the official draft report for audit number 27004-0001-41,
                 California’s Controls over Summer Food Service Program (SFSP). Specifically, the
                 Department of Agriculture’s Food and Nutrition Service (FNS) is responding to the 29
                 recommendations in the report.

                 FNS acknowledges the importance of State agency (SA) controls in order to maintain
                 public trust in the program and to ensure that the full value of program resources are
                 used to serve nutritious meals to children.

                 In working with the California Department of Education (CDE) to prepare this
                 response, given that several of the recommendations pertained to CDE improving its
                 Administrative Review (AR) process, the SA wanted to ensure that OIG and the
                 readers of this report understand the difference between an AR and a performance
                 audit, such as this one performed by OIG.

                 There are different expectations and resource requirements of ARs compared to
                 performance audits conducted in accordance with Government Auditing Standards
                 (GAS). An AR is an assessment designed to ensure that all participating sponsors and
                 agencies comply with the federal and state program requirements of the SFSP. The AR
                 process is intended to provide technical assistance balanced with an assessment of
                 program compliance conducted in a condensed time frame. Accordingly, ARs are
                 completed with focused procedures and smaller sample sizes.

                 A performance audit conducted in accordance with GAS is an examination-level
                 engagement designed to provide findings or conclusions based on an evaluation of
                 sufficient, appropriate evidence against criteria. A performance audit generally
                 includes larger sample sizes spanning a longer time period with more comprehensive
Gil Harden
Page 2


procedures. Additionally, performance audits typically require significantly more staff
resources to perform than are available for the performance of ARs.

The AR process is intentionally designed to be limited in scope and breadth when
compared to a performance audit conducted in accordance with GAS. Therefore, the
results and supporting documentation are not comparable and should not be expected to
reflect the same outcomes or level of detail.

OIG Recommendation 1:

Direct the State agency to develop and implement procedures to assess the adequacy of
SFSP applicants’ financial management capabilities to separately track SFSP funds and
support SFSP costs during the application process, and ensure sponsors demonstrate
financial and management capabilities for program operations.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to institute internal
procedures to more closely review the SFSP budgets for sponsors that are operating
multiple Child Nutrition Programs (CNPs) in order to ensure they are correctly prorating
costs among the multiple CNPs. Additionally, FNS will provide onsite technical
assistance focused on budget review.

CDE has already instituted the following changes to its budget review process:

· The Nutrition Services Division Data Management Unit (DMU) will provide the
  Summer Meals Unit (SMU) an annual report by March 15 of every SFSP sponsor
  operating multiple CNPs.

· Sponsors identified as operating multiple CNPs will be flagged for additional budget
  review. This additional review will include SMU analysts examining each sponsor’s
  current year Child and Adult Care Food Program (CACFP) budget for similar costs
  being charged to both programs. SMU analysts will then work with the sponsor to
  ensure that costs are being allocated appropriately.

Estimated Completion Date:

May 1, 2019

OIG Recommendation 2:

Direct the State agency to develop the financial management standards as required by
SFSP regulations and specified in FNS Instruction 796-4.

FNS Response:




                             AN EQUAL OPPORTUNITY EMPLOYER
Gil Harden
Page 3


FNS concurs with the recommendation, noting that CDE already has financial
management standards for all Public School Districts (PSDs) and County Offices of
Education (COEs) approved to operate the SFSP as they are required to follow the
financial management standards described in the California School Accounting Manual
(CSAM). FNS will direct CDE to provide financial management standards to all
remaining SFSP sponsors.

Estimated Completion Date:

May 1, 2019

OIG Recommendation 3:

Direct the State agency to communicate its financial management standards (developed
in Recommendation 2) and the current Federal financial management requirements to
SFSP sponsors in its State-sponsor agreements.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to communicate the
standards and the financial management requirements to affected SFSP sponsors via a
Listserv and management bulletin, as well as incorporate the recommendations in the
State-sponsor agreement by applicable management bulletin reference. Additionally,
FNS will direct CDE to incorporate the financial management standards/requirements in
the annual SFSP sponsor training as well as analyze compliance with standards during
the sponsor application process.

For PSDs and COEs, the CDE already communicates financial management standards
through the CSAM and policy guidance (e.g., CDE Definitions, Instructions, &
Procedures webpage [https://www.cde.ca.gov/fg/ac/sa/] and management bulletin [see
SNP 06-2014]).

Estimated Completion Date:

May 1, 2019

OIG Recommendation 4:

Confirm the State agency developed and implemented procedures to include the use of
the State agency’s sponsor administrative review results as part of the application
assessment.

FNS Response:

FNS concurs with the recommendation and had directed CDE to incorporate review
results accordingly during our FY 2017 SFSP Management Evaluation (ME). CDE has



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since established (beginning June 2018) a Cross-Division Communication and
Accountability Group. One of the first focus areas being addressed by the accountability
group is the communication of review findings from the Field Services Unit (FSU) to the
program units. This communication will equip staff, including those in SMU, with the
information required to deny the application of sponsors that have been declared
seriously deficient and eliminate the vulnerability of sponsors with operational problems
identified during administrative reviews being approved for additional meal sites in
subsequent program years.

Estimated Completion Date:

May 1, 2019

OIG Recommendation 5:

Direct the State agency to develop and implement procedures to ensure its staff verify
key SFSP sponsor-provided application information (such as site classifications) that
affects SFSP reimbursements and site eligibility.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to develop procedures to
comprehensively validate application information, including area eligibility as well as
rural-urban and food-preparation designations.

Beginning this summer, SMU analysts validated the area eligibility of all SFSP sites. In
future years, on March 1, the Data Management Unit (DMU) will provide the SMU
manager a report listing the area eligibility for all sites approved the prior year, including
the eligibility start and end dates. The Area Eligibility Report will be used by SMU
analysts to identify sites that have area eligibility information that expired or is nearing
expiration and work with sponsors to ensure the area eligibility information is accurately
updated.

SMU analysts will validate the area eligibility of all new SFSP meal sites prior to their
approval to participate in the program using census and school eligibility data. The SMU
will prioritize the use of census data to establish area eligibility in the SFSP. In instances
where an area is not census eligible, the SMU analyst will work with sponsors to clearly
identify the school attendance zones for SFSP meals sites using the CA Hometown
Locator - California Schools, School Attendance Zones, District Boundaries and Maps
webpage located at https://california.hometownlocator.com/schools/.

Once area eligibility is verified, the SMU analyst will perform one of the following two
procedures to confirm site eligibility:

· If school data is used to establish area eligibility, then the SMU analyst will confirm
  the school data by cross-checking the school’s free and reduced-price (F/RP)



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  information with the Student Poverty F/RP Meal Data webpage at
  https://www.cde.ca.gov/ds/sd/sd/filessp.asp.

· If census data is used to establish area eligibility, then the SMU analyst will confirm
  the census data by locating the site location/geo identification number on the Area
  Eligibility map on the USDA FNS webpage at
  https://www.fns.usda.gov/areaeligibility.

Estimated Completion Date:

March 1, 2019

OIG Recommendation 6:

Direct the State agency to develop and implement procedures to document the State
agency’s assessment of SFSP sponsors’ applications and the basis for the State agency’s
conclusions/approvals.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to document the SA’s
assessment of SFSP sponsor applications and the basis for the SA’s conclusions,
including possibly utilizing their current automated system’s comment function to note
items for further follow up. While CDE’s Child Nutrition Information and Payment
System (CNIPS) has some documentation functionality, it is currently limited to what the
SMU analyst can upload to the database. Thus, CDE will assess the cost and time
necessary to update CNIPS in order to determine if sufficient resources are available for
this modification. If no electronic solution is available, then the SMU analyst will print a
hard copy of the documentation and have it saved to the program operator’s permanent
file.

Estimated Completion Date:

May 1, 2019 (for final determination of using either CNIPS, or if CNIPS is not a viable
solution, implementation of adding hard copy documentation to file)

OIG Recommendation 7:

Direct the State agency to ensure the State agency staff are sufficiently trained on the new
application procedures (in Recommendations 1 through 6).

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to ensure staff are trained
on procedures for running the program in accordance with 7 CFR 225.6.




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CDE has already implemented and trained SMU analysts on the new procedures to verify
site and area eligibility. The remaining procedures and training have an anticipated target
completion date of April 2019.
Estimated Completion Date:

April 1, 2019

OIG Recommendation 8:

Direct the State agency to implement procedures that ensure sites do not serve the same
children in the same area.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to independently verify the
relative location of approved summer meal sites to one another to ensure that the area is
not already served by another site that is serving the same eligible children.

CDE is currently evaluating the .25 mile criteria and looking at potential technological
solutions to independently verify the relative location of approved summer meal sites to
one another. One possible solution the CDE will explore is using Google mapping to
automatically upload the address for all approved summer meal sites and then have it
issue a report that will flag any summer meal sites that are within 0.25 mile of one
another. Another possible solution is to expand the functionality of the Summer Meals
phone application to provide SMU staff with another data source showing the location of
approved sites in relation to one another.

Estimated Completion Date:

May 1, 2019 (for final determination and implementation of technological solution that
best meets CDE’s needs)

OIG Recommendation 9:

Direct the State agency to carefully evaluate the eligibility of the two sponsors that lacked
adequate financial management capabilities (Sponsors B and E) if they chose to return to
the program and document the basis of its determinations to ensure the weaknesses
identified by OIG have been corrected.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE, prior to approval, to
ensure the financial management portion of the two sponsors’ application packets receive
extensive review, including focused review of the each sponsor’s budget and
management plan to determine if items of cost are reasonable and allowable.




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CDE plans to use the OIG data and analysis from OIG’s recently provided workpapers to
confirm and issue findings for both sponsors once the final audit report is issued.

Estimated Completion Date:

June 30, 2019*

* Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

OIG Recommendation 10:

Direct the State agency to calculate and recover any unallowable reimbursements paid to
Sponsors B and C resulting from their site misclassifications.

FNS Response:

FNS will work with the State agency to clarify SFSP Sponsor B and C’s classifications as
self-preparation or rural. FNS will direct CDE to develop and provide additional training
and guidance to sponsors, as well as CDE staff on site classification, and incorporate the
appropriate review of systems in their monitoring. If reimbursements received by the
sponsors are confirmed to be unallowable, CDE will begin recovery from the SFSP
sponsors including appeal rights.

Estimated Completion Date:

June 30, 2019*

*Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

OIG Recommendation 11:

Advise the State agency of best practice to expand administrative review under certain
circumstances in which the State believes it is necessary to obtain sufficient information
to ensure SFSP sponsors’ compliance with program requirements.

FNS Response:

FNS concurs with the recommendation. FNS acknowledges that CDE’s current
administrative review procedures meet the outlined regulatory requirements; however,
FNS will encourage the State agency, as a best practice, to develop procedures to expand
the administrative review in circumstances where the reviewer has determined that it is
necessary to ensure SFSP sponsors’ compliance with program requirements. FNS will
also encourage CDE to provide reviewers with updated training that reflects the
procedures developed to expand the administrative review in certain circumstances.



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Estimated Completion Date:

May 1, 2019

OIG Recommendation 12:

Direct the State agency to develop and implement procedures to ensure SFSP sponsors’
corrective actions adequately address the underlying cause of sponsors’ noncompliance,
and follow up to ensure the corrective actions are effective.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to ask for detailed, step-
by-step procedures that will address the underlying cause for each review finding, as well
as training documents showing that sponsor staff are trained on those detailed procedures
as part of the sponsor’s corrective action. If the sponsoring organization participates the
following summer, the agency will be reviewed to verify corrective action.

Estimated Completion Date:

June 15, 2019

Recommendation 13:

Direct the State agency to provide its staff responsible for conducting SFSP
administrative reviews with training that is focused on the sponsors’ SFSP fiscal
accountability requirements.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to ensure staff are trained
on procedures for running the program in accordance with 7 CFR 225.6. FNS will also
encourage CDE to provide training focused on the sponsor’s SFSP fiscal accountability
requirements.

CDE has already tentatively scheduled its first training for March 30, 2019.

Estimated Completion Date:

March 30, 2019

Recommendation 14:




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Direct the State agency to develop and implement procedures to periodically verify the
reviewers’ determinations (for example, requiring the State agency reviewers to maintain
fiscal supporting documentation for review).
FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to maintain documentation
supporting fiscal findings, as well as, develop and implement review procedures that
include periodic verification of reviewers’ determinations for the fiscal portion of the
SFSP review.

Estimated Completion Date:

August 31, 2019

Recommendation 15:

Direct the State agency to confirm the sponsor questionable costs totaling $214,441
identified by OIG, and recover any disallowed costs from the SFSP sponsors.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS
to follow-up on OIG identified unallowable costs for which recently provided OIG work
papers clearly identify the costs in question. If unallowable costs are confirmed, CDE
will follow-up accordingly to include appeal rights provided to the SFSP sponsor and
attempt to recover the unallowable costs.

Estimated Completion Date:

June 30, 2019*

*Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

Recommendation 16:

Direct the State agency to confirm the sponsor unsupported costs totaling $100,536
identified by OIG, and recover any disallowed costs from the SFSP sponsors.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS
to follow-up on OIG-identified unsupported costs as delineated in the recently-provided
OIG workpapers. If unsupported costs are confirmed, CDE will follow-up accordingly to
include providing appeal rights to the SFSP sponsor and requesting that sponsors
replenish any unsupported costs to their nonprofit food service account.



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Estimated Completion Date:

June 30, 2019*

*Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

Recommendation 17:

Direct the State agency to confirm the sponsor questionable meal claims totaling $18,923
identified by OIG, and recover any disallowed SFSP reimbursements from the sponsors.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS
to follow-up on OIG identified questionable meal claims on as delineated in the recently-
provided OIG workpapers. If any portion of the sponsors’ claims are determined to be
unallowable following the procedures outlined in 7 CFR 225.12, CDE will follow-up
accordingly to include providing appeal rights to the SFSP sponsors and attempting to
recover the unallowable reimbursements.

Estimated Completion Date:

June 30, 2019*

*Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

Recommendation 18:

Direct the State agency to confirm the sponsor unsupported meal claims totaling $42,860
identified by OIG, and recover any disallowed SFSP reimbursements from the sponsors.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS to
follow-up on OIG identified unsupported meal claims as delineated in the recently-
provided OIG workpapers. If any portion of the sponsors’ claims are determined to be
unallowable following the procedures outlined in 7 CFR 225.12, CDE will follow-up
accordingly to include providing appeal rights to the SFSP sponsors and attempting to
recover the unallowable reimbursements.

Estimated Completion Date:



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June 30, 2019*

*Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

Recommendation 19:

Direct the State agency to determine whether Sponsors B and E are seriously deficient. If
the State agency determines these sponsors are seriously deficient, it should initiate the
seriously deficient process.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to evaluate whether or not
Sponsors B and E should be determined seriously deficient based their review of the
workpapers recently provided by OIG. If CDE deems the sponsors seriously deficient, it
will follow State agency procedures to initiate the seriously deficient process.

Estimated Completion Date:

June 30, 2019*

*Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

Recommendation 20:

Direct the State agency to confirm each of the OIG-identified sponsor noncompliance
issues and ensure identified sponsors correct the deficiencies.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to follow up on all
documented non-compliance issues, including ensuring appropriate corrective actions are
implemented, as applicable, utilizing the workpapers recently provided by OIG.

Estimated Completion Date:

June 30, 2019*

*Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

Recommendation 21:




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Require the State agency to direct identified sponsors to provide additional, enhanced
SFSP training to site staff to ensure staff have sufficient knowledge of program
requirements when operating sites and serving meals.
FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to ensure affected sponsors
are providing training to site staff in accordance with 7 CFR 225.15(d), which outlines
sponsor responsibilities for training and monitoring site personnel and operations.

In addition, FNS will direct CDE to require affected sponsors to provide additional,
enhanced training to site staff to ensure compliance with meal service times, meal
patterns, and congregate feeding.

Estimated Completion Date:

August 31, 2019

Recommendation 22:

Direct the State agency to direct identified sponsors to provide specialized training that
includes monitors’ duties and responsibilities as prescribed by the FNS Sponsor
Monitor’s Guide to site monitors that visit and monitor site operations.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to ensure affected sponsors
are providing training to site staff in accordance with 7 CFR 225.15(d), which outlines
sponsor responsibilities for training and monitoring site personnel and operations.

In addition, FNS will direct CDE to require affected sponsors to provide specialized
training for site monitors to ensure duties are performed as prescribed by the FNS
Sponsor Monitor’s Guide.

Estimated Completion Date:

August 31, 2019

Recommendation 23:

Direct the State agency to direct identified sponsors to conduct formal, documented site
reviews more frequently than once during the sites’ operations.

FNS Response:

FNS concurs with the recommendation. FNS will work with CDE to ensure that their
sponsors are meeting the sponsor monitoring requirements outlined in 7 CFR



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225.15(d)(3). FNS will encourage CDE to require sponsors perform site reviews as
federally required including additional reviews as necessary to ensure ongoing
compliance throughout program operation.
CDE already plans to require sponsors to conduct formal, documented site reviews more
frequently than once during each site’s annual operations.

Estimated Completion Date:

August 31, 2019

Recommendation 24:

Direct the State agency to monitor and assess the identified sponsors’ enhanced site
training, specialized site monitor training, and increased level of site monitoring to ensure
the identified sponsors’ compliance.

FNS Response:

FNS concurs with the recommendation. While there is no regulatory requirement to do
so, FNS will encourage CDE to monitor and assess affected sponsors’ implementation of
enhanced site and monitor trainings as well as increased site monitoring.

Estimated Completion Date:

August 31, 2019

Recommendation 25:

Direct the State agency to confirm whether the sponsors claimed any of the OIG-
identified questionable, non-reimbursable meals counted by the sites. If the sponsor
claimed these meals, direct the State agency to recover the $430 in questionable meal
claims.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to work jointly with FNS to
follow-up on OIG identified questionable, non-reimbursable meals as delineated in the
recently-provided OIG workpapers. If any portion of the sponsors’ claims are
determined to be unallowable following the procedures outlined in 7 CFR 225.12, CDE
will follow-up accordingly to include providing appeal rights to the SFSP sponsors and
attempting to recover the unallowable reimbursements.

Estimated Completion Date:

June 30, 2019*




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*Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

Recommendation 26:

Direct the State agency to require identified sponsors to develop and implement
specialized training for site monitors to ensure they properly identify program outreach
noncompliance issues.

FNS Response:

FNS concurs with the recommendation. While there is no regulatory requirement to do
so, FNS will encourage CDE to require affected sponsors to provide specialized training
for site monitors, to ensure they properly identify program outreach noncompliance. This
action will be taken once CDE completely reviews all the workpapers and associated
documentation from OIG supporting this finding.

Estimated Completion Date:

June 30, 2019*

*Dependent upon finalization of OIG report and full FNS/CDE review of OIG
workpapers received by FNS in late August 2018.

Recommendation 27:

Direct the State agency to require identified sponsors to develop and implement
procedures to properly classify sites, and update the status of non-operational sites timely
in the State system.

FNS Response:

FNS concurs with the recommendation. FNS will direct CDE to work with affected
sponsors to implement procedures to properly classify sites (as open, restricted open,
closed enrolled, or camp), and make timely updates within CNIPS on non-operational
status.
Estimated Completion Date:

June 15, 2019

Recommendation 28:

Direct the State agency to consult with FNS to ensure Sponsor C’s future media releases
clearly communicate that free meals are available to the public and not restricted to
enrolled members, and ensure the revised media releases are adequate prior to approving
the sponsor’s application.



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FNS Response:

FNS concurs with the recommendation. While Sponsor C’s media release and website is
fully compliant with Program regulations, FNS agrees that the language used may have
been unclear. FNS will advise the State agency to ensure Sponsor C removes the word
“attending” from all materials containing the phrase “all attending children” to ensure
clear communication that free meals are available to the public.

Estimated Completion Date:

FNS has advised the CDE accordingly on August 30, 2018. Sponsor C’s media release
will be updated by April 30, 2019.

Recommendation 29:

Direct the State agency to confirm the identified sponsors implemented the additional
monitoring from Recommendations 26, 27, and 28.

FNS Response:

FNS concurs with the recommendation. While there is no regulatory requirement to do
so, FNS will encourage CDE to confirm affected sponsors have implemented all required
additional monitoring per Recommendations 26, 27, and 28.

CDE already plans to send follow-up letters to identified sponsors requesting corrective
actions for the audit findings. Since the identified sponsors are problematic sponsors,
CDE will complete an administrative review immediately following receipt of the
sponsor’s corrective action to ensure those sponsors have implemented corrective actions
to address their audit findings.

Estimated Completion Date:

August 31, 2019




                             AN EQUAL OPPORTUNITY EMPLOYER
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