Meeting Recap

by Rick Osborn

The USDA has four major programs – School Lunch, Daycare subsidies, Food Inspection, and Farm subsidies.

The Child/Adult Food program, with which Mr. Gray was involved as far as OIG audit, distributes funds through the 1200 States and local school districts and 200,000 private/non-profits agencies.  On a daily basis, the program feeds 3 million children and 100,000 adults.

The USDA has 100 inspectors assigned to review the school lunch providers.  The usual review process is either to rely on Single Audit reports or perform their own reviews.  The auditee or entity to be reviewed is usually notified in advance.

In 2000 based upon the concern these reviews were not adequate or timely, the OIG preformed unannounced audits or reviews of 50 randomly selected providers.  This resulted in 28 of the 50 being terminated or disbarred.  This lead to a strong recommendation that more reviews should be performed and they should be unannounced.  Though randomly selected, the 50 selected providers was not a statistically valid sample from which to project.  An example of the basis for terminating a provider, for one provider the OIG discovered “3,173” invisible children, various forms of forgery, fraud, and misappropriate of assets.

For those who were doing or trying to do a good job, the unannounced audits resulted in a lot of “deer in the headlights” effect.  Additionally, the OIG became aware that while these agencies, when they signed their agreements indicated that they were aware of and had an “understanding of” the Yellowbook and that they could be audited based upon its contents, they had no concept of what the impact could be.  As a result, the OIG recommend that concerted effort should be made to train the school lunch providers in the Yellowbook standards and the audit process, so they would have at least a basic understanding.

As far as the OIG audits, several Interim reports have been filed and oral testimony given, but the final report has not been issued. Additionally, a number of the 28 agency who were terminated have been the subject of criminal investigation and prosecution.

With this as a basis, Mr. Gray presented some of the training segments that he and some of his associates are presenting to the program participant/auditee.  These included internal controls – what are they and how do they work; evidence/documentation for participants – testamentary, physical, observation, and computation; and elements of a finding and the consequences of a finding be presented in a published audit report.