FINDING 2023-003
Subject: Drinking Water State Revolving Fund (DWSRF) Cluster - Procurement
Federal Agency: Environmental Protection Agency
Federal Program: Drinking Water State Revolving Fund
Assistance Listings Number: 66.468
Federal Award Number (or Other Identifying Number): DW22168902
Pass-Through Entity: Indiana Finance Authority
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
Federal regulations allow for informal procurement methods when the value of the procurement for
property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless
a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive
threshold of $150,000, informal procurement methods are permitted when the value of the procurement
does not exceed $150,000. This informal process allows for methods other than the formal bid process.
The informal process is divided between two methods based on thresholds. Micro-purchases, typically for
those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase
threshold but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used, then price or
rate quotations must be obtained from an adequate number of qualified sources.
The Town did not obtain price or rate quotes for the two vendors identified and tested that were
less than the simplified acquisition threshold of $150,000 but exceeded the $10,000 micro-purchase
threshold. The micro-purchase threshold may be increased, but the Town did not provide documentation
that the threshold had been increased. Documentation detailing the history of procurement, which must
include the reason for the procurement method used, was not available for audit.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
INDIANA STATE BOARD OF ACCOUNTS
18
TOWN OF CAMBRIDGE CITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases –
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold but
does not exceed the simplified acquisition threshold. If small purchase procedures
are used, price or rate quotations must be obtained from an adequate number of
qualified sources as determined appropriate by the non-Federal entity. . . ."
Cause
The Town was unable to provide documentation to demonstrate it had properly procured services.
The Town noted they were unaware professional services agreements for consultants were required to
follow small purchase procurement guidelines.
Effect
Without the proper implementation of an effectively designed system of internal controls, the Town
could not demonstrate it had obtained an adequate number of price or rate quotations prior to selecting a
vendor. Therefore, the Town could have overpaid for the services obtained.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommend that management of the Town strengthen its system of internal controls to ensure
that an adequate number of price or rate quotations are obtained for small purchases.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
INDIANA STATE
FINDING 2023-003
Subject: Drinking Water State Revolving Fund (DWSRF) Cluster - Procurement
Federal Agency: Environmental Protection Agency
Federal Program: Drinking Water State Revolving Fund
Assistance Listings Number: 66.468
Federal Award Number (or Other Identifying Number): DW22168902
Pass-Through Entity: Indiana Finance Authority
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
Federal regulations allow for informal procurement methods when the value of the procurement for
property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless
a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive
threshold of $150,000, informal procurement methods are permitted when the value of the procurement
does not exceed $150,000. This informal process allows for methods other than the formal bid process.
The informal process is divided between two methods based on thresholds. Micro-purchases, typically for
those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase
threshold but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used, then price or
rate quotations must be obtained from an adequate number of qualified sources.
The Town did not obtain price or rate quotes for the two vendors identified and tested that were
less than the simplified acquisition threshold of $150,000 but exceeded the $10,000 micro-purchase
threshold. The micro-purchase threshold may be increased, but the Town did not provide documentation
that the threshold had been increased. Documentation detailing the history of procurement, which must
include the reason for the procurement method used, was not available for audit.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
INDIANA STATE BOARD OF ACCOUNTS
18
TOWN OF CAMBRIDGE CITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases –
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold but
does not exceed the simplified acquisition threshold. If small purchase procedures
are used, price or rate quotations must be obtained from an adequate number of
qualified sources as determined appropriate by the non-Federal entity. . . ."
Cause
The Town was unable to provide documentation to demonstrate it had properly procured services.
The Town noted they were unaware professional services agreements for consultants were required to
follow small purchase procurement guidelines.
Effect
Without the proper implementation of an effectively designed system of internal controls, the Town
could not demonstrate it had obtained an adequate number of price or rate quotations prior to selecting a
vendor. Therefore, the Town could have overpaid for the services obtained.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommend that management of the Town strengthen its system of internal controls to ensure
that an adequate number of price or rate quotations are obtained for small purchases.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
INDIANA STATE