[Audit Report on Followup of Recommendations Concerning Food Services Operations, Department of Education, Government of Guam]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 97-I-617

Title: Audit Report on Followup of Recommendations Concerning Food
       Services Operations, Department of Education, Government
       of Guam

Date: March 26, 1997

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United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
Washington, D.C. 20240

MEMORANDUM

TO:

FROM:Inspector General


SUBJECT SUMMARY:Final Audit Report - "Followup of Recommendations
Concerning Food Services Operations, Department of Education,
Government of Guam" (97-I-617)

Attached for your information is a copy of the subject final audit
report. The objective of the followup review was to determine
whether the Government of Guam's Department of Education had
satisfactorily implemented the recommendations made in our 1988
report and whether any new recommendations were warranted.

We concluded that the Department of Education had implemented all
eight of the recommendations made in our prior audit report.
However, during our current review, we found that the Department
had not retained student applications for the 3-year period
mandated by program regulations and had not prepared severe need
analyses to determine school eligibility for higher reimbursement
rates. This occurred because the Department had not developed
adequate written procedures to address these deficiencies. As a
result, the Department incurred questioned costs of $351,231. We
made five new recommendations to the Department in the report.

Based on the response to the draft report from the Department of
Education, we considered two of the report's five recommendations
resolved and implemented. However, the Department was asked to
reconsider the recommendation relating to amending the Food
Services Guide to include a requirement on maintaining program
records and to provide additional detailed information for the
recommendations on employee qualifications and severe need
analyses.

If you have any questions concerning this matter, please contact me
at (202) 208-5745 or Mr. Robert J. Williams, Assistant Inspector
General for Audits, at (202) 208-4252.

Attachment

N-IN-GUA-011-96
United States Department of the Interior
OFFICE OF INSPECTOR GENERAL
Washington, D.C. 20240

AUDIT REPORT

Ms. Gloria Nelson
Chairperson, Territorial Board of Education
Department of Education
P.O. Box DE
Agana, Guam 96910

Subject: Audit Report on Followup of Recommendations Concerning
Food Services Operations, Department of Education, Government of
Guam (No. 97-I-617)

Dear Ms. Nelson:

This report presents the results of our followup review of
recommendations contained in our July 1988 audit report "Food
Services Operations, Department of Education, Government
of Guam" (No. 88-92). The objective of the followup review was to
determine whether the Government of Guam's Department of Education
had satisfactorily implemented the recommendations in our 1988
report and whether any new recommendations were warranted.

BACKGROUND

The National School Lunch Act of 1946 and the Child Nutrition Act
of 1966 authorized the Food and Nutrition Service (now called the
Food and Consumer Service), U.S. Department of Agriculture, to
enter into agreements with state agencies for the purpose of
providing funds to ensure that all children attending school
receive nutritious meals. On Guam, the Department of Education
serves as the state agency, and within the Department, the Food
Services Section is responsible for administering and monitoring
the meal programs.

For school years 1992-1993, 1993-1994, and 1994-1995, the
Department received $9.2
million of Federal funds. During this period, 12 million meals were
served to children at 42
public and private schools, including those under the Head Start
Program, and at the
Department of Youth Affairs.

 




SCOPE OF AUDIT

To accomplish our audit objective, we reviewed documents and
records pertaining to the
Department's food services operations for school years 1992-1993,
1993-1994, and
1994-1995.  In addition, we interviewed Departmental personnel
responsible for
administering the National School Lunch Program and the School
Breakfast Program.

This followup review was conducted at the Department's Food
Services Section; at 24
schools; and at the Head Start Program office, which is an
independent office "within the
Department of Education. Our review was made, as applicable, in
accordance with the
"Government Auditing Standards," issued by the Comptroller General
of the United States.
Accordingly, we included such tests of records and other auditing
procedures that were
considered necessary under the circumstances. Because of the
limited scope and objective
of our review, internal controls were reviewed only to the extent
that they related to
corrective actions taken on the prior recommendations.

PRIOR AUDIT COVERAGE

During the past 5 years, no audit reports have been issued by the
General Accounting Office
or the Office of Inspector General that evaluated the operations of
the Food Services Section
on Guam. However, our July 1988 audit report concluded that the
Department: (1) prepared
inaccurate claims for reimbursement from the former Food and
Nutrition Service, U.S.
Department of Agriculture; (2) did not charge teachers, volunteer
parents, and ineligible
students for meals; and (3) performed inadequate school oversight
reviews. This occurred
because the Department had not enforced the requirement for schools
to develop written
procedures to ensure accurate accounting for meals served. In
addition, schools had been
instructed by Departmental officials not to charge teachers,
volunteer parents, and ineligible
students for meals. Finally, the Department did not have written
instructions for the
performance of oversight reviews. As a result, from August 1985 to
October 1987, the
Department claimed $529,379 in excess reimbursements, did not
collect $208,924 for meals
served, and did not detect these discrepancies during its oversight
reviews. Because of these
deficiencies, we made eight recommendations in the prior report to
the Department (see
Appendix 3).

RESULTS OF AUDIT

We found that the Department of Education had implemented seven of
the eight
recommendations made in our 1988 audit report and had partially
implemented the
remaining recommendation. (These prior recommendations are
summarized in Appendix 3.)
However, our followup review disclosed that: (1) seven schools and
the Head Start Program
office had not retained approved student applications for free and
reduced-price meals and
(2) the Department had not prepared analyses to determine a
school's eligibility to receive
additional reimbursement (severe need analyses) and to identify
those schools that were
eligible for higher reimbursement rates. These conditions occurred
because the Department:
(1) had not developed written procedures that require schools to
notify Food Services when

2

 


personnel performing meal program duties were changed to ensure
that new employees were
trained and (2) had not developed monitoring control procedures to
ensure that program
records were retained for 3 years and that severe need analyses
were prepared for
determining school eligibility for assistance. As a result, the
Department was unable to
support incurred costs totaling $351,231. Based on the deficiencies
identified during our
followup audit, we made five new recommendations.

Program Records

The Code of Federal Regulations (7 CFR 3015.2 1 ) requires the
Department to maintain all
program records "for 3 years from the starting date specified in
[Section] 3015 .22." Section
3015.22 states, "The 3-year retention period for the records of
each funding period starts on
the day the recipient submits to USDA [U.S. Department of
Agriculture] its annual or final
expenditure report for that period. " Further, Title 7 requires the
Department to review and
monitor its food services operations. Specifically, Section 210.
18(c)(1) requires the
Department to conduct, on a cyclical basis, comprehensive
administrative reviews at the
schools to determine whether the schools are complying with program
requirements. Finally,
Section 210.8(a)(l ) requires the Department to perform annually at
least one on-site
monitoring review of each school to determine whether the schools
are complying with
program requirements for processing applications, collecting cash,
and counting meals
served. Schools are required to maintain student applications, meal
preparation reports,
reimbursement claims, and food inventory reports. The Department
had implemented an on-
site monitoring review of all schools; however, its review guide
did not include a
determination that the schools maintain student applications for
the required 3 years.

Based on our visits to 24 of the 35 public schools and the Head
Start Program office, we
found that meal preparation reports, reimbursement claims, and food
inventory reports were
tested and found to be satisfactorily maintained. However, we also
found that: (1 ) two
schools had not retained school year 1994-1995 applications for
those students who had
transferred to other schools; (2) one school could not locate
school year 1994-1995
applications for students who had received reduced-price meals and
had not retained any
school year 1992-1993 applications; and (3) four schools and the
Head Start Program office
had not retained any applications for school year 1992-1993. As a
result, the seven schools
and the Head Start Program office were unable to support claims for
reimbursement for free
and reduced-price meals totaling $334,882.

The Acting Administrator of the Food Services Section said that the
Department had
conducted training workshops which included the requirement for
retaining program records
for 3 years. However, the Acting Administrator said that records
had not been retained
because new personnel assigned to food services operations at the
schools had not received
the required training. Therefore, we believe that the Department
should develop written
procedures to require schools to notify the Food Services Section
when school personnel
responsible for performing activities for the meal programs are
changed so that the new
employees are adequately trained. In addition, we believe that the
Department's Food
Services Section monitoring guide should be amended to include a
requirement that record
retention procedures should be reviewed at the schools. Further,
the Department should

3

 
report the $334,882 of unsupported claims to Agriculture's Food and
Consumer Service for
a determination of eligibility.

Severe Need Analyses

Severe need assistance is a provision within the School Breakfast
Program Regulations that
allows the Department to receive a higher reimbursement rate for
breakfast meals served at
quali$ing schools. Title 7, Chapter II, Section 220.9(e), of the
Code of Federal Regulations
states that schools are eligible to receive severe need assistance
when "40 percent or more
of the lunches served to students at the school in the second
preceding school year were
served free or at a reduced price."

For school year 1994-1995, we found that the Department had not
prepared severe need
analyses that were based on data from the required second preceding
school year (that is,
school year 1992- 1993). Instead, the Department continued to claim
severe need based on
analyses from school year 1990-1991. At our request, the Department
prepared a free and
reduced-price meal analysis for the School Breakfast Program based
on school year
1992-1993 data. This analysis showed that 6 of the 18 schools that
received severe need
assistance for school year 1994-1995 were not eligible for this
assistance. In addition, the
analysis showed that one school was eligible but did not receive
severe need assistance in
school year 1994-1995. As a result, the Department received net
excess reimbursements of
$16,349 for school year 1994-1995 under the School Breakfast
Program.

According to the Acting Administrator, the responsibility for
preparing the claims for
Federal reimbursement (including claims for severe need assistance)
was transferred in April
1993 from the Food Services Section to the Department's Business
Office. The Acting
Administrator said that the transfer of responsibility and the
absence of procedures resulted
in the severe need analyses not being prepared. Therefore, we
believe that the Department
should develop and implement procedures to ensure that the analyses
are prepared to
determine school eligibility under the Severe Need Program. In
addition, the Department
should report the $16,349 of excess reimbursements received to
Agriculture's Food and
Consumer Service.

Recommendations

We recommend that the Chairperson, Territorial Board of Education,
require the Director,
Department of Education, to:

  1. Notify the Department of Agriculture's Food and Consumer
Service of the
$334,882 of unsupported reimbursements received under the National
School Lunch and
School Breakfast programs for a determination of the allowability
of those
reimbursements.

  2. Develop and implement written procedures to require schools to
notify the Food
Services Section when school personnel responsible for performing
meal program duties
are changed to ensure that new employees are adequately trained.

4

 


  3. Amend the Food Services Section monitoring guide to require
the reviewers to
determine whether the schools are maintaining program records,
including student
applications, for 3 years.

  4. Develop and implement written procedures to ensure that severe
need analyses
are prepared to determine school eligibility under the Severe Need
Program.

  5. Noti& Agriculture's Food and Consumer Service of the $16,349
of excess severe
need reimbursements received under the School Breakfast Program.

Department of Education Response and Office of Inspector General
Reply

In the January 21, 1997, response (Appendix 4) to the draft report
from the Director of
the Department of Education, the Department concurred with all of
our recommendations.
Based on the response, we consider Recommendations 1 and 5 resolved
and implemented,
and additional information is needed for us to consider
Recommendations 2 and 4 resolved
(see Appendix 5).  However, even though the Department stated
concurrence with
Recommendation 3, we consider it unresolved. Specifically, the
Department stated that
the Food Services Section's examiner performs monitoring reviews of
food services
operations at the schools and that the Section's standard operating
procedures include a
requirement for program records to be maintained for 3 years.
Although we concur with
the statement in the response that the Food Services Section's
standard operating
procedures include a requirement for schools to maintain program
records for 3 years, the
Section's monitoring guide (also referred to as the monitoring
checklist) used by the
examiner does not include a requirement for the examiner to verify
that schools are
maintaining program records for the required 3-year period. As
discussed in the report,
we found that 7 of the 24 schools reviewed and the Head Start
Program Office did not
properly maintain program records. Therefore, the Department is
requested to reconsider
the recommendation (see Appendix 5).

The Inspector General Act, U.S. Public Law 95-452, Section 5(a)(3),
as amended,
requires semiannual reporting to the U.S. Congress on all audit
reports issued, the
monetary impact of audit findings (Appendix 1), actions taken to
implement audit
recommendations, and identification of each significant
recommendation on which
corrective actions has not been taken.

In view of the above, please provide a response, as required by
Public Law 97-357, to this
report by May 8, 1997, to our North Pacific Regional Office, 238
Archbishop F.C.
Flores St., Suite 807, Pacific News Building, Agana, Guam, 96910.
The response should
provide the information requested in Appendix 5.

 
We appreciate the assistance of Department of Education personnel
in the conduct of our
audit.

cc: Director, Department of Education,
  Government of Guam

6

 
 

CLASSIFICATION OF MONETARY

    APPENDIX 1

AMOUNTS

*Amounts represent Federal funds.

 
                        APPENDIX 2

   DEPARTMENT OF EDUCATION,
    GOVERNMENT OF GUAM,
SCHEDULE OF FEDERAL REIMBURSEMENTS AND

QUESTIONED COSTS

School Year/Prom-am

1992-1993:

National School Lunch
School Breakfast
Head Start*

1993-1994:

National School Lunch
School Breakfast
Head Start*

1994-1995:

National School Lunch
School Breakfast
Head Start*

Totals

              Questioned Costs
Federal    Amount   Unallowed   Unsupported
Reimbursement  Tested     costs     costs

$1,994,028
668,328
117,981



2,401,987
832,882
125,665



2,484,248
802,716
124,543

$1,035,858         $154,952
340,734          53,873
117,981          102,648

1,209,548
381,774
125,665

*Amounts represent Federal reimbursements for meals served to Head
Start Program students participating in the
National School Lunch and School Breakfast Programs.

 


                            APPENDIX 3
                             Page 1 of 2

SUMMARY OF RECOMMENDATIONS AND CORRECTIVE ACTIONS
         FOR AUDIT REPORT
       "FOOD SERVICES OPERATIONS,
DEPARTMENT OF EDUCATION, GOVERNMENT OF GUAM"
           (NO. 88-92)

Recommendations

Al.  Inform the Food and Nutrition Service
of the $529,379 in excess reimbursements
received under the National School Lunch,
School Breakfast, and Severe Need Programs
and arrange for repayment.

A.2.  Compute the excess reimbursements
received from October 1987 to the present
under the National School Lunch and Breakfast
Programs and report the amount to the Food
and Nutrition Service.

A.3. Discontinue the practice of serving free
and reduced-price meals to students who do not
have approved applications on file for the
current school year.

A.4.  Obtain  written  procedures,  for
Departmental review and approval, from every
school for preparing accurate Cafeteria Monthly
Collection Reports, as required by the Free and
Reduced-Price Meal Policy Administrative
Guidance. These procedures should emphasize
the requirement for maintaining appropriate
records for the 3 years prior to the current
school year.

    Corrective Actions

Implemented. The Department informed the
Food and Nutrition Service of the excess
reimbursements, and, based on a April 7,
1989, letter from the Nutrition Service to the
Department, the excess reimbursements were
recovered by the Nutrition Service.
Implemented. The Department reported the
excess reimbursements to the Food and
Nutrition Service, and, based on a
September 11, 1991, letter from the Nutrition
Service to the Department, the excess
reimbursements were recovered by the
Nutrition Service.
Partially implemented. Based on our review
of applications at 14 of 35 public schools, we
found that 2 schools did not retain approved
current year applications for students who
transfen-ed and that 1 school could not locate
its current year applications.
Implemented.  The  Department  had
developed a  comprehensive  standard
operating procedures manual, which
provided instructions for collecting cash,
approving applications, issuing meal tickets,
and preparing meal reports. The manual
emphasized the requirement for schools to
retain student applications for at least 3
years.

9

 
Recommendations

APPENDIX 3
Page 2 of 2

Corrective Actions

A.5.  Correct the Severe Need Program claim
records to reflect only those schools that are
eligible, compute the amount of excess
reimbursements claimed since October 1987,
and report the amount to the Food and Nutrition
Service.

A.6.  Discontinue the practice of providing
free meals to teachers, volunteer parents, and
ineligible students enrolled in summer school
and the Head Start Program,

A.7. Compute  the amount of excess
reimbursements in the Head Start Program for
the current and prior 2 school years and report
this amount to the Food and Nutrition Service.

A.8. Develop specific written procedures for
conducting Assessment, Improvement, and
Monitoring System reviews to ensure
compliance with Title 7, Section 210.18, of the
Code of Federal Regulations.

Implemented. The Department reported the
excess reimbursements to the Food and
Nutrition Service, and, based on a September
11, 1991, letter from the Nutrition Service to
the Department, the excess reimbursements
were recovered by the Nutrition Service.

Implemented. Based on our review of records
at the Food Services Section for meals claimed
during summer school and under the Head Start
Program, the Department had stopped providing
free meals served to ineligible persons.

Implemented. The Department reported the
excess reimbursements to the Food and
Nutrition Service, and, based on a September
11, 1991, letter from the Nutrition Service to
the Department, the excess reimbursements
were recovered by the Nutrition Service.

Implemented. The procedures, as stated in the
Department's response, for performing
Assessment, Improvement, and Monitoring
System reviews generally appeared to be
sufficient to ensure compliance with the
requirements of Title 7.

10

 
DEPARTMENT OF EDUCATION

P.O. Box DE
Agana, Guam 96932
Tel: (671 ) 475-0457
Fax: (671) 472-5003

ROLAND L.G. TAIMANGLO
Director of Education

APPENDIX 4 

Page 1 of 2

             DR. ALINE YAMASHITA
January 21, 1997       Deputy Director

Mr. Peter J. Scharwark
Senior Auditor
U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. Flores Street
Suite 807, PDN Bldg.
Agana, Guam 96932

Dear Ms. Scharwark,

This is in response to the DRAFT AUDIT REPORT NO. N- IN-GUA-011-96
on
Food Services Operations Recommendations.

RECOMMENDATIONS:

1.  Notify the Department of Agriculture's Food and Consumer
Services of
  the $ 334,822 of the unsupported reimbursements received under
the
  National  School  Lunch  and  School  Breakfast  Programs  for a
  determination of the allowability of those reimbursements.

RESPONSE: CONCURRENCE

2.  Develop and implement written procedures to require the school
to
  notify the Food Services Section when school personnel
responsible for
  performing  mea I p rog ram  duties are changed to ensure that
new
  employees are adequately trained.

RESPONSE: CONCURRENCE

3.  Amend the Food Service Section monitoring guide to require the
  reviewers to determine whether the schools are maintaining
program

  records, including student applications

RESPONSE:

  The Food Service Section, Federal
  review effort and monitor all areas
  schools which include the reporting

for three (3) years. -

Examiner conducts coordinated
of food service operations at
and recordkeeping.  The Food

Service Section developed the- Administrative Guidance Manual, Food
Service Standard Operating Procedures that prescribed the
procedures
and guidelines in maintaining the documents and also the Government
of Guam Record lManagement  handbook and this also prescribed
procedures and guidelines in maintaining of records.


      COMMONWEALTH NOW!

11

 
APPENDIX 4
Page 2 of 2

Page two
Letter to Senior Auditor,
01/21/97

4.  Develop and implement written procedures to ensure that severe
need
  analysis are prepared to determine school eligibility under
Severe Need
  Program.

RESPONSE: CONCURRENCE

5.  Notify Agriculture's Food and Consumer Service of the $ 16,349
of
  excess  severe  need  reimbursements  received  under  the School
  Breakfast Program.

RESPONSE: CONCURRENCE

1 thank you for your assistance and I want to assure you that
corrective
action will be made in all recommendations.

If you have any further question(s), please do not hesitate to
contact Ms.
Herbie A. Perez, Administrator, Financial Affairs at 475-0418.

Sincerely,

p?ms