Findings and Questioned Costs Related to Federal Awards Finding Number: 2023-001 Repeat Finding: Yes - 2022-001, 2021-001 Program Names/ Assistance Listing Titles: Assistance Listing Numbers: Federal Award Numbers: Questioned Costs: Federal Transit Cluster 20.507 AZ-90-X127, AZ-90-X132, AZ-90-X-143, AZ-2018-003-00, AZ-2019-010-00, AZ-2019-035, AZ-2023-001-00 N/A Formula Grants for Rural Areas and Tribal Transit Program 20.509 CA-2021-028-00, CA-2022-226-00, CA-2022-231-00, GRT-22-0008862-T N/A Federal Agency: Department of Transportation Pass-Through Agency: Arizona Department of Transportation and Quechan Indian Tribe Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Procurement, Suspension, and Debarment CRITERIA Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR §§200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR part 200. The Board adopted a Policies and Procedures Manual that requires the collection of three quotes for purchases of at least $3,000 but less than $100,000 and formal bid procedures for purchases over $100,000. Condition The Authority did not follow its Board adopted Policies and Procedures Manual or federal regulations. Cause YCIPTA was operating under an expired contract and did not follow Board-adopted policies. Effect YCIPTA was not in compliance with the Board adopted Policies and Procedures Manual and federal regulations. Context During our review of procurement, the following were noted: For one purchase in excess of the federal procurement threshold of $250,000, YCIPTA did not perform a sealed bid or proposal. For two purchases in the YCIPTA’s quote range, the YCIPTA did not obtain or maintain quotes. The sample was not intended to be, and was not, a statistically valid sample. Recommendation YCIPTA should adhere to its Board adopted Policies and Procedures Manual. When purchases are expected to be in excess of $100,000, formal procurement methods should be used to ensure the best pricing possible. Views of Responsible Officials See Corrective Action Plan.
Findings and Questioned Costs Related to Federal Awards Finding Number: 2023-001 Repeat Finding: Yes - 2022-001, 2021-001 Program Names/ Assistance Listing Titles: Assistance Listing Numbers: Federal Award Numbers: Questioned Costs: Federal Transit Cluster 20.507 AZ-90-X127, AZ-90-X132, AZ-90-X-143, AZ-2018-003-00, AZ-2019-010-00, AZ-2019-035, AZ-2023-001-00 N/A Formula Grants for Rural Areas and Tribal Transit Program 20.509 CA-2021-028-00, CA-2022-226-00, CA-2022-231-00, GRT-22-0008862-T N/A Federal Agency: Department of Transportation Pass-Through Agency: Arizona Department of Transportation and Quechan Indian Tribe Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Procurement, Suspension, and Debarment CRITERIA Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR §§200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR part 200. The Board adopted a Policies and Procedures Manual that requires the collection of three quotes for purchases of at least $3,000 but less than $100,000 and formal bid procedures for purchases over $100,000. Condition The Authority did not follow its Board adopted Policies and Procedures Manual or federal regulations. Cause YCIPTA was operating under an expired contract and did not follow Board-adopted policies. Effect YCIPTA was not in compliance with the Board adopted Policies and Procedures Manual and federal regulations. Context During our review of procurement, the following were noted: For one purchase in excess of the federal procurement threshold of $250,000, YCIPTA did not perform a sealed bid or proposal. For two purchases in the YCIPTA’s quote range, the YCIPTA did not obtain or maintain quotes. The sample was not intended to be, and was not, a statistically valid sample. Recommendation YCIPTA should adhere to its Board adopted Policies and Procedures Manual. When purchases are expected to be in excess of $100,000, formal procurement methods should be used to ensure the best pricing possible. Views of Responsible Officials See Corrective Action Plan.
Findings and Questioned Costs Related to Federal Awards Finding Number: 2023-001 Repeat Finding: Yes - 2022-001, 2021-001 Program Names/ Assistance Listing Titles: Assistance Listing Numbers: Federal Award Numbers: Questioned Costs: Federal Transit Cluster 20.507 AZ-90-X127, AZ-90-X132, AZ-90-X-143, AZ-2018-003-00, AZ-2019-010-00, AZ-2019-035, AZ-2023-001-00 N/A Formula Grants for Rural Areas and Tribal Transit Program 20.509 CA-2021-028-00, CA-2022-226-00, CA-2022-231-00, GRT-22-0008862-T N/A Federal Agency: Department of Transportation Pass-Through Agency: Arizona Department of Transportation and Quechan Indian Tribe Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Procurement, Suspension, and Debarment CRITERIA Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR §§200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR part 200. The Board adopted a Policies and Procedures Manual that requires the collection of three quotes for purchases of at least $3,000 but less than $100,000 and formal bid procedures for purchases over $100,000. Condition The Authority did not follow its Board adopted Policies and Procedures Manual or federal regulations. Cause YCIPTA was operating under an expired contract and did not follow Board-adopted policies. Effect YCIPTA was not in compliance with the Board adopted Policies and Procedures Manual and federal regulations. Context During our review of procurement, the following were noted: For one purchase in excess of the federal procurement threshold of $250,000, YCIPTA did not perform a sealed bid or proposal. For two purchases in the YCIPTA’s quote range, the YCIPTA did not obtain or maintain quotes. The sample was not intended to be, and was not, a statistically valid sample. Recommendation YCIPTA should adhere to its Board adopted Policies and Procedures Manual. When purchases are expected to be in excess of $100,000, formal procurement methods should be used to ensure the best pricing possible. Views of Responsible Officials See Corrective Action Plan.
Findings and Questioned Costs Related to Federal Awards Finding Number: 2023-001 Repeat Finding: Yes - 2022-001, 2021-001 Program Names/ Assistance Listing Titles: Assistance Listing Numbers: Federal Award Numbers: Questioned Costs: Federal Transit Cluster 20.507 AZ-90-X127, AZ-90-X132, AZ-90-X-143, AZ-2018-003-00, AZ-2019-010-00, AZ-2019-035, AZ-2023-001-00 N/A Formula Grants for Rural Areas and Tribal Transit Program 20.509 CA-2021-028-00, CA-2022-226-00, CA-2022-231-00, GRT-22-0008862-T N/A Federal Agency: Department of Transportation Pass-Through Agency: Arizona Department of Transportation and Quechan Indian Tribe Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Procurement, Suspension, and Debarment CRITERIA Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR §§200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR part 200. The Board adopted a Policies and Procedures Manual that requires the collection of three quotes for purchases of at least $3,000 but less than $100,000 and formal bid procedures for purchases over $100,000. Condition The Authority did not follow its Board adopted Policies and Procedures Manual or federal regulations. Cause YCIPTA was operating under an expired contract and did not follow Board-adopted policies. Effect YCIPTA was not in compliance with the Board adopted Policies and Procedures Manual and federal regulations. Context During our review of procurement, the following were noted: For one purchase in excess of the federal procurement threshold of $250,000, YCIPTA did not perform a sealed bid or proposal. For two purchases in the YCIPTA’s quote range, the YCIPTA did not obtain or maintain quotes. The sample was not intended to be, and was not, a statistically valid sample. Recommendation YCIPTA should adhere to its Board adopted Policies and Procedures Manual. When purchases are expected to be in excess of $100,000, formal procurement methods should be used to ensure the best pricing possible. Views of Responsible Officials See Corrective Action Plan.
Findings and Questioned Costs Related to Federal Awards Finding Number: 2023-001 Repeat Finding: Yes - 2022-001, 2021-001 Program Names/ Assistance Listing Titles: Assistance Listing Numbers: Federal Award Numbers: Questioned Costs: Federal Transit Cluster 20.507 AZ-90-X127, AZ-90-X132, AZ-90-X-143, AZ-2018-003-00, AZ-2019-010-00, AZ-2019-035, AZ-2023-001-00 N/A Formula Grants for Rural Areas and Tribal Transit Program 20.509 CA-2021-028-00, CA-2022-226-00, CA-2022-231-00, GRT-22-0008862-T N/A Federal Agency: Department of Transportation Pass-Through Agency: Arizona Department of Transportation and Quechan Indian Tribe Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Procurement, Suspension, and Debarment CRITERIA Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR §§200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR part 200. The Board adopted a Policies and Procedures Manual that requires the collection of three quotes for purchases of at least $3,000 but less than $100,000 and formal bid procedures for purchases over $100,000. Condition The Authority did not follow its Board adopted Policies and Procedures Manual or federal regulations. Cause YCIPTA was operating under an expired contract and did not follow Board-adopted policies. Effect YCIPTA was not in compliance with the Board adopted Policies and Procedures Manual and federal regulations. Context During our review of procurement, the following were noted: For one purchase in excess of the federal procurement threshold of $250,000, YCIPTA did not perform a sealed bid or proposal. For two purchases in the YCIPTA’s quote range, the YCIPTA did not obtain or maintain quotes. The sample was not intended to be, and was not, a statistically valid sample. Recommendation YCIPTA should adhere to its Board adopted Policies and Procedures Manual. When purchases are expected to be in excess of $100,000, formal procurement methods should be used to ensure the best pricing possible. Views of Responsible Officials See Corrective Action Plan.
Finding 2023-003 – Procurement Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Health Centers Cluster and Health Center Infrastructure Support Assistance Listing Number: 93.224, 93.527 and 93.526 Federal Award Identification Number: H80CS00824-21-00; H80CS00824-22-00; H8FCS41534-01-02; C8EC44826-01-00 Award Periods: May 1, 2022 – April 30, 2023; May 1, 2023 – April 30, 2024; April 1, 2021– March 31, 2023; September 15, 2021 – September 15, 2024, respectively Type of Finding: Compliance and material weakness in internal control over compliance Criteria: The non-federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price (2 CFR 200.318). Additionally, the non-federal entity must have and use documented procurement procedures, consistent with the standards of 2 CFR 200.320 which includes five acceptable methods of procurement which vary based on the size of the purchase and nature of the expense. Condition: For a portion of the year under audit, the Organization did not have a procurement policy that complied with 2 CFR 200.320 and did not maintain sufficient documentation to support the use of an approved or prequalified vendor listing. As a result of this, the Organization incorrectly applied the micro-purchase methodology to transactions which qualified for the simplified acquisition method. Questioned Costs: Unknown. Context: Five (5) of five (5) transactions selected for procurement testing. Cause: The Organization did not have a procurement policy which was consistent with 2 CFR 200.230 during a specific period of time during the year under audit. During the last quarter of the fiscal year, the Organization did update its procurement policy to be consistent with the requirements of the Uniform Guidance. Effect: Without an appropriate procurement policy, there is a potential to use federal grants in a manner which is not the most efficient and economical. Repeat Finding: No.
Finding 2023-003 – Procurement Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Health Centers Cluster and Health Center Infrastructure Support Assistance Listing Number: 93.224, 93.527 and 93.526 Federal Award Identification Number: H80CS00824-21-00; H80CS00824-22-00; H8FCS41534-01-02; C8EC44826-01-00 Award Periods: May 1, 2022 – April 30, 2023; May 1, 2023 – April 30, 2024; April 1, 2021– March 31, 2023; September 15, 2021 – September 15, 2024, respectively Type of Finding: Compliance and material weakness in internal control over compliance Criteria: The non-federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price (2 CFR 200.318). Additionally, the non-federal entity must have and use documented procurement procedures, consistent with the standards of 2 CFR 200.320 which includes five acceptable methods of procurement which vary based on the size of the purchase and nature of the expense. Condition: For a portion of the year under audit, the Organization did not have a procurement policy that complied with 2 CFR 200.320 and did not maintain sufficient documentation to support the use of an approved or prequalified vendor listing. As a result of this, the Organization incorrectly applied the micro-purchase methodology to transactions which qualified for the simplified acquisition method. Questioned Costs: Unknown. Context: Five (5) of five (5) transactions selected for procurement testing. Cause: The Organization did not have a procurement policy which was consistent with 2 CFR 200.230 during a specific period of time during the year under audit. During the last quarter of the fiscal year, the Organization did update its procurement policy to be consistent with the requirements of the Uniform Guidance. Effect: Without an appropriate procurement policy, there is a potential to use federal grants in a manner which is not the most efficient and economical. Repeat Finding: No.
WIC Special Supplemental Nutrition Program for Women, Infants, and Children Assistance Listing No. 10.557 U.S. Department of Agriculture Criteria or Specific Requirement – Procurement (45 CFR 200.318-200.326) Condition - The Health System entered into various professional services contracts for marketing, advertising, and information dissemination that do not exceed the simplified acquisition threshold and are considered micro-purchase awards but did not maintain appropriate documentation to document the price reasonableness based on research, experience, and purchase history to support its procurement decisions. Questioned Costs - None Context - We tested two out of a total of seven contracts that were considered micro-purchases. The sample was not intended to be, and was not, a statistically valid sample. During our testing of procurement requirements, the two vendor contracts tested over the micro-purchase threshold did not have appropriate documentation to evidence the basis of vendor selection (documentation of the price reasonableness based on research, experience, and purchase history). Effect - Micro-purchases were made without appropriate documentation to comply with Uniform Guidance requirements. Cause - The Organization does not have a comprehensive procurement policy that is in line with Uniform Guidance requirements. Adequate supporting documentation on the procurements were not obtained or maintained within vendor files and vendor contracts do not contain the necessary contract provision and language required by the Uniform Guidance. Repeat Finding - No Recommendation - We recommend the Health System revisit controls over this compliance requirement to ensure that appropriate documentation is gathered and retained within its procurement files to support all Federally funded purchasing decisions. We also recommend the Organization perform a comprehensive review of its procurement policy and ensure that it is in compliance and in-line with the procurement requirements of the Uniform Guidance.
Finding 2023-002: Procurement, Suspension and Debarment (Material Weakness) Federal Program: U.S. Department of the Treasury: ALN 21.027 Criteria or Specific Requirement: 2 CFR Section 200.318 requires that the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. 2 CFR Section 200.214 requires that, for covered transactions, a non-Federal entity must verify that entities are not suspended, debarred or otherwise excluded. This verification may be accomplished by checking the System for Award Management (SAM) website maintained by the General Services Administration. Condition: AHCMC does not have a formal procurement policy which requires full and open competition for purchases of goods and services. In addition, during the year under audit, AHCMC did not perform the screening process for all payments made with Federal funds. Cause: AHCMC did not have polices and procedures in place throughout the year to perform and maintain documentation of its procurement procedures. In addition, AHCMC did not perform and maintain documentation of the SAM screening. Effect or Potential Effect: Failure to perform the proper procurement procedures could result in disallowance of Federal expenditures based on lack of fair competition. In addition, failure to screen potential vendors, suppliers, employees, fellows or other non-contracted Federal transactions against the suspended and debarred list increases the possibility that U.S. Government funds may inadvertently be provided to individuals or organizations deemed to be excluded parties by the U.S. Government. Questioned Costs: None noted. Context: With a formal procurement policy, AHCMC did not comply with the procurement standards in the Uniform Guidance. Payments were made throughout the year by AHCMC without performing the SAM screening process. The SAM screening process was done after the fact during the audit and no suspended, debarred or otherwise excluded parties were paid Federal funds. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: AHCMC should implement a procurement policy that conforms to the Uniform Guidance. Furthermore, AHCMC should maintain documentation in its files to provide evidence to support that it followed the procurement policy. In addition, AHCMC should establish internal controls to ensure documentation is maintained to evidence that it performed the required suspension and debarment searches on the SAM website.
FINDING 2023-003 Information on the federal program: Subject: Child Nutrition Cluster – Internal Controls Federal Agency: Department of Education Federal Program: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listing Number: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Significant Deficiency Criteria: 2 CFR section 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). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For the two small purchase method procurements sampled for testing, we noted that the School Corporation, did not obtain three quotes from separate vendors. The School Corporation did properly perform a suspension and debarment check on the vendor. Additionally, no errors were noted in the one simplified acquisition threshold procurement sampled for testing. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2021-004. Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that 3 quotes are obtained as required for small purchase method procurements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-003 Information on the federal program: Subject: Child Nutrition Cluster – Internal Controls Federal Agency: Department of Education Federal Program: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listing Number: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Significant Deficiency Criteria: 2 CFR section 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). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For the two small purchase method procurements sampled for testing, we noted that the School Corporation, did not obtain three quotes from separate vendors. The School Corporation did properly perform a suspension and debarment check on the vendor. Additionally, no errors were noted in the one simplified acquisition threshold procurement sampled for testing. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2021-004. Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that 3 quotes are obtained as required for small purchase method procurements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-003 Information on the federal program: Subject: Child Nutrition Cluster – Internal Controls Federal Agency: Department of Education Federal Program: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listing Number: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Significant Deficiency Criteria: 2 CFR section 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). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For the two small purchase method procurements sampled for testing, we noted that the School Corporation, did not obtain three quotes from separate vendors. The School Corporation did properly perform a suspension and debarment check on the vendor. Additionally, no errors were noted in the one simplified acquisition threshold procurement sampled for testing. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2021-004. Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that 3 quotes are obtained as required for small purchase method procurements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-003 Information on the federal program: Subject: Child Nutrition Cluster – Internal Controls Federal Agency: Department of Education Federal Program: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listing Number: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Significant Deficiency Criteria: 2 CFR section 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). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For the two small purchase method procurements sampled for testing, we noted that the School Corporation, did not obtain three quotes from separate vendors. The School Corporation did properly perform a suspension and debarment check on the vendor. Additionally, no errors were noted in the one simplified acquisition threshold procurement sampled for testing. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2021-004. Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that 3 quotes are obtained as required for small purchase method procurements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster – Internal Controls Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Number: 84.027, 84.027X, 84.173 and 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 2611-55-PN01, 21611-55-PN01, 22611-055-ARP, 22611-55-PN01, 23611-55-PN01, 20619-55-PN01, 21619-55-PN01, 22619-055-ARP, 22619-55-PN01, 23619-55-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Significant Deficiency Criteria: 2 CFR section 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). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For the one small purchase method procurement sampled for testing, we noted that the School Corporation, did not obtain three quotes from separate vendors. The procurement was for $106,091 and $88,896 worth of behavioral health services for the years ended June 30, 2022, and June 30, 2023 respectively. The School Corporation did properly perform a suspension and debarment check on the vendor. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2021-005. Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that 3 quotes are obtained as required for small purchase method procurements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster – Internal Controls Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Number: 84.027, 84.027X, 84.173 and 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 2611-55-PN01, 21611-55-PN01, 22611-055-ARP, 22611-55-PN01, 23611-55-PN01, 20619-55-PN01, 21619-55-PN01, 22619-055-ARP, 22619-55-PN01, 23619-55-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Significant Deficiency Criteria: 2 CFR section 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). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For the one small purchase method procurement sampled for testing, we noted that the School Corporation, did not obtain three quotes from separate vendors. The procurement was for $106,091 and $88,896 worth of behavioral health services for the years ended June 30, 2022, and June 30, 2023 respectively. The School Corporation did properly perform a suspension and debarment check on the vendor. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2021-005. Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that 3 quotes are obtained as required for small purchase method procurements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster – Internal Controls Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Number: 84.027, 84.027X, 84.173 and 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 2611-55-PN01, 21611-55-PN01, 22611-055-ARP, 22611-55-PN01, 23611-55-PN01, 20619-55-PN01, 21619-55-PN01, 22619-055-ARP, 22619-55-PN01, 23619-55-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Significant Deficiency Criteria: 2 CFR section 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). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: For the one small purchase method procurement sampled for testing, we noted that the School Corporation, did not obtain three quotes from separate vendors. The procurement was for $106,091 and $88,896 worth of behavioral health services for the years ended June 30, 2022, and June 30, 2023 respectively. The School Corporation did properly perform a suspension and debarment check on the vendor. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2021-005. Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that 3 quotes are obtained as required for small purchase method procurements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Finding 2023-004 – Material Weakness AL No: 20.507 Federal Grantor: U.S. Department of Transportation, Federal Transit Administration, Federal Transit Formula Grants - Direct Award. Compliance Requirement: Procurement, Suspension and Debarment. Condition: The District was unable to provide documentation that the procurement of the CNG tank replacement project for five Orion buses exceeding the simplified acquisition threshold of $250,000 was approved by the Board. There is documentation that an invitation for bid (IFB) was released for the project, but only one bid was received and the District awarded the contract to the sole bidder. Missing documentation includes support of the rationale to approve the contract absent evidence of full and open competition. The District was also not able to provide the request for proposal for review. Criteria: 2 CFR Part 200 Subpart E (Uniform Guidance) states the following: Section 200.318(a) states that “The non-federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or service required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in Sections 200.317 through 200.327.” Section 200.318(i) states that “The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.” Section 200.320(c) states that “There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold…; (2) The item is available only from a single source; (3) The public exigency or emergency for the retirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non- Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate.” Section 200.324(a) states that “The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals.” Cause: Staff turnover at the District and the need for the project to be completed by a certain date to avoid the buses losing certification led to the lack of adequate records being maintained. Effect: The District was unable to prove it was in compliance with the Uniform Guidance regarding open competition on procurements. Context: The CNG tank replacement needed to be completed by a certain timeframe in order for the buses to be operational, so not every step was documented. The awarded contract was signed on the date of a Board meeting, but the Board minutes did not document that this contract was reviewed nor approved by the Board. Recommendation: We recommend the District establish a procurement folder on its server with subfolders for each individual procurement where documentation of each procurement is maintained, including advertising of the procurement, requests for proposals, proposals received, analysis of reasons for selecting the winning bid, executed contract, certifications by contractor if not part of proposal or executed contract, management report to board recommending which bid should be approved, board resolution approving the winning bid and for contracts under $250,000 a memo or form documenting bids received and reason for selecting the bid, including reasons for not selecting the lowest bid if applicable. We also recommend training be provided to staff that work on procurements of the requirements under Uniform Guidance Section 2 CFR 200.318 to 200.326. View of Responsible Officials and Planned Corrective Action: Management’s response and planned corrective action is included at the Corrective Action Plan end of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 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 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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 . . . (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 A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 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 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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 . . . (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 A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 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 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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 . . . (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 A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 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 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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 . . . (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 A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 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 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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 . . . (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 A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 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 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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 . . . (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 A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 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 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 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 . . . (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 A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
2023-006. FINDING Failure to Comply with Established Procurement Procedures Federal Agency: National Science Foundation Assistance Listing Number: 47.076 Program Names: Research and Development Cluster - Conference: 2023 NSF Louis Stokes Alliances for Minority Participation Principal Investigators/ Project Directors Meeting Collaborative Research: Louis Stokes Regional Center of Excellence: Louis Stokes Midwest Regional Center of Excellence for Broadening Participation in STEM Program Expenditures: $478,648; $256,713 Award Numbers: 2312141; 1826719 Questioned Costs: None The Chicago State University (University) did not ensure procurements exempt from solicitation and competitive bidding were published in the Illinois Procurement Bulletin. During testing, two of 13 (15%) exempt contracts, each exceeding $100,000, were not published in the Illinois Procurement Bulletin. The sample methods used in performing this testing were not statistically valid. The Code of Federal Regulations (Code) (2 CFR § 200.318(a)) requires the University to use documented procurement procedures consistent with State, local, and tribal laws and regulations and the standards of the Code, for the acquisition of property or services required under a Federal award or subaward. The Illinois Procurement Code (30 ILCS 500/1-13(b)) requires the University to publish notices of each contract with an annual value of more than $100,000 in the Procurement Bulletin within 14 calendar days after contract execution. University management indicated the failure to publish the notices in the Procurement Bulletin was due to oversight. Failure to publish notices of exempt contracts is a noncompliance with the Code and the Illinois Procurement Code. (Finding Code No. 2023-006) RECOMMENDATION We recommend that the University publish notices of exempt contracts in the Procurement Bulletin in accordance with the Code and the Illinois Procurement Code. UNIVERSITY RESPONSE The University agrees with the finding. Adjustments have been made to internal processes to ensure exemptions are always posted to the Illinois Procurement Bulletin for Public Institutions of Higher Education in a timely manner when necessary.
2023-006. FINDING Failure to Comply with Established Procurement Procedures Federal Agency: National Science Foundation Assistance Listing Number: 47.076 Program Names: Research and Development Cluster - Conference: 2023 NSF Louis Stokes Alliances for Minority Participation Principal Investigators/ Project Directors Meeting Collaborative Research: Louis Stokes Regional Center of Excellence: Louis Stokes Midwest Regional Center of Excellence for Broadening Participation in STEM Program Expenditures: $478,648; $256,713 Award Numbers: 2312141; 1826719 Questioned Costs: None The Chicago State University (University) did not ensure procurements exempt from solicitation and competitive bidding were published in the Illinois Procurement Bulletin. During testing, two of 13 (15%) exempt contracts, each exceeding $100,000, were not published in the Illinois Procurement Bulletin. The sample methods used in performing this testing were not statistically valid. The Code of Federal Regulations (Code) (2 CFR § 200.318(a)) requires the University to use documented procurement procedures consistent with State, local, and tribal laws and regulations and the standards of the Code, for the acquisition of property or services required under a Federal award or subaward. The Illinois Procurement Code (30 ILCS 500/1-13(b)) requires the University to publish notices of each contract with an annual value of more than $100,000 in the Procurement Bulletin within 14 calendar days after contract execution. University management indicated the failure to publish the notices in the Procurement Bulletin was due to oversight. Failure to publish notices of exempt contracts is a noncompliance with the Code and the Illinois Procurement Code. (Finding Code No. 2023-006) RECOMMENDATION We recommend that the University publish notices of exempt contracts in the Procurement Bulletin in accordance with the Code and the Illinois Procurement Code. UNIVERSITY RESPONSE The University agrees with the finding. Adjustments have been made to internal processes to ensure exemptions are always posted to the Illinois Procurement Bulletin for Public Institutions of Higher Education in a timely manner when necessary.
Findings And Questioned Costs For Federal Awards Reference Number: 2023-001 Prior year Finding: No Federal Agency: U.S. Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Compliance Requirement: Procurement, Suspension and Debarment Type of Finding: Significant Deficiency in Internal control, Noncompliance Criteria: Compliance - Per 2 CFR section 200.318, when procuring property, the non- Federal entity must have and use documented procurement procedures, consistent with States, for the acquisition of property or services required under a Federal award or subaward. Compliance - Per 2 CFR 200.214, restricts awards, subawards and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. 2 CFR 180.300 states that an entity may determine suspension and debarment status by: (a) Checking SAM (System for Award Management) Exclusions; or (b) Collecting a certification from that person (c) Adding a clause or condition to the covered transaction with that person. Control - Per 2 CFR 200.303(a), a non-Federal entity must: 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 comply 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). Condition: The Town was unable to provide documentation to support compliance with the required State procurement processes for acquiring property or services. In addition, the Town did not provide support that the suspension and debarment status of the vendor was checked before the contract was awarded. Context: For all contracts selected for testing, no support was provided for how the contract was procured. Further, the suspension and debarment status of the vendor was not documented for that contract. Questioned Costs: Undetermined. Cause: The Town’s internal controls were not sufficient to ensure that applicable procurement policies and Federal suspension and debarment regulations were followed for purchased made for the program. Effect: The Town is not compliant with federal and state procurement and suspension and debarment requirements. Failure to adhere to procurement and suspension and debarment policies and procedures may result in obtaining goods and services under terms that are not in the best interest of the Federal program. Recommendation: The Town should review and enhance controls and procedures to ensure that it follows the applicable procurement policy and Federal suspension and debarment regulations for all goods and services charged to the program. Views of responsible officials: We agree with the auditor’s recommendation. The Town of Camden, Delaware will review the State’s procurement process to satisfy the compliance requirements for the program. The Town of Camden, Delaware will also put procedures in place to check and review each bidder as part of the Federal suspension and debarment policies.
2023-002: Lack of Documentation for Procurement, Suspension and Debarment Testing Federal Department: Department of Labor Assistance Listing #: 17.274 Material Weakness in Internal Controls and Noncompliance Category of Finding – Procurement, Suspension, and Debarment Criteria - Uniform Guidance and CFR sections 200.318 through 200.326 set forth the procurement standards non‐federal entities other than states must follow when operating federal programs and the procurement procedures required depending on the amount of the transaction. Condition - There was no documentation maintained related to the search for price comparisons or suspension and debarment testing performed on vendors. Context – It was communicated by management during audit fieldwork that there was no documentation maintained related to the search for price comparisons or suspension and debarment testing performed on vendors. Cause – Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, therefore controls were not adequately designed to ensure compliance with all of these requirements. Effect - Increased overall risk that Change Inc. is contracting and awarding contracts to suspended or debarred vendors or is not obtaining the best possible prices for goods or services. Recommendation - We recommend that management implement a process to perform price comparisons and suspension and debarment testing as required by their procurement policy, and that as part of this process they maintain adequate supporting documentation and records to document history and methods of procurement, suspension, and debarment and the procedures performed to comply with these CFR sections. This could include the use of standard forms and templates for purchase orders, contracts, cost/price analyses, bid evaluation, and suspension & debarment testing. Auditee’s comments and response – Management is in agreement with this finding. Management is in the process of obtaining additional training and updating processes to comply with these requirements. Responsible party for corrective action: Jill Johnson, Associate Director Repeat Finding: 2022-003
2023-002: Lack of Documentation for Procurement, Suspension and Debarment Testing Federal Department: Department of Labor Assistance Listing #: 17.274 Material Weakness in Internal Controls and Noncompliance Category of Finding – Procurement, Suspension, and Debarment Criteria - Uniform Guidance and CFR sections 200.318 through 200.326 set forth the procurement standards non‐federal entities other than states must follow when operating federal programs and the procurement procedures required depending on the amount of the transaction. Condition - There was no documentation maintained related to the search for price comparisons or suspension and debarment testing performed on vendors. Context – It was communicated by management during audit fieldwork that there was no documentation maintained related to the search for price comparisons or suspension and debarment testing performed on vendors. Cause – Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, therefore controls were not adequately designed to ensure compliance with all of these requirements. Effect - Increased overall risk that Change Inc. is contracting and awarding contracts to suspended or debarred vendors or is not obtaining the best possible prices for goods or services. Recommendation - We recommend that management implement a process to perform price comparisons and suspension and debarment testing as required by their procurement policy, and that as part of this process they maintain adequate supporting documentation and records to document history and methods of procurement, suspension, and debarment and the procedures performed to comply with these CFR sections. This could include the use of standard forms and templates for purchase orders, contracts, cost/price analyses, bid evaluation, and suspension & debarment testing. Auditee’s comments and response – Management is in agreement with this finding. Management is in the process of obtaining additional training and updating processes to comply with these requirements. Responsible party for corrective action: Jill Johnson, Associate Director Repeat Finding: 2022-003
(2023-095) Title: Internal control over conflict of interest requirements needs improvement Prior Year Findings: None State Department: Administrative and Financial Services State Bureau: Division of Procurement Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Procurement and suspension and debarment Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.318 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award or administration of contracts. No employee, officer, or agent may participate in the selection, award or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Condition: The Division of Procurement Services (DPS) oversees the creation, development, approval, and implementation of contracts for the State. DPS publishes contract templates and a Procurement Justification Form (PJF) template to be used by State agencies during the procurement process. The templates are reviewed by DPS to ensure all pertinent Federal requirements are included. The Office of the State Auditor reviewed the contract and PJF templates and found that the following templates did not include required conflict of interest language: • Service contract template, which only addressed a prohibition of employment between a State employee and the party to the contract • PJF template, which is utilized for contracts procured through the non-competitive bidding (sole source) process Context: $825.3 million in Federal expenditures was paid to contractors, subcontractors, or vendors through contracts in fiscal year 2023. Cause: Lack of supervisory oversight Effect: • All conflicts of interest may not be disclosed and thus, may not be considered by the State when entering into contracts with contractors, subcontractors or vendors. Conflict of interest disclosures are required to ensure transparency, accountability, and remove potential bias. • Noncompliance with Federal regulations Recommendation: We recommend that DPS enhance oversight procedures to ensure conflict of interest requirements and disclosures are included in all contract and PJF templates. This will ensure transparency, accountability, and remove potential bias. Corrective Action Plan: See F-38 Management’s Response: The Department agrees with this finding. The service contract did not include updated conflict of interest verbiage. Upon review and consultation, Procurement Services has updated the contract to appropriately reference the applicable statute and verbiage. These new contracts will be distributed to agencies for future use. Historically, the NOI-PJF has not included the conflict of interest reference. This was the case at the time of this audit review, a revised PJF form has been created with a department attestation referencing the statute at the time of the document signature. This new PJF will be distributed for use. Contact: David Morris, Acting Chief Procurement Officer, DAFS, 207-624-7335 (State Number: 23-1010-01)
(2023-095) Title: Internal control over conflict of interest requirements needs improvement Prior Year Findings: None State Department: Administrative and Financial Services State Bureau: Division of Procurement Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Procurement and suspension and debarment Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.318 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award or administration of contracts. No employee, officer, or agent may participate in the selection, award or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Condition: The Division of Procurement Services (DPS) oversees the creation, development, approval, and implementation of contracts for the State. DPS publishes contract templates and a Procurement Justification Form (PJF) template to be used by State agencies during the procurement process. The templates are reviewed by DPS to ensure all pertinent Federal requirements are included. The Office of the State Auditor reviewed the contract and PJF templates and found that the following templates did not include required conflict of interest language: • Service contract template, which only addressed a prohibition of employment between a State employee and the party to the contract • PJF template, which is utilized for contracts procured through the non-competitive bidding (sole source) process Context: $825.3 million in Federal expenditures was paid to contractors, subcontractors, or vendors through contracts in fiscal year 2023. Cause: Lack of supervisory oversight Effect: • All conflicts of interest may not be disclosed and thus, may not be considered by the State when entering into contracts with contractors, subcontractors or vendors. Conflict of interest disclosures are required to ensure transparency, accountability, and remove potential bias. • Noncompliance with Federal regulations Recommendation: We recommend that DPS enhance oversight procedures to ensure conflict of interest requirements and disclosures are included in all contract and PJF templates. This will ensure transparency, accountability, and remove potential bias. Corrective Action Plan: See F-38 Management’s Response: The Department agrees with this finding. The service contract did not include updated conflict of interest verbiage. Upon review and consultation, Procurement Services has updated the contract to appropriately reference the applicable statute and verbiage. These new contracts will be distributed to agencies for future use. Historically, the NOI-PJF has not included the conflict of interest reference. This was the case at the time of this audit review, a revised PJF form has been created with a department attestation referencing the statute at the time of the document signature. This new PJF will be distributed for use. Contact: David Morris, Acting Chief Procurement Officer, DAFS, 207-624-7335 (State Number: 23-1010-01)
(2023-095) Title: Internal control over conflict of interest requirements needs improvement Prior Year Findings: None State Department: Administrative and Financial Services State Bureau: Division of Procurement Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Procurement and suspension and debarment Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.318 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award or administration of contracts. No employee, officer, or agent may participate in the selection, award or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Condition: The Division of Procurement Services (DPS) oversees the creation, development, approval, and implementation of contracts for the State. DPS publishes contract templates and a Procurement Justification Form (PJF) template to be used by State agencies during the procurement process. The templates are reviewed by DPS to ensure all pertinent Federal requirements are included. The Office of the State Auditor reviewed the contract and PJF templates and found that the following templates did not include required conflict of interest language: • Service contract template, which only addressed a prohibition of employment between a State employee and the party to the contract • PJF template, which is utilized for contracts procured through the non-competitive bidding (sole source) process Context: $825.3 million in Federal expenditures was paid to contractors, subcontractors, or vendors through contracts in fiscal year 2023. Cause: Lack of supervisory oversight Effect: • All conflicts of interest may not be disclosed and thus, may not be considered by the State when entering into contracts with contractors, subcontractors or vendors. Conflict of interest disclosures are required to ensure transparency, accountability, and remove potential bias. • Noncompliance with Federal regulations Recommendation: We recommend that DPS enhance oversight procedures to ensure conflict of interest requirements and disclosures are included in all contract and PJF templates. This will ensure transparency, accountability, and remove potential bias. Corrective Action Plan: See F-38 Management’s Response: The Department agrees with this finding. The service contract did not include updated conflict of interest verbiage. Upon review and consultation, Procurement Services has updated the contract to appropriately reference the applicable statute and verbiage. These new contracts will be distributed to agencies for future use. Historically, the NOI-PJF has not included the conflict of interest reference. This was the case at the time of this audit review, a revised PJF form has been created with a department attestation referencing the statute at the time of the document signature. This new PJF will be distributed for use. Contact: David Morris, Acting Chief Procurement Officer, DAFS, 207-624-7335 (State Number: 23-1010-01)
(2023-095) Title: Internal control over conflict of interest requirements needs improvement Prior Year Findings: None State Department: Administrative and Financial Services State Bureau: Division of Procurement Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Medicaid Cluster (COVID-19) Assistance Listing Number: 93.775, 93.777, 93.778 Federal Award Identification Number: See E-93 to E-94 Compliance Area: Procurement and suspension and debarment Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.318 The Department must establish and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award or administration of contracts. No employee, officer, or agent may participate in the selection, award or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Condition: The Division of Procurement Services (DPS) oversees the creation, development, approval, and implementation of contracts for the State. DPS publishes contract templates and a Procurement Justification Form (PJF) template to be used by State agencies during the procurement process. The templates are reviewed by DPS to ensure all pertinent Federal requirements are included. The Office of the State Auditor reviewed the contract and PJF templates and found that the following templates did not include required conflict of interest language: • Service contract template, which only addressed a prohibition of employment between a State employee and the party to the contract • PJF template, which is utilized for contracts procured through the non-competitive bidding (sole source) process Context: $825.3 million in Federal expenditures was paid to contractors, subcontractors, or vendors through contracts in fiscal year 2023. Cause: Lack of supervisory oversight Effect: • All conflicts of interest may not be disclosed and thus, may not be considered by the State when entering into contracts with contractors, subcontractors or vendors. Conflict of interest disclosures are required to ensure transparency, accountability, and remove potential bias. • Noncompliance with Federal regulations Recommendation: We recommend that DPS enhance oversight procedures to ensure conflict of interest requirements and disclosures are included in all contract and PJF templates. This will ensure transparency, accountability, and remove potential bias. Corrective Action Plan: See F-38 Management’s Response: The Department agrees with this finding. The service contract did not include updated conflict of interest verbiage. Upon review and consultation, Procurement Services has updated the contract to appropriately reference the applicable statute and verbiage. These new contracts will be distributed to agencies for future use. Historically, the NOI-PJF has not included the conflict of interest reference. This was the case at the time of this audit review, a revised PJF form has been created with a department attestation referencing the statute at the time of the document signature. This new PJF will be distributed for use. Contact: David Morris, Acting Chief Procurement Officer, DAFS, 207-624-7335 (State Number: 23-1010-01)
FINDING 2023-010 Information on the federal program: Federal Agency: Department of the Treasury Pass-Through Entity: The Indianapolis Foundation and The City of Indianapolis Federal Program: Coronavirus State and Fiscal Recovery Funds Assistance Listing Number: 21.027 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Significant Deficiency, Internal Controls 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 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320(b) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: For one selected procurement, EmployIndy was unable to provide support indicating review of procurement documents. Cause: A proper system of internal controls was not implemented by management of the Organization, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Organization’s management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect: Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. 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 organization. Questioned costs: There are no questioned costs. Context: Management was unable to provide adequate support indicating preparation and review of procurement and suspension and debarment documents for the Plaid Agency. Crowe was only able to view the bid request and bid. Documents indicating rationale for awarding the contract were not provided. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: We recommend that management establish a proper system of internal control and develop policies and procedures to ensure all required documentation is retained and provided for purchases and to ensure contractors and subrecipients, as appropriate are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of responsible officials and planned corrective actions: Management acknowledges the finding. See management’s corrective action plan attached to this audit report.
FINDING 2023-010 Information on the federal program: Federal Agency: Department of the Treasury Pass-Through Entity: The Indianapolis Foundation and The City of Indianapolis Federal Program: Coronavirus State and Fiscal Recovery Funds Assistance Listing Number: 21.027 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Significant Deficiency, Internal Controls 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 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320(b) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: For one selected procurement, EmployIndy was unable to provide support indicating review of procurement documents. Cause: A proper system of internal controls was not implemented by management of the Organization, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Organization’s management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect: Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. 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 organization. Questioned costs: There are no questioned costs. Context: Management was unable to provide adequate support indicating preparation and review of procurement and suspension and debarment documents for the Plaid Agency. Crowe was only able to view the bid request and bid. Documents indicating rationale for awarding the contract were not provided. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: We recommend that management establish a proper system of internal control and develop policies and procedures to ensure all required documentation is retained and provided for purchases and to ensure contractors and subrecipients, as appropriate are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of responsible officials and planned corrective actions: Management acknowledges the finding. See management’s corrective action plan attached to this audit report.
FINDING 2023-010 Information on the federal program: Federal Agency: Department of the Treasury Pass-Through Entity: The Indianapolis Foundation and The City of Indianapolis Federal Program: Coronavirus State and Fiscal Recovery Funds Assistance Listing Number: 21.027 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Significant Deficiency, Internal Controls 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 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320(b) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: For one selected procurement, EmployIndy was unable to provide support indicating review of procurement documents. Cause: A proper system of internal controls was not implemented by management of the Organization, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Organization’s management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect: Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. 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 organization. Questioned costs: There are no questioned costs. Context: Management was unable to provide adequate support indicating preparation and review of procurement and suspension and debarment documents for the Plaid Agency. Crowe was only able to view the bid request and bid. Documents indicating rationale for awarding the contract were not provided. Identification as a repeat finding, if applicable: This is not a repeat finding. Recommendation: We recommend that management establish a proper system of internal control and develop policies and procedures to ensure all required documentation is retained and provided for purchases and to ensure contractors and subrecipients, as appropriate are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of responsible officials and planned corrective actions: Management acknowledges the finding. See management’s corrective action plan attached to this audit report.
Finding 2023-002 Program Name: WIC Special Supplemental Nutrition Program for Women,Infants, and Children and Grants for Capital Development in Health Centers Federal Assistance Listing Number: 10.557 and 93.526 Federal Agencies: United States Department of Agriculture (USDA) and and U.S. Department of Health and Human Services Finding Type: Material Weakness Compliance Requirement: Procurement Condition: Ampla Health did not have adequate procurement policies in place that meet the minimum federal requirements for procurement standards. We examined the procurement records for nine vendors where Ampla Health expended federal funds. For all four sole source procurement records reviewed, Ampla Health did not retain documentation of the sole source determination or have an approved sole source vendor list. For two of three vendors selected in the small acquisition threshold, Ampla Health could not provide competing quotes or sufficient evidence to demonstrate procurement was performed. For one of three vendors selected in the small acquisition threshold, Ampla Health was only able to provide procurement support for a portion of the funds expended. Criteria: Under 2 CFR sections 200.318 through 200.326 and 45 CFR 75.327 Ampla Health is required to implement certain written procurement policies and procedures that adhere to the minimum Federal Procurement standards. Ampla Health must use its own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200 and maintain sufficient records to detail the history of procurements. Cause: Ampla Health did not have a policy in place that meets the minimum federal requirements under Uniform Guidance. In addition, Ampla Health could not provide support to demonstrate that it performed the necessary procurement steps or retained documentation demonstrating compliance with Uniform Guidance for purchases made with federal funds. Effect: Ampla Health was not in compliance with federal regulations or their own policies. Recommendation: Ampla Health should update their procurement policy to meet the minimum federal requirements and ensure procurement policies are being followed for all procurement levels with written documentation. Additionally, management should ensure individuals participating in the procurement process receive adequate training and guidance on procurement rules under the Uniform Guidance. View of Responsible Officials: Management will review the procurement policy and make necessary changes to ensure the policy meets all federal requirements.
Finding 2023-002 Program Name: WIC Special Supplemental Nutrition Program for Women,Infants, and Children and Grants for Capital Development in Health Centers Federal Assistance Listing Number: 10.557 and 93.526 Federal Agencies: United States Department of Agriculture (USDA) and and U.S. Department of Health and Human Services Finding Type: Material Weakness Compliance Requirement: Procurement Condition: Ampla Health did not have adequate procurement policies in place that meet the minimum federal requirements for procurement standards. We examined the procurement records for nine vendors where Ampla Health expended federal funds. For all four sole source procurement records reviewed, Ampla Health did not retain documentation of the sole source determination or have an approved sole source vendor list. For two of three vendors selected in the small acquisition threshold, Ampla Health could not provide competing quotes or sufficient evidence to demonstrate procurement was performed. For one of three vendors selected in the small acquisition threshold, Ampla Health was only able to provide procurement support for a portion of the funds expended. Criteria: Under 2 CFR sections 200.318 through 200.326 and 45 CFR 75.327 Ampla Health is required to implement certain written procurement policies and procedures that adhere to the minimum Federal Procurement standards. Ampla Health must use its own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200 and maintain sufficient records to detail the history of procurements. Cause: Ampla Health did not have a policy in place that meets the minimum federal requirements under Uniform Guidance. In addition, Ampla Health could not provide support to demonstrate that it performed the necessary procurement steps or retained documentation demonstrating compliance with Uniform Guidance for purchases made with federal funds. Effect: Ampla Health was not in compliance with federal regulations or their own policies. Recommendation: Ampla Health should update their procurement policy to meet the minimum federal requirements and ensure procurement policies are being followed for all procurement levels with written documentation. Additionally, management should ensure individuals participating in the procurement process receive adequate training and guidance on procurement rules under the Uniform Guidance. View of Responsible Officials: Management will review the procurement policy and make necessary changes to ensure the policy meets all federal requirements.
Reference Number: 2023-008 Federal Program Title: Public Health Emergency Preparedness Federal Assistance Listing Number: 93.069 Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: N/A Federal Award Number and Year: 6 NU90TP922022-04-01; Fiscal Year 2022-23 Name of Department: Department of Public Health Category of Finding: Procurement and Suspension and Debarment Type of Finding: Material Weakness in Internal Control Over Compliance; Material Noncompliance Criteria Procurement In accordance with Title 2 U.S. Code of Federal Regulations (CFR) § 200.318: (j) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. 2 CFR § 200.319 states: (b) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and § 200.320. 2 CFR § 200.320 states: 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. Suspension and Debarment In addition, in accordance with 2 CFR § 180.200 a covered transaction is a nonprocurement or procurement transaction that is subject to the prohibitions of this part. Per 2 CFR § 180.970(a), nonprocurement transaction means any transaction, regardless of type (except procurement contracts), including, but not limited to grants. According to 2 CFR § 180.300, when the County enters into a covered transaction with another person at the next lower tier, the County must verify that the person is not excluded or disqualified. The County can do this by: 1. Checking System for Award Management (SAM) exclusions 2. Collecting a certification from that person; or 3. Adding a clause or condition to the covered transaction with that person. Per 2 CFR § 180.985, person means any individual, corporation, partnership, association, unit of government, or legal entity, however organized. Condition During our audit of the Department of Public Health (DPH) compliance with the procurement and suspension and debarment requirements for the Public Health Emergency Preparedness Program, we noted the following: • For twenty-one (21) contracts, DPH did not provide documentation related to the history of the procurement. Therefore, we were unable to determine whether DPH complied with the procurement requirements related to the method of procurement, competition, and the basis for the contract price. • For two (2) contracts, DPH did not provide documentation of the justification and approval of sole source. Therefore, we were unable to determine whether the procurement method used was appropriate and whether limiting competition was justified. • For three (3) contracts, DPH did not provide documentation to demonstrate DPH verified that the vendor was not suspended or debarred from participating in federally funded contracts prior to entering into a covered transaction. Based on a subsequent review of the SAM exclusions, the vendors are not suspended or debarred. Cause DPH did not provide procurement and suspension and debarment documentation due to staff shortages and increased workload. For suspension and debarment, for two of the three contracts, DPH provided copies of the verification from Sam.gov, however, the documents did not have dates indicating the verification occurred prior to contract execution. Effect Failure to document the history of procurements results in noncompliance with the procurement requirements with 2 CFR §§ 200.317, 200.318, 200.319 and 200.320. Failure to document verification of suspension and debarment results in noncompliance with 2 CFR § 180.300, and there is a risk that federal funds may be used to pay subrecipients and vendors that are suspended or debarred. Questioned Costs Questioned costs were not identified. Context For the twenty-seven (27) contracts selected for testing, which totaled $1,942,586 from a population of 178 contracts with expenditures totaling $2,132,936, DPH did not provide the necessary documentation for twenty-three (23) contracts with expenditures totaling $1,273,569 and suspension and debarment documentation for three (3) contracts with expenditures totaling $124,809. The sample was not a statistically valid sample. Recommendation We recommend that DPH maintain sufficient records to support vendor selection in accordance with procurement requirements. In additional, we recommend that DPH either: 1) include a contract clause or condition to the covered transaction with that person, 2) check the SAM exclusions prior to entering into a contract and maintain documentation of that verification, or 3) collect a certification from that person.
Reference Number: 2023-006 Federal Program Title: Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Federal Assistance Listing Number: 93.354 Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: N/A Federal Award Number and Year: 6 NU90TP922183-01-03; Fiscal Year 2022-23 Name of Department: Department of Public Health Category of Finding: Procurement and Suspension and Debarment Type of Finding: Material Weakness in Internal Control Over Compliance; Instance of Noncompliance Criteria Procurement In accordance with Title 2 U.S. Code of Federal Regulations (CFR) § 200.318: (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. 2 CFR § 200.319 states: (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and § 200.320. 2 CFR § 200.320 states: 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. Suspension and Debarment In addition, in accordance with 2 CFR § 180.200 a covered transaction is a nonprocurement or procurement transaction that is subject to the prohibitions of this part. Per 2 CFR § 180.970(a), nonprocurement transaction means any transaction, regardless of type (except procurement contracts), including, but not limited to grants. According to 2 CFR § 180.300, when the County enters into a covered transaction with another person at the next lower tier, the County must verify that the person is not excluded or disqualified. The County can do this by: 1. Checking System for Award Management (SAM) exclusions 2. Collecting a certification from that person; or 3. Adding a clause or condition to the covered transaction with that person. Per 2 CFR § 180.985, person means any individual, corporation, partnership, association, unit of government, or legal entity, however organized. Condition During our audit of the Department of Public Health (DPH) compliance with the procurement and suspension and debarment requirements for the Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Program, we noted that for one (1) contract, DPH did not provide documentation related to the history of the procurement. Therefore, we were unable to determine whether DPH complied with the procurement requirements related to the method of procurement, competition, and the basis for the contract price. In addition, for the same one (1) contract, DPH did not provide documentation to demonstrate DPH verified that the vendor was not suspended or debarred from participating in federally funded contracts prior to entering into a covered transaction. Based on a subsequent review of the SAM exclusions, the vendor is not suspended or debarred. Cause The Office of the County Counsel stated the contract was privileged from disclosure under attorney-client privilege and did not provide the contract or procurement related documentation. In addition, County Counsel stated the contract did not contain an explicit debarment provision and did not provide documentation that Sam.gov was reviewed or a certification from the vendor. Effect Not providing sufficient documentation to auditors to demonstrate compliance with federal compliance results in an audit scope limitation. Failure to document verification of suspension and debarment results in noncompliance with 2 CFR § 180.300, and there is a risk that federal funds may be used to pay subrecipients and vendors that are suspended or debarred. Questioned Costs Questioned costs were not identified. Context For the six (6) contracts selected for testing, which totaled $37,256,347 from a population of eight (8) contracts with expenditures totaling $37,874,851, DPH did not provide procurement and suspension and debarment documentation for one (1) contract with expenditures totaling $1,499,482. The sample was not a statistically valid sample. Recommendation We recommend County departments discuss and document sensitive legal matters funded by federal funds with respective grantors to obtain guidance and direction on addressing audit requests. In addition, we recommend that DPH ensure sufficient documentation is maintained and available to demonstrate compliance with suspension or debarment. Acceptable items to confirm that vendors and subrecipients are not suspended or debarred are: 1) include a contract clause or condition to the covered transaction with that contractor, 2) search SAM exclusions prior to entering into a contract and maintain documentation of that verification, or 3) collect a certification from the contractor.
Reference Number: 2023-006 Federal Program Title: Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Federal Assistance Listing Number: 93.354 Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: N/A Federal Award Number and Year: 6 NU90TP922183-01-03; Fiscal Year 2022-23 Name of Department: Department of Public Health Category of Finding: Procurement and Suspension and Debarment Type of Finding: Material Weakness in Internal Control Over Compliance; Instance of Noncompliance Criteria Procurement In accordance with Title 2 U.S. Code of Federal Regulations (CFR) § 200.318: (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. 2 CFR § 200.319 states: (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and § 200.320. 2 CFR § 200.320 states: 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. Suspension and Debarment In addition, in accordance with 2 CFR § 180.200 a covered transaction is a nonprocurement or procurement transaction that is subject to the prohibitions of this part. Per 2 CFR § 180.970(a), nonprocurement transaction means any transaction, regardless of type (except procurement contracts), including, but not limited to grants. According to 2 CFR § 180.300, when the County enters into a covered transaction with another person at the next lower tier, the County must verify that the person is not excluded or disqualified. The County can do this by: 1. Checking System for Award Management (SAM) exclusions 2. Collecting a certification from that person; or 3. Adding a clause or condition to the covered transaction with that person. Per 2 CFR § 180.985, person means any individual, corporation, partnership, association, unit of government, or legal entity, however organized. Condition During our audit of the Department of Public Health (DPH) compliance with the procurement and suspension and debarment requirements for the Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response Program, we noted that for one (1) contract, DPH did not provide documentation related to the history of the procurement. Therefore, we were unable to determine whether DPH complied with the procurement requirements related to the method of procurement, competition, and the basis for the contract price. In addition, for the same one (1) contract, DPH did not provide documentation to demonstrate DPH verified that the vendor was not suspended or debarred from participating in federally funded contracts prior to entering into a covered transaction. Based on a subsequent review of the SAM exclusions, the vendor is not suspended or debarred. Cause The Office of the County Counsel stated the contract was privileged from disclosure under attorney-client privilege and did not provide the contract or procurement related documentation. In addition, County Counsel stated the contract did not contain an explicit debarment provision and did not provide documentation that Sam.gov was reviewed or a certification from the vendor. Effect Not providing sufficient documentation to auditors to demonstrate compliance with federal compliance results in an audit scope limitation. Failure to document verification of suspension and debarment results in noncompliance with 2 CFR § 180.300, and there is a risk that federal funds may be used to pay subrecipients and vendors that are suspended or debarred. Questioned Costs Questioned costs were not identified. Context For the six (6) contracts selected for testing, which totaled $37,256,347 from a population of eight (8) contracts with expenditures totaling $37,874,851, DPH did not provide procurement and suspension and debarment documentation for one (1) contract with expenditures totaling $1,499,482. The sample was not a statistically valid sample. Recommendation We recommend County departments discuss and document sensitive legal matters funded by federal funds with respective grantors to obtain guidance and direction on addressing audit requests. In addition, we recommend that DPH ensure sufficient documentation is maintained and available to demonstrate compliance with suspension or debarment. Acceptable items to confirm that vendors and subrecipients are not suspended or debarred are: 1) include a contract clause or condition to the covered transaction with that contractor, 2) search SAM exclusions prior to entering into a contract and maintain documentation of that verification, or 3) collect a certification from the contractor.
Title V Grant Procurement DEPARTMENT OF EDUCATION ALN #: 84.031S Federal Award Identification #: P031S200171 Condition: The University does not have a purchasing or competitive bid policy that follows the federal regulations. The University did not follow its policy and federal procurement requirements when making purchasing and vendor decisions with Title V grant funds. Criteria: 2 CFR 200.318 through 200.327 Questioned Costs: $0 Context: While the expenditures tested as part of the audit met allowable cost and allowable activities requirements, the University did not follow its competitive bid policy nor were minimum federal procurement requirements followed properly. Cause: University personnel were unfamiliar with the federal procurement requirements. Effect: Noncompliance with procurement requirements that could impact future funding opportunities. Identification as repeat finding, if applicable: Not applicable Recommendation: We recommend the University update their policies that follow the federal procurement requirements and the University implement procedures and controls to help prevent deviations from the policies. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. See corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion 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 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 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. • 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. . . . “ 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement 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 non-Federal 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 $50,000 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. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion 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 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 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. • 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. . . . “ 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement 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 non-Federal 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 $50,000 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. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion 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 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 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. • 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. . . . “ 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement 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 non-Federal 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 $50,000 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. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion 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 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 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. • 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. . . . “ 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement 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 non-Federal 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 $50,000 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. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion 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 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 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. • 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. . . . “ 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement 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 non-Federal 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 $50,000 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. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion 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 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 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. • 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. . . . “ 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement 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 non-Federal 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 $50,000 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. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion 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 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 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. • 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. . . . “ 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement 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 non-Federal 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 $50,000 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. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion 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 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 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. • 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. . . . “ 2 CFR 180.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement 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 non-Federal 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 $50,000 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. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.