FINDING 2023-002 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): FY 21/22, FY 22/23 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. 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 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. During the audit period, the School Corporation had 11 vendors with purchases totaling $556,523 that were considered small purchases. All 11 vendors were selected for testing. For 6 vendors, the School Corporation could not provide the procurement history or the rationale for the method of procurement, selection of vendor, and basis for price. The total dollar amount spent with these 6 vendors was $136,422. 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. INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed that the Food Service Director verified vendors were not suspended or debarred by including a clause in the vendor contract or collecting a certification from the vendor. Eight covered transactions that equaled or exceeded $25,000 were identified. All eight transactions, totaling $704,116, were selected for testing. Two transactions from 1 vendor, totaling $59,346, did not have documentation to show that the School Corporation verified the vendor's suspension and debarment status prior to payment. The lack of internal controls and noncompliance were systemic 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. (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 19 SOUTH SPENCER COUNTY 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. . . ." 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 designed by management of the School Corporation. Embedded within a properly designed or implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to for vendors that fell within the small purchase threshold 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. 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 2023-002 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): FY 21/22, FY 22/23 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. 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 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. During the audit period, the School Corporation had 11 vendors with purchases totaling $556,523 that were considered small purchases. All 11 vendors were selected for testing. For 6 vendors, the School Corporation could not provide the procurement history or the rationale for the method of procurement, selection of vendor, and basis for price. The total dollar amount spent with these 6 vendors was $136,422. 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. INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed that the Food Service Director verified vendors were not suspended or debarred by including a clause in the vendor contract or collecting a certification from the vendor. Eight covered transactions that equaled or exceeded $25,000 were identified. All eight transactions, totaling $704,116, were selected for testing. Two transactions from 1 vendor, totaling $59,346, did not have documentation to show that the School Corporation verified the vendor's suspension and debarment status prior to payment. The lack of internal controls and noncompliance were systemic 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. (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 19 SOUTH SPENCER COUNTY 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. . . ." 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 designed by management of the School Corporation. Embedded within a properly designed or implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to for vendors that fell within the small purchase threshold 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. 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 2023-002 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): FY 21/22, FY 22/23 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. 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 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. During the audit period, the School Corporation had 11 vendors with purchases totaling $556,523 that were considered small purchases. All 11 vendors were selected for testing. For 6 vendors, the School Corporation could not provide the procurement history or the rationale for the method of procurement, selection of vendor, and basis for price. The total dollar amount spent with these 6 vendors was $136,422. 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. INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed that the Food Service Director verified vendors were not suspended or debarred by including a clause in the vendor contract or collecting a certification from the vendor. Eight covered transactions that equaled or exceeded $25,000 were identified. All eight transactions, totaling $704,116, were selected for testing. Two transactions from 1 vendor, totaling $59,346, did not have documentation to show that the School Corporation verified the vendor's suspension and debarment status prior to payment. The lack of internal controls and noncompliance were systemic 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. (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 19 SOUTH SPENCER COUNTY 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. . . ." 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 designed by management of the School Corporation. Embedded within a properly designed or implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to for vendors that fell within the small purchase threshold 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. 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 2023-002 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): FY 21/22, FY 22/23 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. 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 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. During the audit period, the School Corporation had 11 vendors with purchases totaling $556,523 that were considered small purchases. All 11 vendors were selected for testing. For 6 vendors, the School Corporation could not provide the procurement history or the rationale for the method of procurement, selection of vendor, and basis for price. The total dollar amount spent with these 6 vendors was $136,422. 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. INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed that the Food Service Director verified vendors were not suspended or debarred by including a clause in the vendor contract or collecting a certification from the vendor. Eight covered transactions that equaled or exceeded $25,000 were identified. All eight transactions, totaling $704,116, were selected for testing. Two transactions from 1 vendor, totaling $59,346, did not have documentation to show that the School Corporation verified the vendor's suspension and debarment status prior to payment. The lack of internal controls and noncompliance were systemic 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. (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 19 SOUTH SPENCER COUNTY 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. . . ." 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 designed by management of the School Corporation. Embedded within a properly designed or implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to for vendors that fell within the small purchase threshold 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. 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 2023-002 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): FY 21/22, FY 22/23 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. 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 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. During the audit period, the School Corporation had 11 vendors with purchases totaling $556,523 that were considered small purchases. All 11 vendors were selected for testing. For 6 vendors, the School Corporation could not provide the procurement history or the rationale for the method of procurement, selection of vendor, and basis for price. The total dollar amount spent with these 6 vendors was $136,422. 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. INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed that the Food Service Director verified vendors were not suspended or debarred by including a clause in the vendor contract or collecting a certification from the vendor. Eight covered transactions that equaled or exceeded $25,000 were identified. All eight transactions, totaling $704,116, were selected for testing. Two transactions from 1 vendor, totaling $59,346, did not have documentation to show that the School Corporation verified the vendor's suspension and debarment status prior to payment. The lack of internal controls and noncompliance were systemic 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. (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 19 SOUTH SPENCER COUNTY 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. . . ." 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 designed by management of the School Corporation. Embedded within a properly designed or implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to for vendors that fell within the small purchase threshold 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. 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 2023-002 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): FY 21/22, FY 22/23 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. 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 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. During the audit period, the School Corporation had 11 vendors with purchases totaling $556,523 that were considered small purchases. All 11 vendors were selected for testing. For 6 vendors, the School Corporation could not provide the procurement history or the rationale for the method of procurement, selection of vendor, and basis for price. The total dollar amount spent with these 6 vendors was $136,422. 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. INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed that the Food Service Director verified vendors were not suspended or debarred by including a clause in the vendor contract or collecting a certification from the vendor. Eight covered transactions that equaled or exceeded $25,000 were identified. All eight transactions, totaling $704,116, were selected for testing. Two transactions from 1 vendor, totaling $59,346, did not have documentation to show that the School Corporation verified the vendor's suspension and debarment status prior to payment. The lack of internal controls and noncompliance were systemic 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. (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 19 SOUTH SPENCER COUNTY 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. . . ." 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 designed by management of the School Corporation. Embedded within a properly designed or implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to for vendors that fell within the small purchase threshold 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. 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.
MUNICIPALITY OF PATILLAS, PUERTO RICO SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2023 SECTION III – Federal Award Finding and Questioned Costs FINDING 2023-005 FEDERAL PROGRAM COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) (ASSISTANCE LISTING NO.14.228) DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PASS THROUGH STATE HOUSING DEPARTMENT CATEGORY INTERNAL CONTROL/COMPLIANCE NONCOMPLIANCE PROCUREMENT AND SUSPENSION AND DEBARMENT CONDITIONS During our audits test we noted that the Municipality did not include the applicable clauses in two of the contracts as required by 2 CRF section 200.327. CRITERIA The contract for the delegation of funds between the Municipality and the Department of Housing of Puerto Rico establishes that the subrecipient must ensure that every contract to purchase goods and services paid with CDBG funds include the applicable contract clauses required by the 2 CFR section 200.327 appendix II. CAUSE The Municipal Secretary Office failed to take internal control measures to ensure that the contracts included all clauses required by applicable regulations. EFFECT The Municipality is in noncompliance with the applicable requirements. RECOMMENDATION The Municipal Secretary Office should implement adequate internal control procedures to ensure that the contracts contain all the clauses required by the federal regulation. QUESTIONED COST: None PRIOR YEAR Not Applicable
Finding 2023-002: Procurement, Suspension and Debarment (Material Weakness) Federal Program: U.S. Department of the Treasury: ALN 21.027 Criteria or Specific Requirement: 2 CFR Section 200.318 requires that the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. 2 CFR Section 200.214 requires that, for covered transactions, a non-Federal entity must verify that entities are not suspended, debarred or otherwise excluded. This verification may be accomplished by checking the System for Award Management (SAM) website maintained by the General Services Administration. Condition: AHCMC does not have a formal procurement policy which requires full and open competition for purchases of goods and services. In addition, during the year under audit, AHCMC did not perform the screening process for all payments made with Federal funds. Cause: AHCMC did not have polices and procedures in place throughout the year to perform and maintain documentation of its procurement procedures. In addition, AHCMC did not perform and maintain documentation of the SAM screening. Effect or Potential Effect: Failure to perform the proper procurement procedures could result in disallowance of Federal expenditures based on lack of fair competition. In addition, failure to screen potential vendors, suppliers, employees, fellows or other non-contracted Federal transactions against the suspended and debarred list increases the possibility that U.S. Government funds may inadvertently be provided to individuals or organizations deemed to be excluded parties by the U.S. Government. Questioned Costs: None noted. Context: With a formal procurement policy, AHCMC did not comply with the procurement standards in the Uniform Guidance. Payments were made throughout the year by AHCMC without performing the SAM screening process. The SAM screening process was done after the fact during the audit and no suspended, debarred or otherwise excluded parties were paid Federal funds. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: AHCMC should implement a procurement policy that conforms to the Uniform Guidance. Furthermore, AHCMC should maintain documentation in its files to provide evidence to support that it followed the procurement policy. In addition, AHCMC should establish internal controls to ensure documentation is maintained to evidence that it performed the required suspension and debarment searches on the SAM website.
Finding 2023-004 – Material Weakness AL No: 20.507 Federal Grantor: U.S. Department of Transportation, Federal Transit Administration, Federal Transit Formula Grants - Direct Award. Compliance Requirement: Procurement, Suspension and Debarment. Condition: The District was unable to provide documentation that the procurement of the CNG tank replacement project for five Orion buses exceeding the simplified acquisition threshold of $250,000 was approved by the Board. There is documentation that an invitation for bid (IFB) was released for the project, but only one bid was received and the District awarded the contract to the sole bidder. Missing documentation includes support of the rationale to approve the contract absent evidence of full and open competition. The District was also not able to provide the request for proposal for review. Criteria: 2 CFR Part 200 Subpart E (Uniform Guidance) states the following: Section 200.318(a) states that “The non-federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or service required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in Sections 200.317 through 200.327.” Section 200.318(i) states that “The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.” Section 200.320(c) states that “There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold…; (2) The item is available only from a single source; (3) The public exigency or emergency for the retirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non- Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate.” Section 200.324(a) states that “The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals.” Cause: Staff turnover at the District and the need for the project to be completed by a certain date to avoid the buses losing certification led to the lack of adequate records being maintained. Effect: The District was unable to prove it was in compliance with the Uniform Guidance regarding open competition on procurements. Context: The CNG tank replacement needed to be completed by a certain timeframe in order for the buses to be operational, so not every step was documented. The awarded contract was signed on the date of a Board meeting, but the Board minutes did not document that this contract was reviewed nor approved by the Board. Recommendation: We recommend the District establish a procurement folder on its server with subfolders for each individual procurement where documentation of each procurement is maintained, including advertising of the procurement, requests for proposals, proposals received, analysis of reasons for selecting the winning bid, executed contract, certifications by contractor if not part of proposal or executed contract, management report to board recommending which bid should be approved, board resolution approving the winning bid and for contracts under $250,000 a memo or form documenting bids received and reason for selecting the bid, including reasons for not selecting the lowest bid if applicable. We also recommend training be provided to staff that work on procurements of the requirements under Uniform Guidance Section 2 CFR 200.318 to 200.326. View of Responsible Officials and Planned Corrective Action: Management’s response and planned corrective action is included at the Corrective Action Plan end of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2021-2022, FY2022-2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2021-005. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the procurement of goods and the suspension and debarment of vendors. Procurement - Micro-Purchases Upon inquiry of the School Corporation in order to review the procedures in place for verifying micro purchase procedures the School Corporation disclosed its process for micro-purchases, typically those purchases for $10,000 or under, was for the purchase to be reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. The review was documented by initials or a signature on the claim. To verify the internal control was operating effectively four vendors that fell within the micro-purchase threshold were selected for testing. Two of the four vendors selected were not reviewed, as there was no documentation of initials or a signature on the corresponding claim. Procurement - Small Purchases When the value of goods or services exceeds the simplified acquisition threshold, the proper purchasing method would be the bidding process, unless the purchase meets certain other qualifications. Federal regulations allow for informal procurement methods when the value of the procurement for goods or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Upon inquiry of the School Corporation in order to review the procedures in place for verifying small purchase procedures the School Corporation disclosed it had two processes for ensuring proper procurement procedures were followed. There was one process for small purchases that required a contract and one process for small purchases that did not require a contract. For small purchases requiring a contract, the Food Service Director made the determination, which was then reviewed and approved by the School Board. Small purchases that did not require a contract were reviewed by the Treasurer or Food Service Director to ensure proper procurement procedures were followed. To verify the control was operating effectively five of the six vendors that fell within the small purchase threshold were selected for testing. Of the five tested, one contracted vendor and three noncontracted vendors did not have evidence of a review. Due to the lack of effective internal controls over small purchases, three of five small purchase vendors tested did not obtain the required price or rate quotes. In addition, documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures included the School Board approving bids, which include a certification from the vendor. The one covered transaction identified was not approved by the School Board. As such the internal control was determined to not be properly implemented. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria Indiana Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 200.318(i) states: "The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement . . . (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Cause A proper system of internal controls was not implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement methods used were not properly documented. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding 2023-001 Significant Deficiency and Material Instance of Non-Compliance Procurement Policy This finding impacts the procurement and suspension and debarment compliance requirement forthe major program, Assistance Listing Number 84.282 Charter Schools (CSP), funded by the U.S. Department of Education and passed-through by the Commonwealth of Massachusetts Department of Elementary and Secondary Education (DESE). Criteria: The School must follow the procurement standards set out at 2 CFR Sections 200.317. through 200.327. The School also must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statues and the procurement requirements identified in 2 CFR part 200. Condition: As part of testing the School’s compliance with Uniform Guidance procurement standards, we reviewed the School’s procurement policy against Uniform Guidance standards and tested three transactions totaling approximately $378,000 for evidence of competitive bids. While the School maintains a procurement policy in accordance with Uniform Guidance standards, the School did not maintain evidence of bids in accordance with its procurement policy. Cause: The School had a limited amount of time to apply for and spend the CSP funds and open its high school with the goods that were purchased. This led to the School not following its existing procurement policy. Effect: Non-compliance with the Uniform Guidance, potentially resulting in a decrease in Federal Funding. The finding did not result in any questioned costs as evidence of purchases was maintained. Repeat Finding: No. Recommendation: AAFCPAs recommends that management follows its procurement policy which complies with Uniform Guidance. Management Response: Management prioritized being equipped for the opening of school with students when faced with a tight timeline to apply for and expend grant funds. In a time when delays on goods and services were normalized, management moved forward with a furniture order that met all of our operational needs including a guaranteed delivery timeline that included assembly and setup as well as the quality and aesthetic of the furniture we were confident with. In doing so, we did not ensure full compliance with the School's procurement process. Management remains confident in the School's procurement policies and if ever a similar, albeit atypical, situation should arise we will ensure compliance with the School's procurement policies. Management understands that following the School's procurement policy, which complies with Uniform Guidance, is necessary so as not to jeopardize future funding opportunities.
Criteria: 2 CFR Section 200.327 states that “(financial) information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances.” Under this reporting requirement, the program must submit a Federal Financial Report (FFR) within 90 days after the close of the statutory grant period. Condition: We noted four FFRs were not timely submitted. Context: The program was required to submit eight FFRs during the year. During the audit, we noted that four FFRs selected for testing were submitted between 92 and 117 days after the close of the statutory grant period. Cause: Based on further inquiry with Department personnel, we noted that the delay in submitting the FFRs was caused by a lack of personnel available to monitor reporting requirements and complete reporting requirements timely. Effect: Failure to timely submit FFRs results in noncompliance with the reporting requirement. Questioned Costs: None Identification as a Repeat Finding, if applicable: Not applicable Recommendation: We recommend that management be more diligent in following Federal deadlines in order to ensure compliance with Federal requirements. Views of Responsible Officials and Planned Corrective Action: See Part VI Corrective Action Plan.
Criteria: 2 CFR Section 200.327 states that “(financial) information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances.” Under this reporting requirement, the program must submit a Federal Financial Report (FFR) within 90 days after the close of the statutory grant period. Condition: We noted four FFRs were not timely submitted. Context: The program was required to submit eight FFRs during the year. During the audit, we noted that four FFRs selected for testing were submitted between 92 and 117 days after the close of the statutory grant period. Cause: Based on further inquiry with Department personnel, we noted that the delay in submitting the FFRs was caused by a lack of personnel available to monitor reporting requirements and complete reporting requirements timely. Effect: Failure to timely submit FFRs results in noncompliance with the reporting requirement. Questioned Costs: None Identification as a Repeat Finding, if applicable: Not applicable Recommendation: We recommend that management be more diligent in following Federal deadlines in order to ensure compliance with Federal requirements. Views of Responsible Officials and Planned Corrective Action: See Part VI Corrective Action Plan.
Title V Grant Procurement DEPARTMENT OF EDUCATION ALN #: 84.031S Federal Award Identification #: P031S200171 Condition: The University does not have a purchasing or competitive bid policy that follows the federal regulations. The University did not follow its policy and federal procurement requirements when making purchasing and vendor decisions with Title V grant funds. Criteria: 2 CFR 200.318 through 200.327 Questioned Costs: $0 Context: While the expenditures tested as part of the audit met allowable cost and allowable activities requirements, the University did not follow its competitive bid policy nor were minimum federal procurement requirements followed properly. Cause: University personnel were unfamiliar with the federal procurement requirements. Effect: Noncompliance with procurement requirements that could impact future funding opportunities. Identification as repeat finding, if applicable: Not applicable Recommendation: We recommend the University update their policies that follow the federal procurement requirements and the University implement procedures and controls to help prevent deviations from the policies. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. See corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. For fiscal year 2023, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation did not obtain price or rate quotes nor was there documentation detailing the history of procurement, which must include the reason for the procurement method used. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. “Covered transactions” include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Criteria: Under Title 2 CFR 200.327 and 200.328, Financial reporting, and grant contract conditions require a non-federal entity direct recipient to report on federal awards and include all activity of the reporting period on a quarterly basis, and be supported by applicable accounting or performance records, and are fairly presented in accordance with applicable governing requirements. Condition/Context: We tested two quarterly reports and noted that neither of the Project and Expenditure Report reports tied to supporting detail schedules of expenditures accumulated. Cause: The individuals preparing the reports did not have the proper knowledge and understanding to perform those duties. Effect: The County was not able to file correct quarterly reports in compliance with federal regulations and contained material errors. Without a centralized system of internal controls that includes documentation and preparation by an individual with the required skills and knowledge, review and timely reconciliation of reported expenditures and amounts reported to federal agencies may be inaccurate. Question costs: None. Repeat finding: No. Recommendation: We recommend the County assigns a knowledgeable individual with proper training and skill to complete the reports, ensuring that the reviewer also ties the reports to the support before sending to federal agencies. Views of Responsible Officials: The County has restructured the duties of the Finance office to ensure the staff with the most appropriate knowledge base is performing the duties that are new or unusual while providing the training necessary to ensure that the source work is done in a way that supports the appropriate reporting outcomes.
Type of Finding: Material Weakness in Internal Control over Compliance Federal Agency: United States Department of Health and Human Services Federal Program Name: Family Violence Prevention and Services/Discretionary Assistance Listing Number: 93.592 Federal Award Identification Number and Year: 90EV0467 Award Period for 90EV0467-02 and 90EV0467-03: September 30, 2020 through September 29, 2024 Award Period for 90EV0467-C6: March 15, 2021 through September 30, 2025 Criteria or specific requirement: CFR 200.318 states the non-Federal entity's documented procurement procedures must conform to the procurement standards identified in CFR sections 200.317 through 200.327. Condition: During our procurement testing, it was noted the procurement policy was written to comply with OMB Circular A-110 (2 CFR 215). As the requirements stated in the Circular have been superseded by OMB Uniform Guidance 2 CFR part 200, the policy as it is written is out of compliance. Questioned costs: None. Context: Though the current procurement policy was not updated to comply with 2 CFR Part 200 procurement standards the 3 samples selected during our audit did not identify instances of noncompliance with procurement standards. Cause: Management was not aware of the specific compliance requirement changes and thus, did not update its procurement policy. Effect: By not having an updated policy, the Organization could enter into a material transaction that is not compliant with 2 CFR Part 200. Repeat Finding: No. Recommendation: We recommend the client update its procurement policy so it is compliant with 2 CFR Part 200. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Type of Finding: Material Weakness in Internal Control over Compliance Federal Agency: United States Department of Health and Human Services Federal Program Name: Family Violence Prevention and Services/Discretionary Assistance Listing Number: 93.592 Federal Award Identification Number and Year: 90EV0467 Award Period for 90EV0467-02 and 90EV0467-03: September 30, 2020 through September 29, 2024 Award Period for 90EV0467-C6: March 15, 2021 through September 30, 2025 Criteria or specific requirement: CFR 200.318 states the non-Federal entity's documented procurement procedures must conform to the procurement standards identified in CFR sections 200.317 through 200.327. Condition: During our procurement testing, it was noted the procurement policy was written to comply with OMB Circular A-110 (2 CFR 215). As the requirements stated in the Circular have been superseded by OMB Uniform Guidance 2 CFR part 200, the policy as it is written is out of compliance. Questioned costs: None. Context: Though the current procurement policy was not updated to comply with 2 CFR Part 200 procurement standards the 3 samples selected during our audit did not identify instances of noncompliance with procurement standards. Cause: Management was not aware of the specific compliance requirement changes and thus, did not update its procurement policy. Effect: By not having an updated policy, the Organization could enter into a material transaction that is not compliant with 2 CFR Part 200. Repeat Finding: No. Recommendation: We recommend the client update its procurement policy so it is compliant with 2 CFR Part 200. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Type of Finding: Material Weakness in Internal Control over Compliance Federal Agency: United States Department of Health and Human Services Federal Program Name: Family Violence Prevention and Services/Discretionary Assistance Listing Number: 93.592 Federal Award Identification Number and Year: 90EV0467 Award Period for 90EV0467-02 and 90EV0467-03: September 30, 2020 through September 29, 2024 Award Period for 90EV0467-C6: March 15, 2021 through September 30, 2025 Criteria or specific requirement: CFR 200.318 states the non-Federal entity's documented procurement procedures must conform to the procurement standards identified in CFR sections 200.317 through 200.327. Condition: During our procurement testing, it was noted the procurement policy was written to comply with OMB Circular A-110 (2 CFR 215). As the requirements stated in the Circular have been superseded by OMB Uniform Guidance 2 CFR part 200, the policy as it is written is out of compliance. Questioned costs: None. Context: Though the current procurement policy was not updated to comply with 2 CFR Part 200 procurement standards the 3 samples selected during our audit did not identify instances of noncompliance with procurement standards. Cause: Management was not aware of the specific compliance requirement changes and thus, did not update its procurement policy. Effect: By not having an updated policy, the Organization could enter into a material transaction that is not compliant with 2 CFR Part 200. Repeat Finding: No. Recommendation: We recommend the client update its procurement policy so it is compliant with 2 CFR Part 200. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Type of Finding: Material Weakness in Internal Control over Compliance Federal Agency: United States Department of Health and Human Services Federal Program Name: Family Violence Prevention and Services/Discretionary Assistance Listing Number: 93.592 Federal Award Identification Number and Year: 90EV0467 Award Period for 90EV0467-02 and 90EV0467-03: September 30, 2020 through September 29, 2024 Award Period for 90EV0467-C6: March 15, 2021 through September 30, 2025 Criteria or specific requirement: CFR 200.318 states the non-Federal entity's documented procurement procedures must conform to the procurement standards identified in CFR sections 200.317 through 200.327. Condition: During our procurement testing, it was noted the procurement policy was written to comply with OMB Circular A-110 (2 CFR 215). As the requirements stated in the Circular have been superseded by OMB Uniform Guidance 2 CFR part 200, the policy as it is written is out of compliance. Questioned costs: None. Context: Though the current procurement policy was not updated to comply with 2 CFR Part 200 procurement standards the 3 samples selected during our audit did not identify instances of noncompliance with procurement standards. Cause: Management was not aware of the specific compliance requirement changes and thus, did not update its procurement policy. Effect: By not having an updated policy, the Organization could enter into a material transaction that is not compliant with 2 CFR Part 200. Repeat Finding: No. Recommendation: We recommend the client update its procurement policy so it is compliant with 2 CFR Part 200. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Finding 2023-001-Procurement, Suspension and Debarment Federal agency: U.S. Department of Health and Human Services Pass-through entity: The University of Texas of Austin Program: Birth Defects and Development Disabilities – Prevention and Surveillance Assistance listing number: 93.073 Federal award identification number and year: • NU84DD000009 2021 • NU84DD000012 2022 Criteria: 2 CFR 200.318 states non-federal entities must have and use documented procurement procedures that conform to 2 CFR 200.317 through 200.327. 2 CFR 200.214 states non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Order 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 requires adequate documentation of compliance with 2 CFR 200.214. Condition and Context: The Foundation does not have a formal procurement policy under requirements of 2 CFR 200.317 through 200.327. The Foundation established policies and procedures over suspension and debarment, including checking all vendors against the government suspension and debarment listing. We noted as part of our testing that there was no documentation that these policies and procedures were being followed. Cause: The Foundation procurement policy did not conform to 2 CFR 200.317 through 200.327 and management did not document compliance with the above criteria regarding suspension and debarment. Effect: The Foundation procurement policy did not conform to 2 CFR 200.317 through 200.327. The Foundation’s documentation was lacking evidence of tracking vendors for suspension and debarment. Questioned costs: None Repeat Finding: No Recommendation: We recommend management develop a formal procurement policy to conform to 2 CFR 200.317 through 200.327. We recommend that the Foundation add and monitor the formal procedure and policy with designated individual(s) responsible to ensure documentation is retained, satisfying the compliance requirement detailed above. Views of responsible individuals: Management agrees with the finding and recommendation. See corrective action plan for further information.
Finding 2023-001-Procurement, Suspension and Debarment Federal agency: U.S. Department of Health and Human Services Pass-through entity: The University of Texas of Austin Program: Birth Defects and Development Disabilities – Prevention and Surveillance Assistance listing number: 93.073 Federal award identification number and year: • NU84DD000009 2021 • NU84DD000012 2022 Criteria: 2 CFR 200.318 states non-federal entities must have and use documented procurement procedures that conform to 2 CFR 200.317 through 200.327. 2 CFR 200.214 states non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Order 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 requires adequate documentation of compliance with 2 CFR 200.214. Condition and Context: The Foundation does not have a formal procurement policy under requirements of 2 CFR 200.317 through 200.327. The Foundation established policies and procedures over suspension and debarment, including checking all vendors against the government suspension and debarment listing. We noted as part of our testing that there was no documentation that these policies and procedures were being followed. Cause: The Foundation procurement policy did not conform to 2 CFR 200.317 through 200.327 and management did not document compliance with the above criteria regarding suspension and debarment. Effect: The Foundation procurement policy did not conform to 2 CFR 200.317 through 200.327. The Foundation’s documentation was lacking evidence of tracking vendors for suspension and debarment. Questioned costs: None Repeat Finding: No Recommendation: We recommend management develop a formal procurement policy to conform to 2 CFR 200.317 through 200.327. We recommend that the Foundation add and monitor the formal procedure and policy with designated individual(s) responsible to ensure documentation is retained, satisfying the compliance requirement detailed above. Views of responsible individuals: Management agrees with the finding and recommendation. See corrective action plan for further information.
Finding 2023-001-Procurement, Suspension and Debarment Federal agency: U.S. Department of Health and Human Services Pass-through entity: The University of Texas of Austin Program: Birth Defects and Development Disabilities – Prevention and Surveillance Assistance listing number: 93.073 Federal award identification number and year: • NU84DD000009 2021 • NU84DD000012 2022 Criteria: 2 CFR 200.318 states non-federal entities must have and use documented procurement procedures that conform to 2 CFR 200.317 through 200.327. 2 CFR 200.214 states non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Order 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 requires adequate documentation of compliance with 2 CFR 200.214. Condition and Context: The Foundation does not have a formal procurement policy under requirements of 2 CFR 200.317 through 200.327. The Foundation established policies and procedures over suspension and debarment, including checking all vendors against the government suspension and debarment listing. We noted as part of our testing that there was no documentation that these policies and procedures were being followed. Cause: The Foundation procurement policy did not conform to 2 CFR 200.317 through 200.327 and management did not document compliance with the above criteria regarding suspension and debarment. Effect: The Foundation procurement policy did not conform to 2 CFR 200.317 through 200.327. The Foundation’s documentation was lacking evidence of tracking vendors for suspension and debarment. Questioned costs: None Repeat Finding: No Recommendation: We recommend management develop a formal procurement policy to conform to 2 CFR 200.317 through 200.327. We recommend that the Foundation add and monitor the formal procedure and policy with designated individual(s) responsible to ensure documentation is retained, satisfying the compliance requirement detailed above. Views of responsible individuals: Management agrees with the finding and recommendation. See corrective action plan for further information.
Condition and Context On HC21-0011-021, the FFRs for the quarters ended December 31, 2022, March 31, 2023 and June 30, 2023 were not submitted within 30 days following the calendar quarter. The December 31, 2022 FFR was filed on August 28, 2023, March 31, 2023 FFR was filed on November 8, 2023 and June 30, 2023 FFR was filed on December 12, 2023. Criteria Per U.S. Department of Housing and Urban Development Reporting Guidance in connection with 2 CFR 200.327, for HC21-0011-021 the FFRs are due quarterly; within 30 days after end of the reporting period. Cause As a result of understaffing in the accounting department, Nueva Esperanza, Inc. was not able to meet Federal Financial Assistance Management Improvement Act (“FAMI”) timeliness requirements. Effect Nueva Esperanza, Inc. was not in compliance with Federal requirements relating to FAMI reporting. Recommendation We recommend that Nueva Esperanza, Inc. establishes controls to identify all award reporting requirements and file reports on a timely basis.
Condition and Context On HC21-0011-021, the FFRs for the quarters ended December 31, 2022, March 31, 2023 and June 30, 2023 were not submitted within 30 days following the calendar quarter. The December 31, 2022 FFR was filed on August 28, 2023, March 31, 2023 FFR was filed on November 8, 2023 and June 30, 2023 FFR was filed on December 12, 2023. Criteria Per U.S. Department of Housing and Urban Development Reporting Guidance in connection with 2 CFR 200.327, for HC21-0011-021 the FFRs are due quarterly; within 30 days after end of the reporting period. Cause As a result of understaffing in the accounting department, Nueva Esperanza, Inc. was not able to meet Federal Financial Assistance Management Improvement Act (“FAMI”) timeliness requirements. Effect Nueva Esperanza, Inc. was not in compliance with Federal requirements relating to FAMI reporting. Recommendation We recommend that Nueva Esperanza, Inc. establishes controls to identify all award reporting requirements and file reports on a timely basis.
Identification of the Federal Program: Assistance Listing Number: 93.612 Assistance Listing Title: Native Hawaiian Revolving Loan Program Federal Agency: Department of Health and Human Services Pass-Through Entity: N/A Federal Award Number and Award Year: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Suspension and Debarment, Non-Federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include those procurement contracts for goods and services awarded under a nonprocurement 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 nonprocurement transactions entered into by a recipient (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 non-Federal 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 and available at https://www.sam.gov/portal/public/SAM/ (Note: The OMB guidance at 2 CFR part 180 and agency implementing regulations still refer to the SAM Exclusions as the Excluded Parties List System), (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). In accordance with OMB Uniform Guidance, entities under the program, including subrecipients of a state, must follow the procurement standards in 2 CFR sections § 200.318 through § 200.327, including ensuring that the procurement method used for the contracts are appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. C.F.R. § 200.319 prescribes that 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. Further, the non-Federal entity must ensure that all prequalified lists of persons, firms, or products which are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition. Also, the non-Federal entity must not preclude potential bidders from qualifying during the solicitation period. Condition: During our audit, we noted that there was no supporting document to indicate that OHA verified the vendors in SAM to ensure that the vendors were not suspended or debarred from federally funded programs before the contract was entered into. Cause: OHA does not have policies and processes in place to check and ensure the suspension and debarment review process for vendors that provide goods or services to OHA’s programs prior to entering into a contract. Effect or Potential Effect: Without verifying whether vendors are suspended or debarred prior to the contract being awarded, OHA could be contracting with vendors that are prohibited from working on federally funded projects. Questioned Costs: None. Context: See condition above for context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommended OHA to include SAM check in its internal control policies and procedures to incorporate the suspension and debarment verification requirements prior to awarding contracts. Views of Responsible Officials: Management concurs the finding. Refer to the separate management’s corrective action plan.
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 200.317 through 200.327. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR Part 200. For acquisitions exceeding the simplified acquisition threshold, the non-Federal entity must use one of the following procurement methods: the sealed bid method if the acquisition meets the criteria in 2 CFR 200.320(b); the competitive proposals method under the conditions specified in 2 CFR 200.320(b)(2); or the noncompetitive proposals method (i.e., solicit a proposal from only one source) but only when one or more of four circumstances are met, in accordance with 2 CFR 200.320(c). 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 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 180.215. During testing of federal compliance, the Center was unable to provide evidence of competitive bidding of a contract nor was a copy of the final contract maintained. Further it was noted that the Center did not check the suspended or debarred list for covered transactions. The Center should implement additional procedures to ensure competitive bidding is undertaken when required and that documentation for such processes is maintained; copies of executed contracts are maintained. Further the Center should ensure that vendors are not on the suspended or debarred list.
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 200.317 through 200.327. They must use their own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR Part 200. For acquisitions exceeding the simplified acquisition threshold, the non-Federal entity must use one of the following procurement methods: the sealed bid method if the acquisition meets the criteria in 2 CFR 200.320(b); the competitive proposals method under the conditions specified in 2 CFR 200.320(b)(2); or the noncompetitive proposals method (i.e., solicit a proposal from only one source) but only when one or more of four circumstances are met, in accordance with 2 CFR 200.320(c). 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 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 180.215. During testing of federal compliance, the Center was unable to provide evidence of competitive bidding of a contract nor was a copy of the final contract maintained. Further it was noted that the Center did not check the suspended or debarred list for covered transactions. The Center should implement additional procedures to ensure competitive bidding is undertaken when required and that documentation for such processes is maintained; copies of executed contracts are maintained. Further the Center should ensure that vendors are not on the suspended or debarred list.
Assistance Listings number and name: 10.691 Good Neighbor Authority Award numbers and year: 22-GN-11030400-027, January 14, 2022 through January 14, 2027 Federal agency: U.S. Department of Agriculture Compliance requirements: Procurement Questioned costs: Unknown Condition—Contrary to federal regulations and the County’s policies and procedures, the Flood Control Department (Department) failed to consider price as a selection factor when awarding a single vendor a construction services contract for which the County paid $5,896,715 during the period July 1, 2022 through June 30, 2023, which was 79.8 percent of the federal program’s expenditures. The Department evaluated the 2 bids it received but awarded the contract to the successful vendor based on its professional qualifications without considering price. Instead, the County negotiated the price of the services after the contract was awarded. Effect—There is an increased risk that the County may have overpaid for construction services, limiting the amount of federal program monies available to carry out other program objectives. Further, the Department was unable to demonstrate whether the County could have acquired these services at a lower cost. This finding could potentially affect other federal programs that the Department administers. Cause—County management reported that the Department’s program personnel misunderstood the County’s procurement policies and procedures for procuring services with federal monies, which require them to follow federal Uniform Guidance regulations and consider cost as a factor. They further explained that instead the Department followed Arizona Revised Statutes, which may be used for procuring construction contracts with State and local monies and does not use cost as a factor when selecting a vendor. Finally, the County did not have a designated person assigned to review all County procurements to verify compliance with federal regulations and the County’s policies. Criteria—Federal Uniform Guidance regulations require the County to establish and follow competitive purchasing policies and procedures that align with federal Uniform Guidance procurement standards when acquiring goods and services using federal awards (2 CFR §§200.318 through 200.327). Specifically, these regulations require that the County use a written, fixed-price contract award to the lowest responsive and responsible bidder after considering factors such as discounts, transportation costs, and life cycle costs, and only architectural/engineering services can be procured without considering price as a selection factor (2 CFR §200.320). Further, the County’s policies and procedures require that the County follow Federal Uniform Guidance procurement procedures outlined in 2 CFR §§200 when making purchases with federal monies. Finally, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The County should: 1. Monitor departments’ adherence to the County’s policies and procedures for purchasing goods and services using federal awards, including the departments' following Uniform Guidance 2 CFR §§200 requirements to use cost as a selection factor for awarding a construction services contract. 2. Train County departments on federal Uniform Guidance requirements and the County’s procurement policies and procedures ensuring that they understand the policies and procedures to follow when acquiring goods and services using federal awards. 3. Designate an independent person who is knowledgeable about federal requirements and the County’s procurement policies and procedures to review and approve procurements involving federal awards. The County’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
FINDING 2023-004 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 2022, FY 2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and 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 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. Fifteen purchases that fell within the small purchases threshold were identified. Three of the purchases were selected for testing. For one of the purchases tested, totaling $55,285, the School Corporation was unable to provide supporting documentation that an adequate number of quotes were obtained from qualified sources. The lack of effective internal controls and noncompliance were isolated to the one purchase 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. INDIANA STATE BOARD OF ACCOUNTS 22 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed there were no policies or procedures in place to verify if vendors were suspended or debarred or otherwise excluded from participation in federal awards. In fiscal year 2021-2022, one covered transaction, totaling $55,285, with one vendor was identified. In 2022-2023, four covered transactions, totaling $130,257, with two vendors were identified. All five covered transactions were selected for testing. For the three vendors, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. 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 23 WABASH CITY SCHOOLS 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. . . ." 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. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, 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. INDIANA STATE BOARD OF ACCOUNTS 24 WABASH CITY 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 2023-004 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 2022, FY 2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and 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 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. Fifteen purchases that fell within the small purchases threshold were identified. Three of the purchases were selected for testing. For one of the purchases tested, totaling $55,285, the School Corporation was unable to provide supporting documentation that an adequate number of quotes were obtained from qualified sources. The lack of effective internal controls and noncompliance were isolated to the one purchase 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. INDIANA STATE BOARD OF ACCOUNTS 22 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed there were no policies or procedures in place to verify if vendors were suspended or debarred or otherwise excluded from participation in federal awards. In fiscal year 2021-2022, one covered transaction, totaling $55,285, with one vendor was identified. In 2022-2023, four covered transactions, totaling $130,257, with two vendors were identified. All five covered transactions were selected for testing. For the three vendors, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. 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 23 WABASH CITY SCHOOLS 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. . . ." 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. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, 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. INDIANA STATE BOARD OF ACCOUNTS 24 WABASH CITY 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 2023-004 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 2022, FY 2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and 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 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. Fifteen purchases that fell within the small purchases threshold were identified. Three of the purchases were selected for testing. For one of the purchases tested, totaling $55,285, the School Corporation was unable to provide supporting documentation that an adequate number of quotes were obtained from qualified sources. The lack of effective internal controls and noncompliance were isolated to the one purchase 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. INDIANA STATE BOARD OF ACCOUNTS 22 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed there were no policies or procedures in place to verify if vendors were suspended or debarred or otherwise excluded from participation in federal awards. In fiscal year 2021-2022, one covered transaction, totaling $55,285, with one vendor was identified. In 2022-2023, four covered transactions, totaling $130,257, with two vendors were identified. All five covered transactions were selected for testing. For the three vendors, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. 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 23 WABASH CITY SCHOOLS 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. . . ." 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. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, 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. INDIANA STATE BOARD OF ACCOUNTS 24 WABASH CITY 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 2023-004 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 2022, FY 2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and 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 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. Fifteen purchases that fell within the small purchases threshold were identified. Three of the purchases were selected for testing. For one of the purchases tested, totaling $55,285, the School Corporation was unable to provide supporting documentation that an adequate number of quotes were obtained from qualified sources. The lack of effective internal controls and noncompliance were isolated to the one purchase 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. INDIANA STATE BOARD OF ACCOUNTS 22 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed there were no policies or procedures in place to verify if vendors were suspended or debarred or otherwise excluded from participation in federal awards. In fiscal year 2021-2022, one covered transaction, totaling $55,285, with one vendor was identified. In 2022-2023, four covered transactions, totaling $130,257, with two vendors were identified. All five covered transactions were selected for testing. For the three vendors, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. 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 23 WABASH CITY SCHOOLS 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. . . ." 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. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, 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. INDIANA STATE BOARD OF ACCOUNTS 24 WABASH CITY 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 2023-004 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 2022, FY 2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and 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 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. Fifteen purchases that fell within the small purchases threshold were identified. Three of the purchases were selected for testing. For one of the purchases tested, totaling $55,285, the School Corporation was unable to provide supporting documentation that an adequate number of quotes were obtained from qualified sources. The lack of effective internal controls and noncompliance were isolated to the one purchase 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. INDIANA STATE BOARD OF ACCOUNTS 22 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed there were no policies or procedures in place to verify if vendors were suspended or debarred or otherwise excluded from participation in federal awards. In fiscal year 2021-2022, one covered transaction, totaling $55,285, with one vendor was identified. In 2022-2023, four covered transactions, totaling $130,257, with two vendors were identified. All five covered transactions were selected for testing. For the three vendors, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. 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 23 WABASH CITY SCHOOLS 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. . . ." 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. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, 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. INDIANA STATE BOARD OF ACCOUNTS 24 WABASH CITY 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 2023-004 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 2022, FY 2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and 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 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. Fifteen purchases that fell within the small purchases threshold were identified. Three of the purchases were selected for testing. For one of the purchases tested, totaling $55,285, the School Corporation was unable to provide supporting documentation that an adequate number of quotes were obtained from qualified sources. The lack of effective internal controls and noncompliance were isolated to the one purchase 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. INDIANA STATE BOARD OF ACCOUNTS 22 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed there were no policies or procedures in place to verify if vendors were suspended or debarred or otherwise excluded from participation in federal awards. In fiscal year 2021-2022, one covered transaction, totaling $55,285, with one vendor was identified. In 2022-2023, four covered transactions, totaling $130,257, with two vendors were identified. All five covered transactions were selected for testing. For the three vendors, the School Corporation did not verify the vendors' suspension and debarment status prior to payment. 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 23 WABASH CITY SCHOOLS 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. . . ." 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. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, 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. INDIANA STATE BOARD OF ACCOUNTS 24 WABASH CITY 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.