Audit 387537

Subject: Special Education Cluster (IDEA) – Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Cluster Assistance Listing Number: 84.027, 84.027X Federal Award Year (or Other Identifying Numbers): 22611-023-PN01, 22611-023-ARP, 23611-023-PN01, 24611-023-PN01, 25611-023-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Suspension and Debarment Audit Findings: Significant Deficiency Criteria: 2 CFR 200.303 states in part: "The Non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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)...." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." Part 4 of the Treasury's Compliance and Reporting Guidance states: ". . . recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance . . ." Condition: An effective system of internal controls was not in place at the School Corporation to ensure the Hamilton-Boone-Madison Special Education Cooperative’s compliance with applicable requirements related to the Special Education Cluster (IDEA), specifically with respect to Suspension and Debarment requirements. No instances of noncompliance (entering a contract with a vendor that was suspended or debarred) were identified in the transactions selected for testing. The matter represents a deficiency in internal controls over the Suspension and Debarment process, rather than identified noncompliance with program requirements. Cause: The School Corporation’s management had not developed an effective system of internal controls to ensure compliance with the Suspension and Debarment requirements for vendors procured by the School Corporation’s Cooperative. We note that no instances of noncompliance (entering a contract with a vendor that was suspended or debarred) were identified in the transactions tested. Rather, this matter reflects a deficiency in the internal control process over Suspension and Debarment, not identified noncompliance with applicable requirements. Effect: Without the proper implementation of an effectively designed system of internal controls, the Cooperative cannot ensure the contractors paid with federal funds are eligible to participate in federal programs. Any program funds the Cooperative used to pay contractors that have been suspended or debarred would be unallowable, and the funding agency could potentially recovery them. Furthermore, noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the Cooperative. Questioned Costs: There were no questioned costs identified. Context: Suspension and Debarment As part of its internal control procedures, the Cooperative utilizes the System for Award Management (SAM.gov) to verify the eligibility status of vendors prior to engaging in financial transactions. This verification process is designed to ensure that vendors are not suspended, debarred, or otherwise excluded from participation in federal programs, in accordance with applicable procurement regulations. Three covered transactions that equaled or exceeded $25,000 were identified. Of the three transactions, all were selected for testing, totaling $141,578. The Cooperative did not verify the vendors' suspension and debarment status prior to payment for two of the three covered transactions. Identification as a repeat finding: Not a repeat finding. Recommendation: We recommend that the School Corporation strengthen its monitoring of the Cooperative to ensure that all contractors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participation in federal programs before entering into any contracts. Views of Responsible Officials and Planned Corrective Actions: For the views of the responsible officials, refer to the Corrective Action Plan that is part of this report.