FINDING 2025-002 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024, FY2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 15 CLOVERDALE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 $150,000 per Indiana Code. 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 of $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchases were followed. The School Corporation did not obtain price or rate quotes from multiple vendors for its audit period expenditures with each of the three vendors tested in the small purchases category. Documentation detailing the history of procurement, including rationale to limit competition at the time of the expenditure(s) was not provided for audit. Suspension and Debarment Nonfederal entities and contractors are subject to nonprocurement debarment and suspension regulations. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or are ineligible for participation in federal assistance programs or activities. This is done by checking SAM Exclusions, collecting a certification from that entity, or adding a clause or condition to the covered transaction with that entity. The School Corporation had not designed or implemented adequate policies or procedures to ensure that applicable vendors who received federal funds over certain thresholds were not suspended or debarred from participating in federal awards programs. There were three vendors subject to suspension and debarment requirements during the audit period that were not procured through the School Corporation's affiliated Educational Services Center for cooperative purchasing. The School Corporation did not perform procedures to ensure the vendors were not suspended, debarred, or otherwise excluded from or ineligible for participation in federal assistance programs or activities for one of these three vendors. The lack of internal controls was a systemic issue throughout the audit period. Noncompliance was isolated to small purchases for procurement and one vendor noted for suspension and debarment. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 16 CLOVERDALE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. . . . (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small Purchases– (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 200.214 states: "Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict 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: "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 INDIANA STATE BOARD OF ACCOUNTS 17 CLOVERDALE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed nor implemented an effective system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. The Food Service Director indicated that some of these purchases may have been emergency situations but was unaware of the need to document the rationale at the time of the transaction if competition was limited for small purchases procurements. Effect The lack of an internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could enable small purchases made by the School Corporation to be uncompetitive and could lead to contracting with vendors who are suspended or debarred from receiving federal grant funding. 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 the School Corporation's management strengthen its system of internal controls over small purchase requirements to ensure that an adequate number of price or rate quotes are obtained before purchase. Additionally, if procurements are made in emergency or extenuating circumstances, documentation at the time of the transaction must be retained for audit to justify limiting competition. We also recommended that vendors with a single or aggregate transaction amounts of $25,000 per fiscal year are verified for suspension and debarment prior to entering into the transaction and/or contract. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
CRITERIA THE UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS (UNIFORM GUIDANCE), SPECIFICALLY 2 CFR §200.317–200.327, REQUIRE NON-FEDERAL ENTITIES TO FOLLOW DOCUMENTED PROCUREMENT PROCEDURES THAT ENSURE FULL AND OPEN COMPETITION. WHEN USING COOPERATIVE OR COLLABORATIVE PROCUREMENT ARRANGEMENTS, THE DISTRICT MUST ENSURE THAT PURCHASES ARE MADE WITHIN THE VALID TERM OF THE UNDERLYING CONTRACT AND THAT CONTRACT EXTENSIONS OR RENEWALS ARE PERMITTED UNDER THE ORIGINAL PROCUREMENT AND PROPERLY EXECUTED. CONDITION THE DISTRICT CONTINUED TO PROCURE GOODS AND/OR SERVICES FROM A VENDOR THAT WAS ORIGINALLY AWARDED THROUGH A COLLABORATIVE PROCUREMENT AFTER THE EXPIRATION OF THE ORIGINAL BID TERM. THE CONTINUED USE OF THE VENDOR WAS NOT SUPPORTED BY A VALID CONTRACT EXTENSION OR REBID IN ACCORDANCE WITH PROCUREMENT REQUIREMENTS APPLICABLE TO FEDERAL AWARDS. AS A RESULT, PURCHASES CHARGED TO THE FEDERAL PROGRAM WERE MADE OUTSIDE THE ALLOWABLE TERM OF THE COMPETITIVELY PROCURED AGREEMENT. CAUSE MANAGEMENT DID NOT IMPLEMENT ADEQUATE PROCEDURES TO MONITOR THE EXPIRATION DATES AND ALLOWABLE TERMS OF COLLABORATIVE PROCUREMENT AGREEMENTS USED FOR FEDERAL EXPENDITURES. ADDITIONALLY, THE DISTRICT RELIED ON HISTORICAL PURCHASING PRACTICES WITHOUT VERIFYING ONGOING COMPLIANCE WITH UNIFORM GUIDANCE PROCUREMENT REQUIREMENTS. EFFECT THE DISTRICT DID NOT COMPLY WITH FEDERAL PROCUREMENT REQUIREMENTS, RESULTING IN EXPENDITURES THAT MAY NOT HAVE BEEN MADE UNDER FULL AND OPEN COMPETITION AS REQUIRED. THIS NONCOMPLIANCE INCREASES THE RISK THAT FEDERAL FUNDS WERE EXPENDED IN A MANNER INCONSISTENT WITH FEDERAL REGULATIONS. QUESTIONED COSTS NONE IDENTIFIED. THE PRICING WAS CONSISTENT WITH THE PRIOR CONTRACT TERMS. REPEAT FINDING NO. RECOMMENDATION WE RECOMMEND THAT MANAGEMENT STRENGTHEN PROCUREMENT CONTROLS BY: • IMPLEMENTING PROCEDURES TO TRACK CONTRACT AND BID EXPIRATION DATES, INCLUDING COLLABORATIVE PROCUREMENT AGREEMENTS; • ENSURING THAT ALL PROCUREMENTS CHARGED TO FEDERAL AWARDS ARE SUPPORTED BY VALID CONTRACTS WITHIN APPROVED TERMS; AND • PROVIDING TRAINING TO STAFF RESPONSIBLE FOR PROCUREMENT AND ACCOUNTS PAYABLE ON FEDERAL PROCUREMENT REQUIREMENTS.
U.S. Department of Homeland Security Direct Funding FFAL# 97.083 Staffing for Adequate Fire and Emergency Response (SAFER) Cash Management, Reporting Significant Deficiency in Internal Control Criteria: In accordance with 2 CFR 200.302, non-Federal entities must establish and maintain effective internal controls over Federal award compliance, including controls over cash management and Federal financial and performance reporting. Additionally, 2 CFR 200.327–200.329 require accurate, complete, and timely submission of performance and financial reports. Condition: The City did not have adequate internal controls to ensure the accuracy, completeness, and proper authorization of submissions to the Federal agency. Specifically: 1. Financial and performance reports submitted to the Federal agency did not undergo a secondary (independent) review prior to submission. 2. Reimbursement requests submitted to the Federal agency did not undergo a secondary (independent) review prior to submission. Cause: The City has not implemented or enforced a formalized review process that requires supervisory-level approval prior to the submission of reports or reimbursement requests. Effect: Without a secondary review, there is an increased risk that inaccurate, incomplete, or unsupported information may be submitted to the Federal agency. This could result in: • Reporting errors or omissions, • Noncompliance with Federal requirements, • Potential questioned costs, and • Increased risk of funding delays or corrective action requirements. Questioned Costs: None to report Context/Sampling: Out of a total population of three reports and reimbursement requests, three were selected for testing. Repeat Finding from Prior Years: No. Recommendation: We recommend that the City design and implement formal internal controls requiring documented secondary review and approval for all financial and performance reports, and all reimbursement requests submitted to Federal agencies. Views of Responsible Officials: Agree.
Finding No. 2025-002: Reporting – Material Weakness in Internal Control over Compliance Agency: Economic Development Administration ALN: 11.307 Federal Award Identification Number: ED22HDQ3070127 Criteria: Under the Committee of Sponsoring Organization framework, control activities are established through policies and procedures that help ensure that management’s directives to mitigate risks to the achievement of objectives are carried out. Segregation of duties is typically built into the selection and development of control activities. Furthermore, according to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administration Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), sections 200.327 and 200.328, recipients of federal awards are required to submit performance and financial reports by the due dates specified in the terms and conditions of the federal award. Context and Condition: There was an overall lack of segregation of duties surrounding the preparation and submission of reports to the awarding agency as the member of management performed this function with no review and approval for the period from July 2024 through March 2025. In addition, three of the four reports selected and tested were not submitted by the reporting due dates. Cause: The District failed to maintain a system of controls and procedures to ensure segregation of duties and appropriate review and approval process as well as submission within the required reporting timeframes. Effect: Due to the lack of adequate review and oversight over grant reporting and failure to submit required reports within the required dates may result in the District being noncompliant with 2 CFR 200.327 and 200.328. Repeat Finding: Yes, previously reported under ALN 17.289 Recommendation: We recommend that the District establish internal controls and procedures to incorporate segregation of duties and ensure that all reporting requirements are being adhered to and the reports are being submitted within the specified due dates. Views of Responsible Officials and Planned Corrective Action: See attached corrective action plan. Questioned Costs: None
Federal Agency: Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Wood County ADAMH Board Award Period: May 8, 2024 – September 29, 2026 Type of Finding: Significant Deficiency in Internal Control Over Compliance and Other Matter Criteria or Specific Requirement: Uniform Guidance (2 CFR Part 200.510) provides requirements over procurement and suspension & debarment for grantees when entering into contracts funded by federal programs. Questioned Costs: None Condition: No suspension and debarment exclusion check was performed for one of the two contractors paid with funds under the federal program. Cause: No formal procurement and suspension and debarment policies were in place for the year under audit. Context: Of the two contracts entered into for the program, suspension and debarment checks were not performed for one of the two contractors. Effect: Federal funds could have been paid to a federally suspended and debarred entity. Per review of the federal suspension and debarred list, both entities contracted with under the grant are not suspended or debarred. Repeat Finding: No Recommendation: Implementation of a formal procurement and suspension and debarment policy that includes procedures over review of the federal suspension and debarred listing, that is in compliance with the Uniform Guidance. Procurement policy should include general procurement standards as described by the Uniform Guidance, that include standards on conduct covering conflicts of interest; method of procurement for micro-purchases, small purchases, sealed bids, and proposals; and all other criteria as outlined in 2CFR 200.318 through 200.327. Views of Responsible Officials and Planned Corrective Actions: Management will develop and implement a procurement policy that is in compliance with the Uniform Guidance.
2025-005 – Significant Deficiency in Internal Controls over Compliance and Noncompliance – Procurement US Department of Agriculture / Oregon Department of Human Services / Farmers Market Fund Federal Assistance Listing Number: 10.565, 10.568, 10.569, 10.182 Federal Program Name: Food Distribution Cluster and Local Food Purchase Agreements Criteria – 2 CFR §200.317 to 327 – Procurement Standards. The recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in §200.317 through §200.327. Condition/context – The Organization’s procurement policy that complied with Federal regulations was implemented in October 2024. Procurements before this date did not have sufficient documentation as to the significant history of procurements that would show compliance with the policy. We observed that the Organization awarded contracts to vendors but did not have a procurement policy that matched Federal procurement standards. Questioned costs – None reported. Cause/effect – The Organization did not have policies or controls throughout the whole year to ensure compliance with Federal regulations regarding procurements. Documentation as to the significant history of procurements, including from vendors, was not available to show compliance with procurement standards. Repeat finding – Yes, prior year finding 2024-005. Recommendation – The Organization should develop a procurement policy that matches Federal procurement standards and internal controls to ensure the policy is followed. The Organization should also retain documentation as to the significant history of procurements to show that the procurement policy was followed. Views of responsible officials and planned corrective actions – Oregon Food Bank acknowledges this repeat finding and agrees with the auditors' assessment. Ben Ardell, Director of Finance, is the party responsible. Since the prior audit period, management has taken steps to review and revise OFB’s procurement policy and procedures, in alignment with federal procurement standards. Finance will continue implementing the corrective actions and establishing the internal controls to ensure adherence to the policy, retaining documentation of the procurement process to demonstrate compliance. These recent and planned improvements will enhance transparency, strengthen accountability, and reduce compliance risk, ensuring a more efficient and well-documented procurement process that supports the organization’s long-term financial integrity and operational effectiveness. The anticipated completion date remains June 30, 2026.
2025-002 – Procurement, Suspension & Debarment Federal Program Information: U.S. Department of Agriculture Passed through the State of Maine Department of Education: ALN 10.553,10.555, 10.559 & 10.579 Child Nutrition Cluster Criteria: The following CFR(s) apply to this finding: 2 CFR 200.317-200.327 Condition: During audit procedures, it was identified that the Unit did not follow policies and procedures. Cause: The Unit did not understand the procurement requirements for the program. Effect: Insufficient controls could result in unallowable expenses being charged to the program and subsequently improperly reimbursed by federal funds Identification of Questioned Costs: None identified. Context: During audit procedures, auditor requested copies of the contracts and procurement history files, none could be provided. This is not a statistically valid sample. Repeat Finding: This is not a repeat finding. Recommendation: It is recommended that the Unit familiarize themselves with the program requirements and implement the internal control policies and procedures that have already been adopted by the Unit. Views of Responsible Officials and Corrective Action Plan: Please see the Corrective Action Plan issued by the Regional School Unit No. 29.
FINDING 2025-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, 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): FY 2023-24, FY 2024-25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-002. Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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 nonfederal entity. The State of Indiana has established a more restrictive threshold of $150,000 for informal procurement methods. 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 micro-purchase threshold but below the simplified acquisition threshold. Small purchase procedures require that price or rate quotations must be obtained from an adequate number of qualified sources or have documented reasoning to support a single source provider. Two vendors were identified that were paid $27,726 and $70,168, respectively, during the audit period using federal funds under the award, thereby requiring small purchase procedures for both procurements. Both vendors were selected for testing. The School Corporation was unable to provide any documentation for the vendor that was paid $70,168 that the procurement method used was appropriate or that the procurement provided full and open competition or rationale to support the determination to limit competition. Additionally, the history of procurement, including the rationale for the method of procurement, selection of the vendor, and the basis for the price, was not adequately documented for the vendor. INDIANA STATE BOARD OF ACCOUNTS 16 WASHINGTON COMMUNITY SCHOOLS, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that vendors and subrecipients are not suspended, debarred, or otherwise excluded from receiving federal funds. "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 Excluded Parties List System (EPLS), collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Four covered transactions that equaled or exceeded $25,000 were identified. All four transactions totaling $4,082,816 were selected for testing. For two of the four vendors, the School Corporation did not verify the vendor's suspension and debarment status prior to entering into the covered transaction with either vendor. The amount paid to both vendors totaled $97,894. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 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 document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. INDIANA STATE BOARD OF ACCOUNTS 17 WASHINGTON COMMUNITY SCHOOLS, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases– (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . (b) Noncompetitive procurement. 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 (see paragraph (a)(1) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement 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." 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." Cause The School Corporation did not have adequate internal controls to ensure compliance with procurement and suspension and debarment requirements. The School Corporation was aware of the Procurement and Suspension and Debarment compliance requirement and relied on its food service management company to ensure compliance. There was not sufficient oversight by the School Corporation to ensure proper procedures were followed. INDIANA STATE BOARD OF ACCOUNTS 18 WASHINGTON COMMUNITY SCHOOLS, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The lack of an effective internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could enable small purchases made by the School Corporation to be uncompetitive and could lead to contracting with vendors who are suspended or debarred from receiving federal grant funding. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure that there are appropriate procurement procedures for goods and services and that contractors and subrecipients, as appropriate, are verified to not be suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, 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): FY 2024, FY 2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system, which would include segregation of duties, was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Adequate internal controls were not in place over procurements made under the simplified acquisition threshold for one of two vendors tested during the audit period. The School Corporation made purchases with a vendor in fiscal year 2023-2024 totaling $289,127, but it did not provide audit evidence that methods and procedures performed for the selection of the vendor aligned with requirements related to vendors procured under the simplified acquisition threshold. Adequate internal controls were not in place over procurements made under the small purchase threshold for one of five vendors tested during the audit period. The School Corporation made purchases with a vendor in 2023-2024 totaling $103,519 and in 2024-2025 totaling $111,613, but it did not provide audit evidence that the procurement procedures performed in relation to the award had been reviewed or approved. The School Corporation did not provide documentation that it had entered into a contract with the vendor during either year of the audit period. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to procurement requirements. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF WASHINGTON TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.318(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." 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. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (1) . . . (iv) Non-Federal entity increase to the micro-purchase threshold up to $50,000. Non-Federal entities may establish a threshold higher than the micro-purchase threshold identified in the FAR in accordance with the requirements of this section. The non-Federal entity may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made available to the Federal awarding agency and auditors in accordance with § 200.334. The self-certification must include a justification, clear identification of the threshold, and supporting documentation of any of the following: (A) A qualification as a low-risk auditee, in accordance with the criteria in § 200.520 for the most recent audit; (B) An annual internal institutional risk assessment to identify, mitigate, and manage financial risks; or, (C) For public institutions, a higher threshold consistent with State law. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: INDIANA STATE BOARD OF ACCOUNTS 19 METROPOLITAN SCHOOL DISTRICT OF WASHINGTON TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or costreimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; INDIANA STATE BOARD OF ACCOUNTS 20 METROPOLITAN SCHOOL DISTRICT OF WASHINGTON TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. . . ." Cause Staff responsible for purchasing were not adequately trained on the School Corporation's procurement policy for obtaining bids for purchases above the simplified acquisition threshold and formal contract requirements for purchases above $50,000. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation cannot ensure that contractors paid under the small purchase and simplified acquisition methods were awarded the best price for their services. This could result in federal funding not providing as many services or projects as possible. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation strengthen its system of internal controls to ensure the proper procurement method is followed and documentation is retained. We also recommended strengthening its policies and procedures to ensure that appropriate audit evidence is retained for audit. Views of Responsible Official For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-005 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-056-PN01, 22611-056-ARP, 22619-056-PN01, 22619-056-ARP 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 similar finding from the immediately prior audit reports. The prior audit finding numbers were 2021-002 and 2023-003. Condition and Context Procurement - Small Purchases 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 micro-purchase 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. There were 23 vendors identified that fell within the small purchase's threshold. Of those vendors, 4 were selected for testing. For each of those 4 vendors tested that fell within the small purchases threshold, the School Corporation did not obtain an adequate number of price or rate quotations to ensure the procurements provided full and open competition. In addition, history of the procurements which would include the rationale for the method of procurement, selection of the vendor, and basis for price was not documented. INDIANA STATE BOARD OF ACCOUNTS 28 METROPOLITAN SCHOOL DISTRICT OF WASHINGTON TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Procurement - Simplified Acquisition When the value of the procurement for property or services exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a nonfederal entity, formal procurement methods are required. The SAT is typically set at $250,000; however, Indiana Code 5-22-8 has a more restrictive threshold, and, therefore, the threshold the SAT is set at $150,000. Formal procurement methods require adherence to documented procedures and formal methods such as sealed bids or proposals. One vendor was identified that fell within the SAT, with total purchases of $165,816. Sealed bids or competitive proposals were not obtained, nor was a circumstance met that would have allowed for a noncompetitive procurement for the purchases. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 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. INDIANA STATE BOARD OF ACCOUNTS 29 METROPOLITAN SCHOOL DISTRICT OF WASHINGTON TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases— (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not in place to ensure that bids were solicited before entering into a contract or that quotes were obtained. The School Corporation was unaware of the requirement to solicit bids for contracts that exceed the simplified acquisition threshold. Additionally, they were unaware of the requirement to obtain an adequate number of quotes for purchases that exceeded the small purchase threshold. 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 procedures for goods and services were not adhered to for procurements that fell within the small purchase threshold. 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 School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods for small purchases and simplified acquisition purchases. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Department of Housing and Urban Development Continuum of Care, Federal Financial Assistance Listing 14.267, Affects all grant awards included under Federal Financial Assistance Listing 14.267 on the Schedule Procurement, Suspension, and Debarment Significant Deficiency in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. 2 CFR 200.318 maintains that recipients must have and use documented procurement policies and must conform to procurement standards in sections 200.317 through 200.327. Condition: Catholic Charities has documented procurement and suspension and debarment procedures that conform to applicable federal standards regarding procurement and testing vendors for suspension and debarment; however, the procedures were not followed for four vendors selected for testing for procurement and one for suspension and debarment. Cause: Catholic Charities did not have adequate internal controls in place to ensure that the processes laid out in their procurement policy regarding the process of obtaining quotes to support procurement and testing vendors for suspension and debarment were followed. Effect: Payments could be made to vendors who have higher costs than other vendors or who were suspended or debarred. Questioned Costs: None reported. Context/Sampling: A nonstatistical sample of 17 vendors out of 83 total transactions were selected for testing, which accounted for $81,494 of $681,188 federal program expenditures. Repeat Finding from Prior Year(s): Yes, 2024-002 Recommendation: We recommend Catholic Charities enhance internal control procedures to ensure all procurement and suspension and debarment verification procedures are performed prior to entering into the transactions. Views of Responsible Officials: Management agrees with the finding.
Finding 2025-001: United States Department of Agriculture, Child Nutrition Cluster, Assistance Listing 10.555,10.559,10.553, 10.582. Passed through by Oregon Department of Education. Compliance requirement: Methods of procurement. Criteria: Uniform Guidance requires non‑Federal entities to maintain written procurement procedures that comply with applicable federal regulations, including methods of procurement, competition requirements, conflict‑of‑interest standards, and documentation expectations. These written procedures must be consistently followed and updated to reflect current federal requirements. Condition and Context: The District did not maintain written procurement policies as required by the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Existing policy reflects state law and does not include the procurement standards outlined in 2 CFR 200.317–200.327. Cause: The District’s procurement policies are designed to be consistent with state law. Effect: Without written federal procurement policies, the District is at increased risk of noncompliance with federal procurement standards. Recommendation: The District should develop, adopt, and maintain written procurement policies that fully align with Uniform Guidance requirements. Policies should be reviewed at least annually and updated as federal regulations change. Views of Responsible Officials: The District concurs with the finding that procurement policies did not fully comply with Uniform Guidance. Policies were based on state law, and staff turnover and limited federal procurement training contributed to the deficiency. All purchases were fair and reasonable; no waste or abuse occurred. Procurement policies have been updated to align with 2 CFR 200 standards, all procurement staff have been trained on Uniform Guidance requirements, and standardized procurement checklists and templates have been implemented to ensure documentation of cost analysis and vendor selection.
Finding Reference: 2025-001 – Procurement, Suspension and Debarment Federal Agency: U.S. Department of Education Federal Program: 84.027 – IDEA Compliance Requirement:Procurement, Suspension and Debarment Type of Finding: Material Weakness in Internal Control Over Compliance and NonCompliance Criteria: The School District is required to maintain and use documented procurement procedures for procurement transactions under federal awards, and those procedures must be consistent with state/local requirements and the federal procurement standards in 2 CFR 200.317-200.327. When a noncompetitive (sole source) procurement method is used, it must be supported by circumstances and documentation consistent with the Uniform Guidance procurement methods requirements in 2 CFR 200.320 (including maintaining sufficient documentation to support the selected procurement method in the procurement file). Statement of Condition: The School District procured IDEA services through the Lincoln Intermediate Unit using a noncompetitive (sole source) approach. The School District did not retain documentation in the procurement file to support the basis for noncompetitive procurement. Statement of Cause: The School District did not consistently follow documented procurement procedures for the IDEA program and the procedures. Possible Asserted Effect: Without documentation supporting the noncompetitive procurement method, the School District is not able to demonstrate compliance with federal procurement requirements applicable to IDEA. Questioned Costs: None noted. Context: One vendor was utilized and there was not appropriate documentation maintained of procurement regarding the services. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that a process be implemented to review the services provided under the IDEA program to ensure procurement documentation is appropriately maintained. Views of Responsible Officials and Planned Corrective Actions: The School District's practice has been to utilize all IDEA funding to support the education of IDEA-qualified students through the use of the Lincoln Intermediate Unit services conducted at the Franklin Learning Center (FLC). 100% of the IDEA funds are utilized to pay for a portion of the services provided by the FLC. The FLC is the only center operating in Franklin County. To ensure compliance with this standard in the future, the Assistant to the Chief Financial and Operations Officer will provide the Director of Special Education and the Superintendent with the Sole Source Justification form by July 1st of each year. The Director of Special Education and the Superintendent will be responsible for completing the Sole Source Justification form and submitting a copy of the signed document to the Business Office. The Special Education Financial Secretary will attach the Sole Source Justification form to the purchase requisition for services from the Franklin Learning Center for the IDEA-qualified students.
Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Subrecipient Monitoring Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 200.332 (January 1, 2024) states, in relevant part, the following: All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. * * * * (ii) Subrecipient’s unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date . . . . * * * * (x) Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings title and number; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at the time of disbursement; * * * * (5) A requirement that the subrecipient permit the pass-through entity and auditors to access the subrecipient’s records and financial statements for the pass-through entity to fulfill its monitoring requirements; and (6) Appropriate terms and conditions concerning the closeout of the subaward. * * * * (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the passthrough entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the passthrough entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward. (3) Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521. (4) The pass-through entity is responsible for resolving audit findings specifically related to the subaward . . . . * * * * (f) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501. 2 CFR § 200.318 (January 1, 2024) states, in relevant part, the following: (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 § 180.300 (January 1, 2024) requires that the pass-through entity take specific steps to document that subrecipients are not suspended or debarred, as outlined below: 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.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. 2 CFR § 200.430(i) (January 1, 2024) states the following in relevant part: (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: * * * * (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE’s definition of IBS); * * * * (vii) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards[.] Good internal controls and sound business practices require policies and procedures to ensure that adequate monitoring is performed to verify that subrecipients are using funds in accordance with all Federal and grant requirements. Condition: The State lacked procedures to ensure that: • Subrecipient use of funds was monitored to ensure compliance with all Federal and grant requirements. • Subrecipients obtained audits required by Federal requirements, and those audits were obtained and reviewed in a timely manner. Repeat Finding: No Questioned Costs: None Statistical Sample: No Context: The State paid $172,943,444 to subrecipients for 143 subawards during the fiscal year ended June 30, 2025. We selected 17 subrecipients to test. Additionally, we reviewed the single audit tracking procedures for all State agencies acting as pass-through entities. We noted the following: Insufficient Subrecipient Monitoring Procedures For 5 of 17 subawards tested, the APA noted that subrecipient monitoring was insufficient to ensure that the subrecipient complied with all Federal and grant requirements. Additionally, for one of the subawards tested, the APA noted that the pass-through entity did not have documentation on file to support it verified the subrecipient was not suspended or otherwise debarred. Deficiencies noted included the following: • One $86,650,000 subaward tested was issued by the Military Department (Military) to the University of Nebraska Board of Regents (University). During testing, the APA noted that the only monitoring performed by the Military was a review of the University’s single audit for fiscal year ended June 30, 2024. A total of $47,533,117 was paid to the University for the fiscal year ended June 30, 2025. • During our audit, we observed that for two subawards, one issued by the Department of Natural Resources (DNR) and one by the Department of Health and Human Services (DHHS), each valued at $2,000,000 for capital riverfront improvements and the construction of a youth activity center, respectively, significant disbursements were used to cover construction costs. However, neither pass-through entity could provide documentation supporting that subrecipient monitoring performed or planned included adequate procedures to ensure that the subrecipient had followed its written procurement policies, and procurement procedures were adequately documented. These subrecipients were paid $1,362,909 and $841,446, respectively, during the fiscal year ended June 30, 2025. • For one subaward tested, issued by the Department of Correctional Services (Corrections) for $1,505,826 to implement a transitional living and vocational skills program for former inmates, the APA did not observe any documentation supporting that Corrections had verified the subrecipient was not suspended or otherwise debarred from receiving Federal funds. Additionally, the APA noted that the subaward included significant costs for subrecipient payroll and benefit costs. For those salaried employees who had only a portion of their payroll coded to the grant, Corrections relied on budget estimates submitted at the beginning of the subaward to ensure the cost allocation was proper. The APA observed that six salaried employees had payroll costs coded to the grant, ranging from 2% - 98% of their total salaries. During the fiscal year ended June 30, 2025, the total paid to the subrecipient for this subaward was $204,302. • For one subaward issued by DHHS for $4,000,000 to be used towards increasing childcare license capacity, the APA noted that DHHS failed to perform the subrecipient monitoring procedures outlined in their monitoring policy. The monitoring policy for the subaward indicated that 10% of all expenses would be reviewed. DHHS claimed to have reviewed 10% of all reimbursements between July 2023 – April 2024; however, the APA observed $628,610 of reimbursed costs after April 2024, all of which was disbursed in August 2024 for which no review was performed. Additionally, the APA noted DHHS did not obtain appropriate documentation to support $387 of payroll costs coded to the grant. A total of $627,110 was paid to this subrecipient during the fiscal year ended June 30, 2025. Failure to Communicate all Required Subaward Information During our review of subrecipient monitoring, the APA noted that, for 4 of 17 subawards tested, the subaward did not contain all required information or contained erroneous information, as follows: • In two instances of subawards issued by DHHS, the subaward listed the Federal Award Identification Number (FAIN) as SLFRP3145; however, the primary CLSFRF award to the State of Nebraska was SLFRP1965, while the SLFRP3145 award merely passed through the State to various Non-Entitlement Units (NEU’s) in the State that were the primary recipients. • One subaward issued by DNR and one subaward issued by Corrections lacked required information, as noted below. Neither department could provide documentation showing that this information had otherwise been communicated to the subrecipient. See Schedule of Findings and Questioned Costs for chart/table. Single Audit Tracking Procedures During our review of single audit tracking procedures implemented by the State, we noted the following: • DNR and the Department of Labor (DOL) lacked procedures for determining if subrecipients were required to have a single audit or obtain and review such audits. DOL had 10 subrecipients who had received cumulative payments as of June 30, 2025, ranging from $1,000 to $318,669. DNR had 13 subrecipients that received cumulative payments as of June 30, 2025, ranging from $12,557 to $32,256,022. Three of DNR’s subrecipients have received payments over $750,000 as of June 30, 2025. In reviewing the Federal Audit Clearinghouse (FAC), two of these subrecipients had single audits for the subrecipients’ fiscal year 2024, which listed CSLFRF (ALN 21.027) as a major program and reported no findings. • During testing, the APA identified three instances of DHHS failing to obtain and review subrecipient single audits due to errors in that agency’s tracking procedures. The three subrecipients had received $2,209,137 in CSLFRF funds as of June 30, 2025. The APA obtained the fiscal year 2024 single audits for all three subrecipients from the FAC and noted that ALN 21.027 was listed as a major program on all three audits. None of the audits noted any program-related findings. Cause: Inadequate procedures to ensure that subrecipients complied with all Federal and grant requirements or to ensure that subrecipients obtained single audits when required. Effect: Without adequate monitoring and review procedures, there is an increased risk of Federal awards being used for unallowable costs. Recommendation: We recommend the State strengthen procedures to ensure that subrecipient monitoring is designed properly to ensure compliance with all Federal and grant requirements. We also recommend the State strengthen procedures to ensure that subrecipient single audit requirements are tracked properly, and all single audits are reviewed in a timely manner. Management Response: Military Department The Department of Military disagrees with this finding. The subrecipient submitted an independent audit on 4/1/2025. The independent auditor employed auditing standards generally accepted in the United States (GAAS). Major federal programs included COVID-19, Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing Number 21.027. The independent auditor concluded there were no significant deficiencies or material weaknesses. The auditee was deemed “low risk.” In NEMA’s risk evaluation, it considers two separate University of Nebraska offices whose responsibility includes work to monitor and ensure compliance with Federal regulations. When determining risk appetite and risk tolerance, the “…cost of internal control should never exceed anticipated benefits. Thus, an entity must accept a certain level of risk.” Findings by the independent auditor and Auditor of Public Accounts exceed any benefit that might have been gained by additional subrecipient monitoring. In October 2025, the Agency formally adopted the Subrecipient Monitoring policy and procedure it has informally used the last several years. APA Response: 2 CFR § 200.332(d)(4) (January 1, 2024) requires pass-through entities to perform subrecipient monitoring, which includes obtaining and reviewing subrecipient Single Audit reports. Subsection (d)(4) of this regulation states: If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding (e.g., has been debarred or suspended), the pass-through entity may rely on the subrecipient’s cognizant audit agency or cognizant oversight agency to perform audit follow-up . . . . Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. Department of Natural Resources While DNR conducted general subrecipient monitoring activities, documentation did not sufficiently demonstrate that monitoring procedures included a review of subrecipient procurement practices for compliance. DNR communicated the required federal award information to the subrecipient through other means, it was not consistently incorporated into the formal subaward agreement as required. While DNR does require Single Audits per their contracts, they did not have formalized, written procedures to consistently determine whether subrecipients met the Single Audit threshold, to ensure timely receipt and review of Single Audit reports when required. The Department acknowledges that documented procedures are necessary to ensure compliance with applicable federal regulations and to strengthen subrecipient oversight. Department of Health and Human Services Agency agrees with finding. Department of Correctional Services Management agrees with the finding.
FINDING 2025-004 Subject: Child Nutrition Cluster - Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Number and Year (or Other Identifying Number): SY25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters 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 and Suspension and Debarment compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 18 BORDEN-HENRYVILLE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. Most large purchases for food and supplies are made through contracts entered into by a purchasing cooperative that the School Corporation belongs to. Those transactions were tested at the cooperative level, and no noncompliance or lack of internal controls were noted. It is the School Corporation's policy that it will either require a certification from the vendor or check the exclusion list prior to entering a covered transaction. The School Corporation only entered into one covered transaction at the School Corporation level. It was unable to provide evidence that it followed its policy for ensuring that the vendor was not suspended or debarred prior to making a series of purchases that totaled $53,414. The lack of internal controls and noncompliance was only noted in the second year of the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(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 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: INDIANA STATE BOARD OF ACCOUNTS 19 BORDEN-HENRYVILLE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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." Cause The School Corporation's management failed to properly design and implement an internal control system that would have ensured that its policy over the Procurement and Suspension and Debarment compliance requirement was adhered to during the audit period. Effect The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could have resulted in the loss of federal funds to the School Corporation. Additionally, the School Corporation could have made payments to a vendor that was suspended or debarred. Payments to such vendors are unallowable. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. The system should be designed to ensure that vendors are not suspended or debarred, or otherwise excluded, prior to the School Corporation entering into a covered transaction. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Information on the federal program: Subject: Child Nutrition Cluster, Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: Child Nutrition Cluster Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024, FY2025 Pass-Through Entity: Indiana Department of Education Compliance Requirements: 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 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 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. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 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: The School Corporation did not have internal controls in place to ensure compliance with the procurement and suspension and debarment requirements. The School Corporation had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchase and simplified acquisition procurement thresholds were followed. Cause: Although the School Corporation has adopted a procurement policy that establishes purchasing requirements based on defined dollar thresholds and requires verification of vendor suspension and debarment status, the policy was not fully adhered to. Required procurement methods were not utilized for certain purchases that exceeded applicable thresholds and the required suspension and debarment verifications were not consistently performed. This condition resulted from insufficient oversight and monitoring to ensure compliance with all aspects of the School Corporation’s procurement policy. 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 procedures for goods and services were not adhered to and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. 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. 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 $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The School Corporation did not review procurements done by the food service management company to ensure that proper procurement policies were followed. The School Corporation did not ensure that the food service management company did not use suspended or debarred vendors. During the audit period, we noted two small purchases for which the School Corporation did not have evidence of obtaining multiple quotes or documented rationale for selecting the vendor. Only the final invoice, purchase order, and quote from the selected vendor were available. During fiscal year 2024, we noted that for one of the three vendors tested, the correct procurement method was not followed. Purchases from the vendor were in excess of $150,000 during the fiscal year, requiring the simplified acquisition procurement process; however, the School Corporation applied the small purchase procurement process. The purchase was for equipment at two different buildings. The School Corporation issued two requests for quotes, one for each school, and treated them as separate procurements. However, as the purchases were similar in nature, the requests for quotes were dated the same day and sent to the same vendor, this should have been treated as one procurement in aggregate. The School Corporation did not have support for public advertisement, requests for formal sealed bids, or formal documentation for the basis of award. 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, we noted two vendors out of three that were sampled, over the $25,000 suspension and debarment threshold for which the School Corporation did not have evidence of a suspension and debarment check. Identification as a repeat finding: No Recommendation: We recommend that the School Corporation strengthen its system of internal control by establishing and implementing policies and procedures to ensure that procurement activities for goods and services comply with applicable requirements and that contractors and subrecipients are verified as not suspended, debarred, or otherwise excluded prior to entering into contracts or subawards. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2025-002 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2023-2024, FY 2024-2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed and 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 and Suspension and Debarment compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 15 NORTH HARRISON COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Procurement 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 micro-purchase 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. Two vendors were tested that exceeded the small purchase threshold during the audit period. For one vendor no quotes were obtained. 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. The School Corporation entered into four covered transactions during the audit period and were unable to provide evidence they followed its policy for one of those transactions. The total purchases made from that vendor totaled $29,091. The lack of internal controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(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." INDIANA STATE BOARD OF ACCOUNTS 16 NORTH HARRISON COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases— (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 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. . . ." 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." 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. INDIANA STATE BOARD OF ACCOUNTS 17 NORTH HARRISON COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. As a result, adequate documentation was not retained for procurements that fell within the small purchase threshold. 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 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. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-002 Subject: Child Nutrition Cluster - Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.582 Federal Award Number and Year (or Other Identifying Number): FY25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed and 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 and Suspension and Debarment compliance requirement. 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. It is the School Corporation's policy that they either require a certification from the vendor or check the exclusion list prior to entering into a covered transaction. INDIANA STATE BOARD OF ACCOUNTS 16 SPRINGS VALLEY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation entered into three covered transactions during the audit period and it was unable to provide evidence that it followed its policy for one of those transactions. The total purchases made from that vendor totaled $64,855. The lack of internal controls and noncompliance were only noted in the second year of the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 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. . . ." 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." Cause The School Corporation's management failed to properly design and implement an internal control system that would have ensured that its policy over the Procurement and Suspension and Debarment compliance requirement was followed during the audit period. Effect The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could have resulted in the loss of federal funds to the School Corporation. Additionally, the School Corporation could have made payment to a vendor that was suspended or debarred. Payments to such vendors are unallowable. INDIANA STATE BOARD OF ACCOUNTS 17 SPRINGS VALLEY COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. The system should be designed to ensure that vendors are not suspended or debarred, or otherwise excluded, prior to the School Corporation entering into a covered transaction. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. INDIANA STATE BOARD OF ACCOUNTS 18
Finding 2025-001 Coronavirus State and Local Fiscal Recovery Funds (Internal Control Significant Deficiency and Compliance - Procurement) – 2025 Program U.S. Department of the Treasury, 21.027 Coronavirus State and Local Fiscal Recovery Funds, Passed Through State Department of Education (12060-SDE64370-28434) Criteria Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200.318–200.327) require non-Federal entities to use documented procurement procedures that comply with federal standards and to conduct procurements in a manner providing full and open competition. Additionally, 2 CFR Part 200.318(a) requires non-Federal entities to use their own documented procurement procedures which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal law and the standards identified in 2 CFR Part 200. The Town’s adopted purchasing policy requires competitive bids for purchases exceeding $25,000. The formal process may be waived under certain circumstances, however, for Education department purchases, the Superintendent must, in writing, state the reason(s) for granting such waiver and shall notify the Board of Education, as applicable, of such action by electronic means. Conditions We noted that two grant expenditures selected for testing that were above the bid threshold were not procured in accordance with the Town’s adopted purchasing policy or the procurement requirements established under Uniform Guidance (2 CFR Part 200). Specifically, the Education department did not obtain the required competitive bids or price quotations applicable to the procurement thresholds in effect at the time of purchase. While the intent was to waive the bid process due to time pressures, there is no documentation of the bid waiver and approval of the waiver. Both exceptions related to the State Department of Education pass through grant for the Bacon Academy carpet project. Questioned costs None noted. Context Not applicable. Effect Failure to comply with federal and local procurement requirements increases the risk of noncompliance with federal award terms and conditions. Noncompetitive procurement practices may limit full and open competition and could result in questioned costs or potential repayment of federal funds. Cause The Education department did not follow established procurement procedures for the Bacon Academy carpet project funded by the Coronavirus State and Local Fiscal Recovery Funds grant. Based on discussions with management, the noncompliance appears to have resulted from inadequate understanding and implementation of the bid waiver process. Recommendation We recommend that the Education department: • Strengthen internal controls to ensure all federal procurements comply with 2 CFR Part 200 and the Town’s purchasing policy; • Provide training to personnel responsible for procurement and grant administration on Uniform Guidance procurement requirements; • Implement a documented review and approval process to verify procurement method compliance prior to contract execution and payment; and • Maintain complete procurement documentation, including evidence of bids or price quotations, cost or price analysis (when required), and contract provisions required by 2 CFR Part 200.327 and Appendix II. If applicable, bid waiver documentation should be maintained. Views of responsible official and planned corrective actions Management agrees with this finding. The Education Department is reviewing their procurement process and will implement controls to ensure procurement compliance is verified prior to contract execution and payment. Additionally, procurement training will be provided to administrators and staff involved in purchasing and grant management. Federal procurements will be monitored by the Business Manager and Superintendent.
FINDING 2025-002 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, 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): FY24, FY25 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 immediately prior audit report. The prior audit finding number was 2023-005. Condition and Context Procurement 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. The School Corporation procured goods totaling $149,426 from five vendors that fell under the small purchase threshold during the audit period. Price or rate quotes were not obtained for any of the vendors nor was there any documentation detailing the history of procurement, which must include the reason for the procurement method used. INDIANA STATE BOARD OF ACCOUNTS 16 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Suspension and Debarment Prior to entering into subawards and covered transactions, recipients are required to verify that 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 (e.g., grant agreement) that are expected to equal or exceed $25,000 and all subawards. The verification is to be done by checking the SAM exclusions list, collection of a certification from that person or entity, or adding a clause or condition to the covered transaction with that person or entity. There were four covered transactions over $25,000 identified during the audit period totaling $130,448. All four were selected for testing; however, the School Corporation did not verify that two of the four vendors totaling $70,411 were not suspended, debarred, or otherwise excluded from participation in federal assistance programs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(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." 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." INDIANA STATE BOARD OF ACCOUNTS 17 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.320 states in part: "The non-Federal entity must have and use document 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. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases— (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 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." Cause Management had not designed or implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect Material noncompliance with the grant agreement and compliance requirements could cause federal expenditures to be unallowable which the funding agency could potentially recover. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure compliance with requirements related to procurement and suspension and debarment. INDIANA STATE BOARD OF ACCOUNTS 18 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-005 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-151-PN01, 23611-151-PN01, 24611-151-PN01, 22611-151-ARP, 23619-151-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement 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. The School Corporation procured goods totaling $60,002 from four vendors that fell under the small purchase threshold during the audit period. The School Corporation did not provide adequate documentation detailing the history of procurement, which must include the reason for the procurement method used, for all four vendors. Price or rate quotes were not obtained for three of the vendors as required. The School Corporation obtained three quotes for one vendor; however, the highest quote was selected without a documented reason. Suspension and Debarment Prior to entering into subawards and covered transactions, recipients are required to verify that 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 (e.g., grant agreement) that are expected to equal or exceed $25,000 and all subawards. The verification is to be done by checking the SAM exclusions list, collection of a certification from that person or entity, or adding a clause or condition to the covered transaction with that person or entity. There was one covered transaction over $25,000 identified during the audit period which was selected for testing. The School Corporation did not verify that the vendor was not suspended, debarred, or otherwise excluded from participation in federal assistance programs. INDIANA STATE BOARD OF ACCOUNTS 22 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(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." 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 200.320 states in part: "The non-Federal entity must have and use document 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. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases— INDIANA STATE BOARD OF ACCOUNTS 23 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not designed or implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect Material noncompliance with the grant agreement and compliance requirements could cause federal expenditures to be unallowable which the funding agency could potentially recover. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure compliance with requirements related to procurement and suspension and debarment. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-005 Subject: Special Education Cluster (IDEA)- Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-148-PN01, 23611-148-PN01, 24611-148-PN01, 25611-148-PN01, 22611-148-ARP, 22619-148-PN01, 23619-148-PN01, 24619-148-PN01, 25619-148-PN01, 22619-148-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 28 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 and Suspension and Debarment compliance requirement. Procurement - Micro-Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the micro-purchase threshold, which is set at $10,000. Micro-purchases may be awarded without soliciting competitive price rate quotations. Three vendors determined to fall under the micro-purchase threshold were selected for testing. One claim from one of the vendors selected for testing did not have proper supporting documentation maintained by the School Corporation to determine if the proper procurement method was followed. 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 SAM exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. One vendor provided contracted services paid with special education grant funds during the audit period totaling $269,948. Upon inquiry of the School Corporation, it was determined that the School Corporation did not verify that the contractor was not suspended or debarred or otherwise excluded. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 29 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (1) Micro-purchases — (i) Distribution. The acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (See the definition of micro-purchase in § 200.1). To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micropurchases if procedures are documented and approved by the non-Federal entity. (iii) Micro-purchase thresholds. The non-Federal entity is responsible for determining and documenting an appropriate micro-purchase threshold based on internal controls, an evaluation of risk, and its documented procurement procedures. The micropurchase threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations. Non-Federal entities may establish a threshold higher than the Federal threshold established in the Federal Acquisition Regulations (FAR) in accordance with paragraphs (a)(1)(iv) and (v) of this section. INDIANA STATE BOARD OF ACCOUNTS 30 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iv) Non-Federal entity increase to the micro-purchase threshold up to $50,000. Non-Federal entities may establish a threshold higher than the micro-purchase threshold identified in the FAR in accordance with the requirements of this section. The non-Federal entity may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made available to the Federal awarding agency and auditors in accordance with § 200.334. The self-certification must include a justification, clear identification of the threshold, and supporting documentation of any of the following: (A) A qualification as a low-risk auditee, in accordance with the criteria in § 200.520 for the most recent audit; (B) An annual internal institutional risk assessment to identify, mitigate, and manage financial risks; or, (C) For public institutions, a higher threshold consistent with State law. . . ." 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." Cause A proper system of internal controls was not designed 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 affect 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 procedures for goods and services were not adhered to, and vendors to whom payments equal to, or in excess of $25,000, were not verified to not be suspended, debarred, or otherwise excluded. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 31 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services and contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-004 Subject: Special Education Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: COVID-19 - Special Education Grants to States Assistance Listings Number: 84.027X Federal Award Number and Year (or Other Identifying Number): 22611-019-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Significant Deficiency, Other Matters Condition and Context Procurement Small purchases, procurements between $50,000 and $150,000, require three quotes to be obtained and a contract awarded. There was one disbursement tested for $52,598 for small purchase procurement, and, while the appropriate number of quotes were obtained, a contract was not awarded for the transaction as required by Indiana Code 5-22-8-3. Suspension and Debarment Prior to entering into subawards and covered transactions with the Special Education Cluster (IDEA) 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 System for Award Management (SAM) Excluded Parties List System (EPLS), collecting a certification from that person or entity, or adding a clause or condition to the covered transaction with that person or entity. It was determined that the School Corporation had a process in place to verify that vendors were not suspended or debarred, but the process was not operating effectively. For the one vendor tested also related to the transaction noted above, documentation of the SAM.gov search could not be provided. INDIANA STATE BOARD OF ACCOUNTS 20 OAK HILL UNITED SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were isolated to the transaction and award number noted above. 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 200.214 states: "Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict 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 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. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . INDIANA STATE BOARD OF ACCOUNTS 21 OAK HILL UNITED SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." Indiana Code 5-22-8-3 states: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). (b) A purchasing agent may purchase supplies under this section by inviting quotes from at least three (3) persons known to deal in the lines or classes of supplies to be purchased. (c) The purchasing agent shall mail an invitation to quote to the persons described in subsection (b) at least seven (7) days before the time fixed for receiving quotes. (d) 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. (e) The purchasing agent may reject all quotes. (f) If the purchasing agent does not receive a quote from a responsible and responsive offeror, the purchasing agent may purchase the supplies under IC 5-22-10-10." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you do business is not excluded or disqualified. You do this by: (a) Checking the EPLS, or (b) Collecting a certification from that person if allowed by this rule, or (c) Adding a clause or condition to the covered transaction with that person." Cause The School Corporation was not aware of the Indiana Code requirement to enter into a contract for the equipment purchase. The School Corporation was aware of the requirements to check for suspension and debarment, but due to newer personnel at the School Corporation they were not able to locate the records or verify that the suspension and debarment verification was performed. INDIANA STATE BOARD OF ACCOUNTS 22 OAK HILL UNITED SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to design and implement an effective internal control system enabled noncompliance to remain undetected. Noncompliance with the provisions of federal statutes, regulations, and terms and conditions of the federal award could result in the reduction of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation amend its procurement policy and system of internal controls to ensure that procurement requirements meet the stricter federal and/or state requirements. Additionally, the internal control system effectiveness should be improved to ensure all contractors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before entering into contracts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
2025-003 – GRANT AWARD POLICIES AND PROCEDURES Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 2 CFR 200.318 requires that the non-federal entity “must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in §§ 200.317 through 200.327.” Condition: There was a lack of adequate documentation to support control activities were present. Specifically, the Municipality had no policies and procedures related to the administration of federal awards. Questioned Costs: None. Context: There were approximately 15 total disbursements totaling $1,031,467. Cause: The Municipality lacks formal internal controls and procedures related to the administration of federal awards. Effect: There is an increased risk that noncompliance with a federal award could occur and not be detected in a timely fashion. Recommendation: Management should establish proper policies and procedures which ensure that federal awards are adequately administered in accordance with program requirements. Management’s Response: Management concurs with the finding and has developed a plan to correct the issue. See corrective action plan. Status: This finding was not present in the prior audit year.
Federal Agency: U.S. Department of Education Federal Program Name: Special Education Cluster Assistance Listing Number: 84.027 Federal Award Identification Number and Year: H027A230035 and 2023 Pass-Through Agency: Maryland State Department of Education Pass-Through Numbers: 24132402 Award Period: October 1, 2023 – September 30, 2025 Compliance Requirement: Procurement Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: Uniform Guidance requires non-federal entities to establish and follow documented procurement procedures that are consistent with federal procurement standards and ensure full and open competition. Such policies must address allowable procurement methods, required documentation, applicable thresholds, and approval requirements in accordance with 2 CFR §§ 200.317–200.327. Condition/Context: During testing of procurement transactions charged to the federal program, one of five procurement transactions tested did not follow the procurement requirements of Uniform Guidance. Specifically, the required procurement method was not properly applied and supporting documentation was insufficient to demonstrate compliance with federal procurement standards. Questioned Costs: None Cause: The Board’s procurement policies were not fully compliant with federal procurement requirements under Uniform Guidance. As a result, internal controls did not adequately ensure that procurement transactions charged to federal programs complied with applicable federal standards prior to payment. Effect: Procurement policies that are not aligned with federal requirements increase the risk of noncompliance with Uniform Guidance, potentially resulting in disallowed costs, reduced competition, or the need for corrective action by the pass-through or federal awarding agency. Repeat Finding: No Recommendation: We recommend the Board revise its procurement policies to fully align with Uniform Guidance requirements and strengthen internal controls to ensure procurement transactions charged to federal awards are reviewed for compliance prior to payment. This should include updated policy guidance, staff training, and documented supervisory review. Views of Responsible Officials: The Board concurs with the finding.
FINDING 2025-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, 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): FY 2023-2024, FY 2024-2025 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 immediately prior audit report. The prior audit finding number was 2023-004. Condition and Context An effective internal control system was not designed or implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Procurement 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. The School Corporation procured goods and services totaling $5,967,079 from three vendors that exceeded the simplified acquisition threshold during the audit period. The School Corporation did not follow procurement requirements for one of the three vendors. Multiple quotes were obtained for the purchase of cafeteria equipment totaling $361,575; however, the procurement method used should have been the bidding process. Additionally, the School Corporation did not obtain a contract for the purchase. The School Corporation made three small purchases totaling $35,045 that were selected for testing. The School Corporation did not obtain price or rate quotes as required. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. INDIANA STATE BOARD OF ACCOUNTS 25 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Suspension and Debarment Prior to entering into subawards and covered transactions, recipients are required to verify that 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 (e.g., grant agreement) that are expected to equal or exceed $25,000 and all subawards. The verification is to be done by checking the SAM exclusions list, collection of a certification from that person or entity, or adding a clause or condition to the covered transaction with that person or entity. There were three covered transactions over $25,000 during the audit period, which totaled $5,967,079. The School Corporation did not verify that one of the three covered transactions, totaling $361,575, was not suspended, debarred, or otherwise excluded from participation in federal assistance programs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 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. . . ." 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 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. INDIANA STATE BOARD OF ACCOUNTS 26 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases— (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction. . . ." 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." Cause Management had not designed or implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect Material noncompliance with the grant agreement and compliance requirements could cause federal expenditures to be unallowable which the funding agency could potentially recover. INDIANA STATE BOARD OF ACCOUNTS 27 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure compliance with requirements related to procurement and suspension and debarment. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-002 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Number and Year (or Other Identifying Number): FY2024 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 immediately prior audit report. The prior audit finding number was 2023-004. Condition and Context The School Corporation did not have effective internal controls in place to ensure compliance with the Procurement and Suspension and Debarment compliance requirement. The School Corporation did not have adequate procedures in place to ensure that the requirements for small purchases were met for each applicable procured good or service or to ensure that vendors were not suspended or debarred prior to entering into a covered transaction. INDIANA STATE BOARD OF ACCOUNTS 17 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds: micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase 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 the audit period, the School Corporation self-certified a micro-purchase threshold of $50,000. Any purchase above this threshold but below the $150,000 simplified acquisition threshold would be considered a small purchase. During fiscal year 2023-2024 , the School Corporation had one vendor with disbursements totaling $60,757, which exceeded the School Corporation established small purchase threshold of $50,000. The School Corporation did not provide supporting documentation that an adequate number of price or rate quotes were obtained from qualified sources for the purchases. The lack of effective internal controls and noncompliance were isolated to the one vendor noted above. 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 and inspection of supporting documentation 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, it was identified that the School Corporation did not have policies or procedures in place to verify if vendors were suspended or debarred or otherwise excluded from participation in federal awards. In 2023-2024, for one covered transaction totaling $60,757, there was no evidence provided that the School Corporation verified the vendor's suspension and debarment status prior to payment. The lack of effective internal controls and noncompliance were isolated to the one vendor noted above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 18 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 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 INDIANA STATE BOARD OF ACCOUNTS 19 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (c) Adding a clause or condition to the covered transaction with that person." Cause An effective system of internal controls was not designed and implemented by management of the School Corporation. The School Corporation had outlined a process for handling small purchase vendor related transactions, but that process was not followed, nor was supporting evidence maintained for the items described in the Condition and Context. Also, the School Corporation had designed a process for determining whether a vendor is suspended or debarred, but that process was not completed. Effect As a result of not designing and implementing an effective system of internal controls and following the School Corporation's policies and procedures, goods that fell within the small purchase threshold were not properly procured, and vendors to whom payments equal to or in excess of $25,000 were made were not verified to be not suspended, debarred, or otherwise excluded. 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 School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement an effective internal control system and follow through with the policies and procedures related to small purchase vendor procurement and suspension and debarment compliance requirements that they designed through an action plan to correct the prior audit period finding. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
2025-001 – Reporting – Internal Control and Compliance over Reporting (Material Weakness) Information of the Federal Program(s): Assistance Listing Number: 14.218 Federal Program Name: Community Development Block Grants-Entitlement Grants Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number(s) and Award Year: B-24-MC-06-0554 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): The OMB Compliance Supplement requires that reports submitted to the Federal awarding agency include all activity of the reporting period, are supported by underlying accounting information and are presented in accordance with program requirements. Pursuant to the Guidance on Cash on Hand Quarterly Report (replaced the Federal Financial Report, SF-425) and financial reporting requirements in the cooperative agreement provisions, and 2 CFR 200.327: Quarterly reports: Program award recipients must submit Cash on Hand Quarterly Report reports to HUD quarterly, 30 days after the reporting period end date. Each report must cover all expenditures on the cooperative agreement from the start date of the reporting period to the reporting period end date. The following federal fiscal year quarter reporting period will be used for all quarterly reports, are due to HUD 30 days after the period end dates noted below: Reporting Period Due Date of Report Quarter 1: 7/1-9/30 October 30 Quarter 2: 10/1-12/31 January 30 Quarter 3: 1/1-3/31 April 30 Quarter 4: 4/1-6/30 July 30 Condition: The City did not submit the required Cash on Hand Quarterly Report in a timely manner. The quarterly Cash on Hand Quarterly Report for three (3) of the four (4) reporting periods were submitted past deadline. Report Report Submission Submission Report Type Reporting Period Deadline Date Federal Financial Report 10/01/2024-12/31/2024 1/30/2025 8/7/2025 Federal Financial Report 01/01/2025 - 03/31/2025 4/30/2025 8/7/2025 Federal Financial Report 04/01/2025 - 06/30/2025 7/30/2025 8/7/2025 Additionally, the City was unable to provide any record of internal approval on all four (4) quarterly reports prior to submission. Cause: Due to staff turnover, the City did not to consistently follow the program’s procedures to ensure that reports were submitted in a timely manner, in accordance with the timelines outlined in the Uniform Guidance. In addition, the City did not maintain documentation of internal review and approval for quarterly reports prior to submission. Effect or Potential Effect: Delays in filing the quarterly reports resulted in noncompliance with the compliance requirements. The internal approvals on the reports were not available, which increased risk of errors or incomplete reporting. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2024-002. Recommendation: We recommend that the City strengthen its reporting submission procedures to ensure that all required federal reports are reviewed, approved, and submitted in accordance with federal reporting deadlines. In addition, the City should maintain written documentation of supervisory review and approval for all required federal reports prior to submission. Views of Responsible Officials: Management concurs.
2025-002 Procurement Supporting Documentation CFDA No: 93.434 Program Name: Preschool Development Grants Award Number: 25FPDGCN-510841-01A Federal Agency: U.S. Department of Health and Human Services (HHS) Pass-Through Grantor: Arizona Department of Education Compliance Requirement: L. Procurement, Suspension and Debarment Questioned Costs: $29,281 Summary of Finding: Material weakness in internal controls over compliance which resulted in a qualified opinion on federal program compliance. Repeat Finding? No Condition Heartwood could not provide documentation for the selection of two vendors within the Simplified Acquisition Threshold, which totaled $29,281. The population of vendors who met applicable thresholds was tested and totaled four vendors. 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 200.327. Specifically, 2 CFR 200.318(i) states “The recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price.” Cause Heartwood did not retain price or rate quotations from an adequate number of qualified sources or document justification for the use of sole source vendors. 2 CFR 200.320(a)(2)(i) states: “Unless specified by the Federal agency, the recipient or subrecipient may exercise judgment in determining what number is adequate.” Effect The inability of Heartwood to retain procurement documentation impairs the ability to demonstrate compliance with federal requirements, increases the risk of unallowable or unreasonable costs, and may result in repayment/disallowance of the related expenditures. Recommendation Primarily, Heartwood should enforce their written procurement and documentation procedures which are prepared as part of grant award acceptance. Then, Heartwood should ensure every purchase is supported, and retained in a central file. At a minimum, the school should: Establish checklist for every purchase (paper or electronic), retained centrally, that includes: Requisition/need justification and funding source, in this instance Preschool Development Grant (PDG) Evidence of price reasonableness: quotes from an adequate number of qualified sources (or documented attempts) Basis for vendor selection Approvals (who approved, when) Contract/purchase order, invoice, and proof of receipt/performance Required contract provisions (when applicable) In the case of sole source procurements, justification dcumentation for the use of the vendor. Suspension/debarment verification (SAM check) when required by the school’s policy/pass-through requirements Centralize record retention Store all procurement documentation in a single shared location (e.g., secured drive) by grant year and vendor, with a naming convention. Assign a specific role (grant manager/business office) responsible for completeness before payment.
Federal Agency: Department of Education Federal Program Name: Wisconsin Charter Schools Program Waiver Cohort Assistance Listing Number: 84.282 Pass-Through Agency: Wisconsin Department of Public Instruction Pass-Through Number(s): 2025-138005-DPI-WCSPWC1-360 Award Period: July 1, 2024 through June 30, 2025 Type of Finding: Material Weakness in Internal Control over Compliance Material Noncompliance (Modified Opinion) Criteria: 2 CFR Sections 200.317 – 200.327 of the Uniform Guidance details procurement requirements for non-federal entities. Condition: One City Schools, Inc. did not document procurement methods, rationales, and decisions in accordance with the Uniform Guidance. Questioned costs: None Context: We sampled 6 procurement transactions, noting that 5 of them did not have documentation following the procurement policy. Cause: Policies and procedures were put in place but not consistently followed. Effect: This could result in noncompliance, disallowed costs, or discontinuance of federal funding. Repeat Finding: Yes (2024-002) Recommendation: We recommend that the Organization maintain effective internal controls over procurement requirements. Views of responsible officials: One City Schools, Inc. agrees with the finding and are working on implementing internal controls over procurement.
2025-001 - Procurement, Debarment and Suspension Federal Program Information: U.S. Department of the Treasury, passed through the Vermont Department of Public Safety CFDA - 21.027 - Coronavirus State and Local Fiscal Recovery Funds Criteria: The following CFRs apply to this finding: 2 CFR 200.214, 2 CFR section 200.317-200.327 Condition: During audit procedures it was identified that the Town did not check sam.gov to confirm that the contractor was not debarred or suspended from receiving federal funds nor did they request a Suspension and Debarment certification from the contractor. Cause: The Town does not have the necessary internal controls over compliance. Effect: Contracts may be awarded to contractors that are debarred or suspended from working on federally funded projects. Identification of Questioned Costs: None Identified. Context: Two contracts were reviewed out of three. This is not a statistically valid sample. Repeat Finding: This is not a repeat finding. Recommendation: It is recommended that the Town revise its procurement policy to fully incorporate all elements required by 2 CFR §200.317-200.327. Views of Responsible Officials and Corrective Action Plan: Please see the Corrective Action Plan.
Federal agency: U.S. Small Business Administration Federal program name: Congressional Grants Inclusive Ventures Small Business Program Assistance listing number: 59.059 Pass-through agency: Anne Arundel County, Maryland Pass-through number: SBAHQ23I0140 Award Period: September 1,2023 through August 31, 2028 Compliance Requirement: Procurement and Suspension and Debarment Type of Findings: Material Weakness in Internal Control over Compliance, Material Noncompliance (Modified Opinion) Criteria or specific requirement: Compliance: Nonfederal entities must follow the procurement standards set out at 2 CFR sections 200.318 through 200.327. 2 CFR section 200.318 states the grant recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in sections 200.317 through 200.327. Compliance: Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. All non-procurement transactions entered into by a pass-through entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the nonfederal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA), (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Control: Per 2 CFR section 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 Corporation did not follow their written procurement procedures which reflect applicable State, local, and tribal laws and regulations which also conform to the applicable federal law and standards identified in the Uniform Guidance. The Corporation could not provide documentation that it ensured contractors were not suspended or debarred before executing contracts with the entities. Questioned Costs Amounts paid to the two contractors for the fiscal year ended June 30, 2025 was $175,000. Context Supporting documentation for the procurement, suspension and debarment status for two of the two contractors selected for testing was not documented. Cause The Corporation has not historically received federal funding so the procurement, suspension and debarment documentation was not deemed necessary. Effect A lack of documented procurement standards for the Corporation could increase the risk of goods and services being procured through a method which is not in accordance with applicable State, local, and tribal law as well as federal regulations including the Uniform Guidance. If the suspension and debarment status is not verified when entering into covered transactions, it is possible that a subaward could be issued to an ineligible entity. Repeat Finding No Recommendation We recommend that management follow their written procurement policies and controls to ensure it maintains documentation of procurement, suspension and debarments checks and that the documentation is available for audit. Views of Responsible Officials Management agrees with finding. See corrective action plan for additional information.
Program: Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Assistance Listing No.: 10.557 Federal Grantor: U.S. Department of Agriculture Passed-through: California Department of Public Health Award No.: 22-10307 Award Year: 2022 Compliance Requirement: Procurement and Suspension and Debarment Type of Finding: Material Weakness in Internal Control over Compliance and Instance of Non-Compliance Criteria: 2 CFR section 200.303(a), Internal Controls, states that the 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. 2 CFR 200.327 Contract provisions. The recipient's or subrecipient's contracts must contain the applicable provisions described in Appendix II to Part 200—Contract Provisions for Non-Federal Entity Contracts Under Federal Awards. Condition: During our testing of the County’s provisions for procurement requirements, we noted the following: 1.For three (3) out of three (3) contracts selected for testing, the County did not include theapplicable provisions described in 2 CFR 200 Appendix II. 2.For one (1) out of three (3) contracts selected for testing, the County could not provide acopy of the approved contract. 3.For three (3) out of three (3) contracts tested, we noted that there was no evidence theCounty verified that the contracted entities were not suspended or debarred or otherwiseexcluded from participating in federal programs prior to entering into the contract. Cause: The County did not follow their policy documenting the approval of the procurement. The County did not follow their policy to verify the information described in the condition prior to entering the transactions. The County’s policy does not include the requirement to include each of the applicable provisions identified in 2 CFR 200 Appendix II in its contracts or purchase orders. Effect: Failure to implement and maintain a proper control process could result in payments to vendors that are suspended or debarred or improper awarding of contracts under the procurement guidance. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: A nonstatistical sample of three (3) out of ten (10) procurement contracts were tested. This represented a total of $184,840 in contracted services under the grant. Repeat Finding from Prior Years: Yes. Finding 2024-002 Recommendation: We recommend the County strengthen its policies and procedures to ensure that the verification of the debarment and suspension is documented and retained, the history of procurement transactions is documented and retained in its official records, and that contracts include all applicable provisions of 2 CFR 200 Appendix II. Views of Responsible Officials: Management agrees. See separately issued Corrective Action Plan.
Finding 2025-001 Internal control deficiency and noncompliance over procurement and suspension and debarment. Identification of the federal program: Assistance Listing Number 93.493: • Congressional Directives • U.S. Department of Health and Human Services • Federal award identification number – CE146487 • Federal award year – 7/1/2024 – 6/30/2025 • Pass-through entity – The Board of Regents of the University of Oklahoma Health Sciences Center • Pass-through entity identifying numbers: H79FG000747 and H79FG001034 Criteria or specific requirement (including statutory, regulatory, or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303, Internal controls: 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). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318, General procurement standards: (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; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318, General procurement standards: (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. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319, Competition: (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. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320, Methods of procurement to be followed: 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: (a) (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; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate –(1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320, Methods of procurement to be followed: (c) Noncompetitive procurement. 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 requirement 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. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324, Contract cost and price: (a) 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. Title 2, Subtitle A, Chapter II, Part 200, Subpart C 200.214, Suspension and debarment: Non-Federal entities are subject to the non-procurement debarment and suspension regulations that restrict 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. Title 2, Subtitle A, Chapter I, Part 180, Subpart C 180.300: What must I do before I enter into a covered transaction with another person at the next lower tier? 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; (b) Collecting a certification from that person; or (c) adding a clause or condition to the covered transaction with that person. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts. Management did not have internal controls in place over procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, during our testing over suspension and debarment, we observed management did not retain support for internal control documentation for all vendors, evidencing that the vendors were searched for suspension and debarment upon entering into a contract supported with federal funds. Cause: Management did not have internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. In addition, if a search for suspension and debarment is not conducted, the entity could contract with vendors that are suspended or debarred. Questioned costs: $1,385,165 – Assistance Listing Number 93.493 Federal award identification number – CE146487 Pass-through entity identifying numbers: H79FG000747 and H79FG001034 Questioned costs were computed as all procurements selected for testing. Questioned costs for each award are as follows: • CE146487: $60,874 • H79FG000747: $119,479 • H79FG001034: $1,204,812 Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we selected five vendors for testing with total expenditures of $1,385,165 from a population of procurements totaling $1,425,361, subject to formal procurement procedures. We observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed for any of the five procurements selected for testing. For suspension and debarment, we selected five vendors for testing totaling $1,385,165. Management was unable to provide documentation that internal controls were executed for any of the vendors selected for testing. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts. Management should develop and implement internal controls over procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should create documented suspension and debarment procedures and develop and implement internal controls to ensure vendors were searched for suspension and debarment at the time of awarding a contract supported by federal funding and retain evidence supporting such procedures. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Company is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Company will update the procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, which includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award, and administer procurement contracts. This policy will include procedures to ensure proper procurement for purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
U.S. Department of Treasury Pass-through Entity: Mecklenburg County, North Carolina Program Name: Coronavirus State and Local Fiscal Recovery Funds Federal Assistance Listing Number: 21.027 Significant Deficiency and Nonmaterial Noncompliance – Procurement Finding 2025-006 – Repeat Finding Criteria: Per Sections 200.318 – 200.327 of the Uniform Grant Guidance, a non-federal entity must have and use documented procurement procedures, consistent with Uniform Grant Guidance Title 2 CFR Section 200.318 for the acquisition of property or services required under a Federal award or subaward. Furthermore, a contract award must not be made to a suspended or debarred party listed on the System for Award Management. Condition: There was one (1) contract out of two (2) contracts tested where Roof Above did not retain documentation demonstrating that the bid was publicly advertised as required under Uniform Grant Guidance procurement standards. Additionally, Roof Above did not perform or retain documentation evidencing verification that the vendor was not suspended or debarred on the System for Award Management (SAM.gov) prior to procuring services. Questioned Costs: None of the nonmaterial noncompliance items resulted in questioned costs. Effect: By not having sufficient documentation, the Organization may not be able to evidence compliance with Uniform Grant Guidance and could have improperly contracted with a vendor. Cause: The Organization did not have formalized procedures in place to ensure procurement requirements under Uniform Grant Guidance were consistently documented and reviewed, including public advertisement of bids and verification of vendor suspension or debarment status, prior to entering into contracts. Recommendation: The Organization should consider implementing a procurement policy in line with Uniform Grant Guidance and ensure proper documentation of the procurement process for all vendors utilized with federal funding. Views of Management: Management agrees with the finding and is implementing procedures to correct this which are further discussed in the Corrective Action Plan. See Corrective Action Plan for more information.
Assistance Listing Number 84.181 Special Education Department of Education Passed Through Turtle Mountain Band of Chippewa Indians Procurement 2 CFR Part 200.317 through 200.327 Criteria Procurement Standards require for the District to maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in 2 CFR Part 200.317 through 200.327. Condition The District performed a procurement activity that did not follow District policies as well as standards found in 2 CFR Part 200.317 through 200.327. The District failed to obtain quotes or bids for a purchase exceeding $10,000. This condition was noted for the following expenditure: Check 240313 Dated 10/17/2024 for $10,219.00 Context Per discussion with the District staff and review of program expenditures, there were 2 expenditures incurred in which quotes or bids should have been obtained. Both transactions were tested and it was noted that 1 transaction did not have the necessary quotes or bids. Cause District’s internal controls in place failed to ensure all procurement policies are followed. Effect District is not in compliance with their internal procurement policies and procurement standards. Questioned Costs Undeterminable. Repeat Finding See prior year finding 2024-006 Recommendation Recommend the District to review internal controls to ensure all internal policies and compliance requirements are both being monitored and the District is remaining in compliance. Management’s Response See corrective action plan.
Finding 2025-001 – Material Weakness AL No: 20.205 Highway Planning and Construction Federal Grantor: U.S. Department of Transportation, Federal Highway Administration (FHWA) Passed-through: California Department of Transportation (Caltrans) and the Sacramento Area Council of Governments (SACOG) Passed-through Grantor’s No’s.: SPIL-6085 (091) for Caltrans and #240023 for SACOG. Compliance Requirement: Procurement, Suspension and Debarment Criteria: 2 CFR Part 200, Subpart E (Uniform Guidance) Section 200.318(a) states that the “The recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in Sections 200.317 through 200.327.” The contract should have conformed to the following sections in the Caltrans Local Assistance Procedures Manual (LAPM): - Section 10.1 provides requirements for federally funded architectural and engineering (A&E) contracts. - Section 10.3 provides requirements for non-A&E contracts. - Section 10.1.9 states that the local public agency (LPA) must “obtain Caltrans approval on the Exhibit 12- F: Cost Effectiveness/Public Interest Finding/A&E Noncompetitive and retain all documents in the project files” for procurements by noncompetitive proposals. - Section 9.7.2 states that the LPA must have a Disadvantaged Business Enterprise (DBE) goal set, and “must have an Exhibit 9-D: DBE Contract Goal Methodology submitted to the” District Local Assistance Engineer (DLAE). “LPAs may not advertise the contract before receiving DLAE feedback on the DBE goal.” Condition: Caltrans notified the Authority that two Next-Generation Facility Project (the Project) consulting contracts were procured in compliance the Federal Transit Administration’s (FTA’s) procurement guidelines but did not conform with the State of California LAPM. Caltrans indicated that the AECOM A&E consultant contract procurement did not comply with Sections 10.01 and 10.1.9 of the LAPM, including not including a Public Interest Finding for the sole source procurement of the agreement, and the LeFlore Group, LLC non-A&E consultant contract procurement did not comply with Section 10.3 of the LAPM. In addition, a Disadvantaged Business Enterprise goal was not requested nor completed as part of the advertisement for the project, which was required under Section 9.7.2 of the Caltrans LAPM. Effect: The Authority was not in compliance with the Caltrans LAPM and as a result, the Authority was required to halt work and repay Caltrans and SACOG for funds already reimbursed to the Project of $300,000 under AL 20.205. Cause: Caltrans and SACOG are both pass-through agencies for this grant, with the Authority being the final subrecipient. SACOG was not aware that the procurement requirements under this grant follow U.S. Department of Transportation, Federal Highway Administration requirements that differ from U.S. Department of Transportation, Federal Transit Administration requirements, which are administered by a different Caltrans department. As a result, the additional requirements in the LAPM were not communicated to the Authority and the Authority was not aware of the requirements and failed to comply with the LAPM. Context: The Authority submitted the procurement to the Caltrans Federal Transit Administration Programs Procurement Oversight Branch for approval prior to contracting with the consultants and the procurement was approved. However, the grant was provided through the Federal Highway Administration (FHWA) and Caltrans has a different oversight Branch for FHWA funded projects, which was not made clear to the Authority by either passthrough agency. AL 20.205 was originally reported on the SEFA and was selected for testing a major program as it was a high-risk Type B program under which the Authority incurred $300,000 of grant expenses and received the grant proceeds prior to June 30, 2025. Caltrans issued a sanction letter on December 9, 2025, which required the grant funds to be returned to Caltrans. As a result, the Authority removed the expenses from the SEFA, but the program is reported as a major program to report the procurement finding on the schedule of findings and questioned costs. - Questioned Costs: $300,000 Recommendation: We recommend the Authority add additional language to its Procurement Policy documenting the requirement to follow Section 10 of the LAPM and the criteria under which it applies when grants are received from the FHWA. Management’s Response: Management’s response is included in the attached Corrective Action Plan. Report on Internal Control over Compliance See finding 2025-001 above, which is also considered to be an internal control over compliance finding in the Major Federal Awards Program Audit.
Section III - Findings and Questioned Costs - Major Federal Award Program Audit Finding Reference Number: 2025-001 Title and Assistance Listing Number of Federal Program: Economic Development Initiative, Community_x0004_ Project Funding, and Miscellaneous Grants - 14.251 Type of Finding: Federal Award Finding Finding Resolution Status: In Process Information on Universe Population Size: N/A Sample Size Information: N/A Identification of Repeat Finding and Finding Reference Number: Not a repeat finding Criteria: Under 2 CFR 200.318(a), non-federal entities must establish and maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders. As required under 2 CFR Subpart D (§§200.317–200.327), organizations must follow written procurement procedures that reflect applicable state, local, and tribal laws and regulations, provided that the procurements conform to applicable federal law and the standards in the Uniform Guidance. Statement of Condition: United Playaz, Inc. and Subsidiary (the "Organization") does not have a documented procurement policy that complies with the procurement standards in 2 CFR 200.317–200.327. The Organization has purchasing policies, but no written procedures addressing required elements such as procurement methods, competition, conflicts of interest, domestic preferences, price/cost analysis, or contractor oversight. Cause: The absence of a compliant procurement policy appears to stem from insufficient familiarity with the detailed procurement requirements in the Uniform Guidance, as this was their first award and audit under these standards. Management utilized other local government procurement policies to perform their procurement procedures. Effect or Potential Effect: While no procurement errors were identified during the audit and no questioned costs resulted from this condition, the lack of required written procedures increases the risk of: -Noncompliance with Federal procurement standards -Inadequate competition and pricing documentation -Increased susceptibility to conflict of interest risks -Potential future questioned costs or disallowed expenditures Failure to maintain documented procedures also impairs the organization’s ability to demonstrate compliance to Federal agencies and pass through entities. Auditor Non-Compliance Code: S - Internal control deficiencies Questioned Costs: $- Reportable Views of Responsible Officials: While United Playaz did not have their own policy compliant with federal standards, the organization has historically used procurement guidelines as required by the San Francisco Mayor’s Office of Housing and Community Development (MOHCD) which complies to the Federal standards and guidelines administered and approved by HUD. In addition, the general contractor procurement process was completed prior to the initiation and receipt of the HUD award. _x0004__x0004_Management acknowledges that, while procurement activities were performed using established external guidelines, the Organization did not have a formally adopted written procurement policy that fully complies with the requirements of 2 CFR 200.317–200.327 at the time of the audit. Management has since identified this gap and is in the process of developing a compliant written procurement policy. Context: For procurement processes, the Organization has historically utilized procurement guidelines required by the San Francisco Mayor’s Office of Housing and Community Development and other applicable local government procurement frameworks. In addition, the general contractor procurement process was completed prior to the initiation and receipt of the federal award. Recommendations: 1. Develop and formally adopt a written procurement policy that complies with 2 CFR 200.317–200.327 addressing at minimum: -Procurement methods and applicable dollar thresholds -Full and open competition requirements -Standards of conduct and conflicts of interest -Price or cost analysis (200.324) -Domestic preference (200.322) -Use of small/minority owned businesses (200.321) -Required contract provisions (200.327) 2. Train staff involved in procurement to ensure consistent understanding and implementation. 3. Periodically review and update the policy to remain compliant as Federal requirements evolve Auditors’ Summary of the Auditee’s Comments on the Findings and Recommendations: Response Indicator: Agree Completion Date: 6/30/2026 Response: The Organization is in the process of developing, and will formally adopt and implement, a written procurement policy that complies with the requirements of 2 CFR 200.317–200.327. The policy will address, at a minimum, procurement methods, competition requirements, standards of conduct and conflicts of interest, price or cost analysis, domestic preference requirements, and required contract provisions. In addition, management will provide formal training to personnel involved in procurement to ensure consistent application of the policy and ongoing compliance with Federal procurement standards.
Condition – During our audit, we noted the quarterly report ended March 31, 2025, was not filed. The expenditures for that period were included on the quarterly report ended June 30, 2025. Effect – The effect is the inaccurate and untimely reporting of expenditures in the proper quarter. Cause – The cause is a lack of timely information received from the subrecipient to complete the reporting in a timely manner. Criteria – According to 2 CFR §200.327, Financial Reporting, information must be collected with the frequency required by the terms and conditions of the Federal award. The contract requires the filing of the quarterly report within 45 days after the quarter-end. Recommendation – We recommend that Yavapai County establish a system of monitoring the WIOA Cluster reporting requirements and review the listing to verify that reports are filed timely. Management’s Response – Yavapai County’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.
Federal Program: Maternal, Infant and Early Childhood Home Visiting Grant (including COVID-19) - ALN 93.870; Federal Award # 24853633; passed through Texas Department of Family and Protective Services; passed through Texas Health and Human Services Commission. State Programs: Texas Home Visiting (THV) Program Grant - Award # 24853633; direct funding from Texas Department of Family and Protective Services. Texas Home Visiting (THV) Program Grant - Award # 24853633; direct funding from Texas Health and Human Services Commission. Criteria: Uniform Guidance (2 CFR 200.318 - 200.327) and TxGMS (General Procurement Standards) requires non-federal entities to ensure procurements are conducted using appropriate methods based on dollar thresholds and retain supporting documentation, including an adequate number of quotations from qualified sources for simplified acquisitions (formerly small purchases). Condition /Context: During testing of procurement transactions, two instances were identified in which management incorrectly classified procurements as sole source without adequate justification in accordance with Uniform Guidance or TxGMS, as applicable. Additionally, in these two instances tested, management did not retain sufficient documentation of quotes to support that procurements were conducted in compliance with simplified acquisition requirements (formerly small purchase). Questioned Costs: None Effect: Noncompliance with procurement requirements of Uniform Guidance and TxGMS, which increases the risk that purchases were not conducted in a manner providing full and open competition and may result in disallowed costs or increased scrutiny from grantor agencies. Cause: The condition resulted from inadequate procurement controls, including a lack of formalized review procedures for determining and documenting appropriate procurement methods. This resulted in United Way ATX not retaining the required supporting documentation for competitive procurements. Recommendations: United Way ATX should strengthen procurement controls by performing supervisory review of procurement classification and supporting documentation prior to approval and payment. In addition, management should implement standardized documentation requirements, including identification of procurement methods used and retention of quotes or bids for applicable procurements.
U.S. Department of Housing and Urban Development, passed through Barren County Fiscal Court ALN 14.251 – Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Contract No. B-22-CP-KY-0347 (2022) and B-23-CP-KY-0612 (2023) Criteria: 2 CFR 200.327 requires non-Federal entities to include a provision for compliance with the Davis-Bacon Act as supplemented by Department of Labor regulations. The Davis-Bason Act requires contractors to pay prevailing wages on federally funded or assisted construction projects, and requires non-Federal entities entering into such construction contracts to collect weekly certified payroll reports for all weeks in which wages are paid to construction workers. 2 CFR 200.303 requires recipients and subrecipients to establish, document, and maintain effective controls over Federal awards. Condition: During our audit procedures, we noted the Authority did not notify contractors that Federal funds would be in payments. As such, contractors did not include federal prevailing wage language in their bids/contracts, and did not provide weekly certified payroll reports to the Authority. Cause: Management was unaware of the requirements of prevailing wage for federal construction grants, and as such, did not communicate to contractors that federal funds would be utilized. Effect: The Authority was not in compliance with the Davis-Bacon Act and related regulations. Questioned Costs: Unable to determine. Recommendation: We recommend management obtain a greater understanding of the Davis-Bacon Act, and implement a review process whereby contracts and invoices are not approved without appropriate prevailing wage consideration and certified payrolls. Views of Responsible Officials and Planned Corrective Actions: Management concurs with the finding and as a result, the Authority will gain a greater understanding of HUD grants, and will implement a review process to ensure prevailing wage requirements are considered prior to approving contracts and invoices.
NONCOMPLIANCE WITH PROCUREMENT AND SUSPENSION AND DEBARMENT REQUIREMENTS, CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS, ASSISTANCE LISTING No. 21.027, Direct Allocation, AM-23-0256, AM-23-0255, YEAR ENDED JUNE 30, 2025 Criteria: Per 2 CFR 200.214, non-Federal entities are subject to the non-procurement, debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict 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. Condition: The city did not comply with the procurement standards outlined in 2 CFR §200.318-§200.327, which require competitive procurement processes and verification that contractors are not suspended or debarred. Specifically, the city did not verify the eligibility of program recipients/participants/contractors through the System for Award Management (SAM) or equivalent documentation in order to verify that they were not suspended, debarred, or otherwise excluded from participation in the program. Cause: The city does not have procurement policies and procedures in place that allow it to comply with procurement standards outlined in the Uniform Guidance. Effect: Non-compliance with program terms and conditions. Questioned costs: None. Recommendation: Management should develop procedures that will provide reasonable assurance that procurement of goods and services are made in compliance with applicable federal regulations and other procurement requirements specific to a federal award or subaward, and that no subaward, contract, or agreement for purchase of goods or services is made with any suspended or debarred party. Views of responsible officials and planned corrective actions: The government agrees with this finding and will adhere to the attached corrective action plan.
2025-005 – Procurement Federal program information: Funding agency: U.S. Department of Health and Human Services Title: All major programs Assistance listing numbers: 93.696, 93.912 Award year: 7/1/2024 – 6/30/2025 Criteria: According to 2 CFR Part 200.318 through 200.327, non-federal entities 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. SFRC’s P&P Manual requires two written quotes for purchases between $10,000 and $250,000. Purchases over $250,000 require advertisement in the local newspaper, bid opening/evaluation, and the Board of Directors shall approve purchases in excess of $250,000 prior to contract signing. Condition: For one vendor paid in excess of $10,000 during fiscal year 2025, no written quotes were obtained for the services. There was also no purchase order approved with this vendor and there is no evidence that the Board of Directors approved the purchase. The contract signed with this vendor exceeded $250,000, and there is also no evidence that the Board of Directors approved this contract. One additional vendor was also paid in excess of $10,000 during fiscal year 2025, and there were no written quotes were obtained for the goods purchased. Context: One of ten vendors tested under ALN 93.696 and two of ten vendors tested under ALN 93.912. Questioned Costs: None Cause: SFRC has not implemented the requirements of its P&P Manual over procurement. Effect: SFRC is not in compliance with its P&P Manual and SFRC could be paying more for goods and services than if bids/quotes had been obtained. Auditor’s Recommendation: SFRC should enforce internal control procedures to ensure that all purchases are made in a manner consistent with its P&P Manual. Management’s Response: Management reviewed existing accounting staffing structure, revised position descriptions, and have advertised to fill two of three open positions; Accounts Payable Specialist and Controller. Management feels with these revised position descriptions, more focus on accounting operations, procedures, and property and equipment management.
NONCOMPLIANCE WITH PROCUREMENT AND SUSPENSION AND DEBARMENT REQUIREMENTS, CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS, ASSISTANCE LISTING No. 21.027, Direct Allocation, MT-ARPA-CG-23-613, RRG-22-1864A, AMC-22-0137, YEAR ENDED JUNE 30, 2025 Criteria: Per 2 CFR 200.214, non-Federal entities are subject to the non-procurement, debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict 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. Condition: The city did not comply with the procurement standards outlined in 2 CFR §200.318-§200.327, which require competitive procurement processes and verification that contractors are not suspended or debarred. Specifically, the city did not verify the eligibility of program recipients/participants/contractors through the System for Award Management (SAM) or equivalent documentation in order to verify that they were not suspended, debarred, or otherwise excluded from participation in the program. Cause: The city does not have procurement policies and procedures in place that allow it to comply with procurement standards outlined in the Uniform Guidance. Effect: Non-compliance with program terms and conditions. Questioned costs: None. Recommendation: Management should develop procedures that will provide reasonable assurance that procurement of goods and services are made in compliance with applicable federal regulations and other procurement requirements specific to a federal award or subaward, and that no subaward, contract, or agreement for purchase of goods or services is made with any suspended or debarred party. Views of responsible officials and planned corrective actions: The government agrees with this finding and will adhere to the attached corrective action plan.
Coronavirus State and Local Fiscal Recovery Funds Criteria: Under 2 CFR 200.214, recipients and subrecipients are subject to procurement suspension and debarment requirements, which prohibit entering into covered transactions with parties that are suspended, debarred, or otherwise excluded from participation in federal programs. These requirements apply to contracts and subawards funded with federal financial assistance. In addition, 200.318–200.327 requires non federal entities to follow procurement standards applicable to federal awards, which include maintaining adequate oversight and compliance with applicable federal requirements, including suspension and debarment provisions. Condition: During our review of procurement transactions charged to federal awards, we noted that the Town did not document verification that vendors used for information technology and phone system upgrades and for the purchase of tasers and body worn cameras were not suspended or debarred at the time the contracts or purchase orders were executed. Specifically, the Town did not perform or retain evidence of a search of the System for Award Management (SAM.gov) or obtain vendor certifications demonstrating compliance with federal suspension and debarment requirements for these procurements. we did not identify any vendors that were suspended or debarred at the time of procurement. We did not identify any vendors that were suspended or debarred at the time of procurement. Universe/ Population: Four contracts totaling $7,347,577 were subjected to compliance testing. For two of the four contracts totaling $90,955, the Town did not perform or retain evidence of a search SAM.gov or obtain vendor certifications demonstrating compliance with federal suspension and debarment requirements. Cause: The Town did not have written procurement procedures or internal controls that required suspension and debarment verification to be performed and documented prior to awarding contracts or issuing purchase orders funded with federal awards. As a result, procurement staff relied on informal practices that did not include consistent SAM.gov verification. Questioned Costs: No questioned costs were identified. Effect: Without performing and documenting suspension and debarment checks, the Entity increases the risk of awarding contracts to vendors that are ineligible to participate in federally funded transactions. This noncompliance exposes the Town to potential cost disallowance, increased federal oversight, and audit findings related to procurement and internal controls. Further, questioned costs could arise if future review determines that payments were made to ineligible vendors. Recommendation: We recommend that the Town: 1. Update its written procurement policies and procedures to require verification of vendor eligibility through SAM.gov prior to awarding any contract or issuing any purchase order funded with federal awards. 2. Require procurement staff to retain documentation of the suspension and debarment verification (e.g., dated SAM.gov search results or vendor certifications). 3. Provide training to relevant personnel on federal procurement requirements, including suspension and debarment compliance under 2 CFR Part 200. 4. Require that all contracts pertaining to federally funded transactions include language that addresses termination for cause as well as other requirements stipulated in 2 CFR Part 200. View of Responsible Official: Management concurs with the finding.
Finding No. 2025-030 Prior Audit Finding: 2024-036 Federal Awarding Agency: U.S. Department of Homeland Security (USDHS) Impact: Material Weakness, Material Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disaster) (Disaster Grants) 97.036 Disaster Grants – COVID-19 Federal Award Number: 4413DRAKP00000001, 4533DRAKP00000001, 4585DRAKP00000001, 4672DRAKP00000001 Applicable Compliance Requirement: Allowable Costs/Cost Principles Condition: A review of 17 FY 25 Disaster Grants payments found that 15 payments (88 percent) lacked adequate supporting documentation. Context: FEMA provides public assistance funding to states for federally declared disaster mitigation and response. To be allowable under the Disaster Grants program, costs must be directly tied to the performance of eligible work, adequately documented, and necessary and reasonable to accomplish the work properly and efficiently. DMVA issues subawards to eligible applicants, including not-for-profits and local governments, and transfers funds to other State departments for disaster response. The State (DMVA) and Disaster Grants subrecipients may contract for services but must meet state and federal procurement requirements when doing so. Contracts must include the procurement provisions detailed in Title 2 CFR 200.327. Furthermore, contractors’ performance must be monitored to ensure compliance with the contract conditions. According to management within DMVA’s Division of Homeland Security and Emergency Management (DHSEM), due to the high number of State disasters and a lack of staff resources, DMVA hired contractors to help oversee the federal disaster projects by performing administrative duties typically conducted by DHSEM staff, including reviewing and approving subrecipient applications for funding, obtaining the required documents to ensure projects were administered in accordance with FEMA requirements, and processing subrecipient payment requests. There were 327 Disaster Grants payments totaling $325,318,285 during FY 25. The audit tested 17 Disaster Grant payments totaling $188,888,098, of which 15 were inadequately unsupported. Specifically, 11 payments were partially supported by procurement contracts that did not include all federal requirements and four were not fully supported by complete or signed contracts. Other errors included: one payment contained amounts for an unrelated project; five payments were not fully supported by invoices; one payment included a markup on a subcontractor’s work; one included an advance payment that lacked required supporting documentation; one payment included a completion bonus; and several payments were not identified as allowable costs in the approved project worksheets. Cause: Due to competing priorities and inadequate supervisory review procedures, DHSEM staff and contractors did not verify that the contracts issued by subrecipients included federal requirements and that documentation for the reimbursement of subrecipient costs was received. Furthermore, contracts for interagency projects were not obtained by DMVA staff or contractors to verify that the costs were within the contract scope or that the contracts included all federal requirements. The audit noted that Department of Health and Social Services (DHSS) submitted a signed Contract/Procurement Review Waiver declining to submit documentation to DMVA for review with the understanding that DHSS would assume all responsibility for the procurement and contracts. DHSEM contractors accepted the waiver and did no monitoring to ensure contracts complied with appropriate procurement processes and included all federally required clauses. Lack of adequate review of the payment requests and supporting documentation, including supervisory review, resulted in payments without adequate invoices or other source documentation. Lack of adequate project oversight resulted in a subrecipient not providing supporting documentation within the 60-day timeline for advance payments. Criteria: Title 2 CFR 200.403(g) requires costs to be adequately documented. FEMA’s guidance for administering the program is detailed in the Public Assistance Program and Policy Guide (PAPPG), which requires Disaster Grants contracts to include the procurement related provisions of Title 2 CFR 200.327 and Homeland Security Acquisition Regulation Class Deviation 15-01 clauses. PAPPG also requires costs to be adequately documented and directly tied to the performance of eligible work. Further, the PAPPG states that FEMA does not reimburse costs incurred under a cost plus a percent of cost contract. Annually, DHSEM management updates the State Administrative Plan for the federal disaster assistance program, which is a required document in each federally approved FEMA-State Agreement for presidentially declared disasters. The purpose of the plan is to identify the State’s roles, responsibilities, processes and procedures for administering FEMA’s Disaster Grants program. The plan requires DHSEM staff to obtain documentation to support all costs claimed and to perform a thorough review to ensure compliance with programmatic and eligibility requirements. The plan also outlines the requirements for advancing FEMA funds to a subrecipient; specifically, the subrecipient must report on the status of advance funds within 30 days of receipt and has up to 60 days to provide the appropriate summary forms and support cost documentation, i.e, invoices, timesheets, etc. If the summary forms and supporting documentation are not received within the time limits, the Plan requires that the State de-obligate remaining funds, recoup advance funds, and close the subrecipient’s project file. Title 2 CFR 200.303(a) requires the State to establish and maintain effective internal controls over federal awards that provide reasonable assurance that the State is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effect: Inadequate documentation may result in unallowable costs. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: Indeterminate Recommendation: DMVA’s DHSEM director should strengthen written procedures to ensure Disaster Grants contracts are obtained and reviewed for compliance with federal requirements. Furthermore, supervisory review procedures should be strengthened to ensure DHSEM staff and contractors obtain and review cost documentation to ensure subrecipient payment requests are allowable for the project and adequately supported. Views of Responsible Officials: Management agrees with this finding.
Department of Health and Human Services and Department of Treasury 2025-001 Coronavirus State and Local Fiscal Recovery Funds (Allowable Costs, Period of Performance, and Procurement) and Congressional Directives (Procurement) Criteria: Under 2 CFR 200.302 and 200.403, non-federal entities must maintain records sufficient to demonstrate that costs charged to Federal Awards are allowable, properly allocated and adequately supported. Under 2 CFR 200.309 costs must provide documentation that costs were incurred within the approved period of performance. Additional 2 CFR 200.317-200.327 requires entities to maintain documentation sufficient to support the procurement process for the use of Federal Awards. Condition: The Center did not maintain adequate documentation to support compliance with Federal requirements related to allowable costs, period of performance, and procurement standards. Allowable Costs – The Center provided grant allocation worksheets that show individual employees hours charged to the federal awards; however, the grant allocation worksheets did not include any employee or supervisor signatures to attest the hour allocations were accurate. Additionally, certain invoices had a portion of the total costs allocated to the federal award, but the Center could not substantiate the basis for the allocation. Period of Performance – The Center had charged costs to the federal award for costs incurred outside the period of performance as defined by the grant agreement but could not provide documentation that supported the grantor allowed charges to be made for costs incurred outside that period. Procurement – The Center entered a contract with a Company under the Simple Acquisition threshold for procurement but was unable to provide documentation that quotes were obtained from multiple qualified vendors. Cause: The Center did not have effective controls in place to ensure proper documentation was obtained and retained to support compliance with the federal award. Effect: Without adequate supporting documentation the Organization is unable to demonstrate its compliance with all requirements of the federal award. Questioned Costs: $175,389 out of $2,453,443 of total expenditures tested. Auditor’s Recommendation: We recommend The Center review and revise its documentation policies and procedures to ensure that compliance is met with regards to federal awards. Management Response: Management agrees with the finding and has collaborated with grant personnel to implement standardized personnel activity reporting and cost allocation documentation for all federal grants. The Center will strengthen controls to ensure that only allowable costs incurred within the approved grant period are charged to federal awards. In addition, procurement procedures have been revised to ensure compliance with 2 CFR $$ 200.317-200.327. Corrective actions have been implemented or are in progress and apply to all federal awards moving forward beginning in FY2026.
SIGNIFICANT DEFICIENCY; CRITERIA: 2 CFR §200.318(a) requires non‑Federal entities to maintain and follow written procurement procedures that are consistent with Federal laws, the Uniform Guidance, and applicable state laws. State procurement rules also require local governments to follow competitive purchasing and contracting procedures when expending public funds.; CONDITION: The Town’s written procurement policies have not been updated to reflect current Federal procurement standards under 2 CFR §§200.317–200.327 or applicable state procurement requirements. ; EFFECT: Because the Town’s procurement policies are not current with Federal and state requirements, the Town risks noncompliance with Federal procurement standards which increases the likelihood of questioned costs for federally funded purchases. Noncurrent policies could allow insufficient competition, incomplete documentation, or use of unallowable contract types. FEMA or other Federal agencies could determine costs to be ineligible, resulting in reimbursement reductions or the need for the Town to repay Federal funds.; CAUSE: The Town had not conducted a recent review of its procurement policies and procedures and was unaware of necessary updates. Limited staffing in the finance and administrative functions contributed to the delay in updating the written policies.; RECOMMENDATION: The Town should update its written procurement policies to fully incorporate the current Federal procurement standards under 2 CFR §200.317–§200.327 and applicable state laws. The Town should provide staff training on the revised procurement procedures and establish a periodic review schedule to ensure ongoing compliance with Federal and state requirements.; VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: The Town of Spruce Pine agrees with this finding. Procurement policies and procedures will be updated to be compliant with federal and state laws. Staff will be trained on new procedures, and the policy will be reviewed on an annual basis.
SIGNIFICANT DEFICIENCY; CRITERIA: Per 2 CFR 200.320 the auditee must use appropriate procurement methods based on dollar amounts and conditions of project-level contracts.; CONDITION: For the fiscal year ending June 30, 2025 one FEMA‑funded project reviewed during the audit period, the Town allowed the contractor to begin work before a written contract was executed. The contractor mobilized and started work without a signed agreement defining scope, pricing, Federal requirements, or terms and conditions.; EFFECT: Noncompliance with Federal procurement regulations increases the risk that FEMA may consider associated costs ineligible or unreasonable. The Town could be subject to disputes over scope, pricing, or performance due to the absence of formal terms agreed upon before work began. Lack of assurance that required Federal contract provisions were included carries the potential for questioned costs that could lead to deobligation or repayment of FEMA funds.; CAUSE: The Town initiated work urgently due to the nature of the emergency event and did not follow formal procurement procedures. Staff cited time constraints and the immediate need for response activities, but no emergency procurement documentation or justification was concurrently prepared as allowed under 2 CFR §200.320(c) (noncompetitive procurement during public exigency). Personnel were also not fully aware of FEMA documentation requirements.; RECOMMENDATION: The Town should update its written procurement policies to fully incorporate the current Federal procurement standards under 2 CFR §200.317–§200.327 and applicable state laws. The Town should provide staff training on the revised procurement procedures and establish a periodic review schedule to ensure ongoing compliance with Federal and state requirements.; VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: The Town of Spruce Pine agrees with this finding. Finance procedures will be updated to include a standard form and procedure for cost and price analysis that will be implemented immediately.
2025-033 Improve Controls over the Procurement Process Compliance Requirement: Procurement and Suspension and Debarment Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of the Treasury Pass-Through Entity: None AL Number and Title: 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Award Number: SLFRP1029 (Year: 2023) Questioned Costs: None Identified Repeat of Prior Year Finding: 2024-037 Description: The Georgia Department of Human Services should improve internal controls to ensure that they are complying with the State of Georgia’s Procurement Policy. Background Information: The Coronavirus State Fiscal Recovery Fund, (CSLFRF), provides direct payments to states, US territories, Tribal governments, metropolitan cities, counties, and non-entitlement units of local government to: 1. Respond to the public health emergency with respect to Coronavirus Disease 2019 (COVID-19) or its negative economic impacts, including by providing assistance to households, small businesses, nonprofits, and impacted industries, such as tourism, travel, and hospitality; 2. Respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of the recipient that perform essential work or by providing grants to eligible employees that have eligible workers who are performing essential work; 3. Provide government services, to the extent of the reduction in revenue of the eligible entities due to the COVID-19 public health emergency relative to revenues collected in the most recent full fiscal year of the eligible entities prior to the emergency; and 4. Make necessary investments in water, sewer, or broadband infrastructure. In August 2022, the Governor’s Office of Planning and Budget (OPB) dedicated more than $1 billion of CSLFRF federal funds to the Department of Human Services (DHS) to establish the Cash Assistance program. The Cash Assistance program provided one-time cash assistance of up to $350 for active enrollees of the Medicaid, PeachCare for Kids, Supplemental Nutrition Assistance Program, and/or Temporary Assistance for Needy Families government benefit programs in response to the negative economic impacts of the COVID-19 public health emergency. Criteria: As a recipient of federal awards, the DHS is required to establish, document, and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. The DHS is also required to comply with the procurement standards set forth in 2 CFR 200.317 through 2 CFR 200.327 of the Uniform Guidance. Pursuant to 2 CFR 200.317, “When conducting procurement transactions under a Federal award, a State… must follow the same policies and procedures it uses for procurements with non-Federal funds.” As a state agency, the DHS adheres to the State of Georgia Procurement Manual issued by the Department of Administrative Services (DOAS). Per the State of Georgia Procurement Manual, all contract extensions must occur in writing and require the supplier’s consent. The State Procurement Department’s (SPD) prior consent to the contract extension may also be required depending on the type of extension. Condition: Our examination of compliance with Procurement and Suspension and Debarment regulations for the Cash Assistance program revealed that the DHS did not follow the State of Georgia’s ongoing contract management process for the continuation of services. The DHS was also unable to provide a written notice of extension or amendment to continue services and was unable to provide documentation of written permission from the SPD. Cause: Through discussion with the DHS management, the DHS relied on the contractor to replace cash assistance cards that were lost or undeliverable in the prior year under the original terms of the contract rather than extending or amending the contract. Effect: Without a valid contract extension or amendment, federal funds may be used in a manner that is not in compliance with federal provisions and the Georgia Procurement Manual. Recommendation: The DHS should improve internal controls as they relate to the procurement and contracting processes to ensure that all contract extensions or amendments follow the processes established in the Georgia Procurement Manual. Views of Responsible Officials: DHS concurs with the finding.