Finding Number: 2022-043 Prior Year Finding Number: 2021-038 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Recipients may use award funds to enter into contracts to procure goods and services necessary to implement one or more of the eligible purposes outlined in sections 602(c) and 603(c) of the Act and Treasury’s Interim Final Rule and Final Rule. As such, recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance. Specifically, a state must follow the same policies and procedures it uses for procurements from its non-federal funds and comply with 2 CFR sections 200.321, 200.322, and 200.323. States must also ensure that every contract includes the applicable contract clauses required by 2 CFR section 200.327. Per Procurement Manual, User Agencies are required to submit a written justification letter to DPP, which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source, and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. As such, please provide the justification letter for these three Task Order Contracts. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) is primarily responsible for procurement transactions. In our review of 9 out of 86 procurement transactions, we noted 3 transactions where there was no written justification letter for task order contracts. Further, internal controls over compliance do not appear to be operating effectively to ensure compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Total amount of the procurement transactions was $17,487,469. Total amount of the samples was $5,699,575. The known amount of the exceptions is $3,530,516. Effect – OMB could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – OMB does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that OMB and DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government updated its procurement laws and issued revised procurement manuals, along with issuing position-specific Standard Operating Procedures. Processes for enforcing Internal controls and adherence to procurement laws have been established and are regularly reinforced. In early 2025, the Government-wide training reinforced expectations for full and open competition. User Agencies now access GVIBUY for informal solicitations in the eProcurement system, with ongoing training to prioritize competition and enhance oversight by the Department of Property and Procurement. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.
Finding No. 2022-029 Federal Agency: U.S. Department of Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Procurement and Suspension and Debarment Questioned Costs: $12,244,415 Criteria: 1. In accordance with 2 CFR Section 200.317, when conducting procurement transactions under a Federal award, a State must follow the same policies and procedures it uses for procurements with non-Federal funds. CNMI procurement regulation states the following: • § 70-30.3-220 Small Purchases: (a) Purchases that use Government-sourced funds (local funds), or any combination of both local and federal funds, may be made according to the small purchase procedures of this subsection: (1) For purchases that exceed $10,000, but which are less than or equal to $50,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. (b) Purchases that use only federal funds may be made according to the small purchase procedures of this subsection: (1) For purchases that exceed $10,000, but which are less than or equal to $250,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. (2) A purchase order may be used to make purchases from the United States General Services Administration (GSA), including purchases that exceed $250,000. When purchasing from GSA, at least one quote shall be obtained. • § 70-30.3-760 Debarment and Suspension: (a) The official with expenditure authority may file a dispute with the Director against an existing contractor for any failures of performance related to a contract governed by this subchapter. 2. In accordance with 31 CFR Section 19.300, prior to entering into subawards and contracts with award funds, recipients must verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person. 3. In accordance with 2 CFR Section 200.321, when possible, the recipient or subrecipient should ensure that small businesses, minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms are considered as set forth below. Such consideration means: (1) These business types are included on solicitation lists; (2) These business types are solicited whenever they are deemed eligible as potential sources; (3) Dividing procurement transactions into separate procurements to permit maximum participation by these business types; (4) Establishing delivery schedules (for example, the percentage of an order to be delivered by a given date of each month) that encourage participation by these business types; (5) Utilizing organizations such as the Small Business Administration and the Minority Business Development Agency of the Department of Commerce; and (6) Requiring a contractor under a Federal award to apply this section to subcontracts. 4. In accordance with 2 CFR Section 200.327, States must also ensure that every contract includes the applicable required contract clauses described in Appendix II of this part. Condition: 1. Inconsistencies were noted in procurement regulations over local and federal funded transactions. No questioned costs are presented as the extent of noncompliance could not be quantified. 2. CNMI does not verify whether contractors are not suspended, debarred, or otherwise excluded pursuant to 31 CFR section 19.300, prior to entering into a covered transaction for an amount equal to or exceeds $25,000 with award funds. No questioned costs are presented as the extent of noncompliance could not be quantified. Of sixty expenditures tested, aggregating $12,867,972 of a total population of $35,131,391 in nonpayroll expenditures subject to procurement, the following were noted: 3. For five (or 8%), transaction amounts exceeded the $10,000 small purchase threshold; however, only one vendor quotation was obtained. 4. For thirty-six (or 60%), either the purchase orders, purchase requisitions, and/or contracts were not provided. 5. For two (or 3%), contracts did not include the required contract clauses pursuant to 2 CFR 200.237. No questioned costs are presented as the extent of noncompliance could not be quantified. 6. For sixty (or 100%) expenditures tested, no documentation was provided to indicate that minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms were considered during the solicitation or vendor selection process and/or whether procurement were divided or delivery schedules were established to encourage participation by these businesses, pursuant to 2 CFR 200.321. Further, documentation that organizations such as the Small Business Administration and the Minority Business Development Agency of the Department of Commerce were utilized and/or whether a contractor was required to apply this section to subcontracts, were also not provided. No questioned costs are presented as the extent of noncompliance could not be quantified. Cause: 1. CNMI does not use the same policies and procedures for procurements under a federal award as with procurements from its non-federal funds under the small purchases method. 2. The CNMI’s procurement regulations are not in accordance with 2 CFR Section 200.317 and 31 CFR Section 19.300 of the Code of Federal Regulations. 3. The CNMI did not meet the minimum requirement of three vendor quotations as required by § 70-30.3-220 Small Purchases for procurements that exceed $10,000, but which are less than or equal to $50,000. 4. Inadequate documentation and systematic filing of relevant documentation supporting program costs. 5. Lack of monitoring control procedures to ensure that minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms are considered during the vendor selection process as required by 2 CFR 200.321. 6. Lack of monitoring control procedures to ensure that the minimum contract provision requirements pursuant to 2 CFR 200.327 are included in all contracts. Effect: The CNMI is in noncompliance with applicable procurement and suspension and debarment regulations and questioned costs of $12,244,415 result for Conditions 3 and 4. Unknown questioned costs are presented for Conditions 1, 2, 5 and 6 as the extent of noncompliance, if any, could not be quantified. In addition, the CNMI could not provide a listing of transactions that were procured during FY2022. Identification as a Repeat Finding: Finding No. 2021-032 Recommendation: 1. The CNMI should revisit its procurement regulations and consider updating applicable sections of the regulations to comply with federal regulations governing federal funds. 2. Responsible CNMI personnel should periodically monitor updates in federal regulations over procurement and suspension and debarment. 3. Establish and implement effective monitoring controls over the verification of excluded or disqualified persons or vendors pursuant to 31 CFR Section 19.300, prior to the CNMI entering into a covered transaction. 4. Responsible CNMI personnel should ensure compliance with its procurement regulations, particularly to those pertaining to small purchases that exceed the $10,000 threshold. 5. Establish and maintain effective systematic filing of relevant documentation to support program costs and for easier retrieval. Views of Responsible Officials: Conditions 1 and 3 - The Procurement Services Division agrees with this finding. The Division will revise CNMI’s procurement regulations to ensure alignment with federal procurement standards as outlined in 2 CFR Part 200, particularly the small purchase threshold requirements and competitive procurement procedures. Conditions 2 and 5 - The Procurement Services Division agrees with this finding. To address the lack of consistent verification of vendor eligibility under federal debarment and suspension requirements (2 CFR §180.300), a policy will be implemented requiring all agencies to submit debarment verification documentation at the time of vendor selection. Acceptable documentation may include (1) a printout or screenshot from the SAM.gov Exclusions database, confirming that the vendor is not debarred or suspended, (2) a signed certification from the vendor attesting to their eligibility, or (3) a signed contract clause or provision that explicitly states the vendor is not excluded from federal transactions and complies with applicable debarment regulations. Conditions 4 and 6 - The Procurement Services Division disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, the Division maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Conditions 4 and 6 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided.
COVID-19 Testing and Mitigation for Rural Health Clinics Federal Assistance Listing Number 93.697 U.S. Department of Health and Human Services Criteria: Procurement, Suspension and Debarment (2 CFR 200.317–200.327; 2 CFR 180.220) Condition: The District is required to have and follow documented procurement procedures that conform with Uniform Guidance (UG) procurement and suspension and debarment standards. Cause: The District did not have a policy that addressed procurement or suspension and debarment. Effect or Potential Effect: The District did not provide for full and open competition in procuring services or check suspension and debarment requirements entered into with grant funds. Questioned Costs: $389,332. Questioned costs were using the direct expenses charged to the grant that no procurement was completed. Context: During testing of expenses charged to the grant and discussion with the District, it was discovered that procurement wasn’t performed on any contracts and that the District didn’t have a procurement policy. Additionally, there was no documentation that the vendors were checked for suspension and debarment. Recommendation: A procurement policy conforming with UG standards should be in place at the District, including policies for suspension and debarment. Views of Responsible Officials and Planned Corrective Actions: See attached corrective action plan.
Reference Number: 2022-001 Prior Year Finding: Yes – 2021-001 Federal Agency: U.S. Department of Housing and Urban Development Pass-through Agency: Various Federal Program: Emergency Solutions Grant Program ALN Number: 14.231 Compliance Requirement: Procurement, Suspension and Debarment Type of Finding: Material Weakness, Material Noncompliance Criteria or specific requirement: As per § 200.318 General procurement standards. (a) The Non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. (d) 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. Condition: Based on our review of the Procurement compliance requirements, we noted that the Division has written procurement policies and competitive policies as required by CFR § 200.318 General procurement standards. We selected five (5) vendors for procurement Suspension and Debarment compliance testing of total population of 5 vendors subject to procurement and we were not provided with Procurement comparative bids therefore, we were unable: • To verify that the procurement method used was appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. • To Verify that procurements provide full and open competition (2 CFR section 200.319 and 48 CFR section 52.244-5). Cause: The Division did not ensured that as a non-Federal entity must have and must use documented procurement procedures, consistent with State, and local laws and regulations and the standards of §§ 200.318 through 200.327, for the acquisition of property or services required under a Federal award or subaward. Effect: The funding agency can reject the expenditures incurred by the Division on certain vendors where the Division must use procurement method appropriately based on the dollar amount and conditions specified in 2 CFR section 200.320. Questioned costs: Cannot be determined Recommendation: We recommend that the Division must: • Use documented procurement procedures, consistent with State, and local, laws and regulations and the standards, for the acquisition of property or services required under a federal award or subaward. • The Division must maintain records sufficient to detail the history of procurement. These records should 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. Views of responsible officials: The Division will work with Territorial Headquarters to document procedures as outlined in the Recommendations above. See corrective action plan.
Finding No. 2022-001: Procurement and Suspension and Debarment ? Significant Deficiency (Program Level) U.S. Department of Health and Human Services (93.318) Protecting and Improving Health Globally: Building and Strengthening Public Health Impact, Systems, Capacity and Security Condition: During testing the Federation?s controls on compliance over procurement and suspension and debarment, the Federation could not provide a procurement policy that is in compliance with prescribed standards in the Uniform Guidance. Context: The Federation currently does not have a procurement policy that complies with Uniform Guidance) requirements nor addresses the applicable sections codified in Chapter 2 Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Criteria: 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 200.320 requires that the non-federal entity must have and use documented procurement procedures, consistent with the standards of section ?200.320 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 subaward. 2 CFR Section 200.320 defines informal procurement methods, including micro-purchase thresholds, formal procurement methods and noncompetitive procurement methods. Cause: The Federation has not updated its procurement policy in order to specifically reference Uniform Guidance and to include prescribed applicable thresholds to be complied with. Effect: The Federation was not in compliance with the procurement policy requirements of the Uniform Guidance. As a result, the Federation could not provide a procurement policy compliant with Uniform Guidance requirements. Questioned costs: None. Repeat Finding?: No. Recommendation: The Federation should establish a procurement policy that addresses Uniform Guidance and required documentation. Views of Responsible Individuals: Management concurs with and will implement the recommendation. See Corrective Action Plan.
Finding No. 2022-001: Procurement and Suspension and Debarment ? Significant Deficiency (Program Level) U.S. Department of Health and Human Services (93.318) Protecting and Improving Health Globally: Building and Strengthening Public Health Impact, Systems, Capacity and Security Condition: During testing the Federation?s controls on compliance over procurement and suspension and debarment, the Federation could not provide a procurement policy that is in compliance with prescribed standards in the Uniform Guidance. Context: The Federation currently does not have a procurement policy that complies with Uniform Guidance) requirements nor addresses the applicable sections codified in Chapter 2 Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Criteria: 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 200.320 requires that the non-federal entity must have and use documented procurement procedures, consistent with the standards of section ?200.320 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 subaward. 2 CFR Section 200.320 defines informal procurement methods, including micro-purchase thresholds, formal procurement methods and noncompetitive procurement methods. Cause: The Federation has not updated its procurement policy in order to specifically reference Uniform Guidance and to include prescribed applicable thresholds to be complied with. Effect: The Federation was not in compliance with the procurement policy requirements of the Uniform Guidance. As a result, the Federation could not provide a procurement policy compliant with Uniform Guidance requirements. Questioned costs: None. Repeat Finding?: No. Recommendation: The Federation should establish a procurement policy that addresses Uniform Guidance and required documentation. Views of Responsible Individuals: Management concurs with and will implement the recommendation. See Corrective Action Plan.
Federal programs: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) CFDA Number: 84.425E / 84.425F Federal award identification number: P425E205418 / P425F204999 Grant period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Material Weakness Compliance requirement: Other ? Policies and procedures requirements Condition and context When obtaining an understanding of the internal controls, policies, and procedures regarding the administration of federal programs, and grant term and conditions, we noted the following deficiencies: a. There is no written policy, nor the procedures designed and implemented by the Institution related to Cash Management were documented. The Institution opted to request the funds on a reimbursement basis. b. There were no written procedures for determining the allowability of costs in accordance with 2 CFR 200 subpart E of this part and the terms and conditions of the Federal award. c. After examination of the Institution procurement policy, we noted that the document was not signed by all members required from management and was not dated. Upon inquiry, we noted that the procurement policy was drafted and submitted to the Institution for review in February 2023. Therefore, no written policy and formal procedures were designed and implemented for the procurement transactions tested for the fiscal year ended July 31, 2022 and thereafter. Criteria 2 CFR 200.302 (b) (6) and (7) establish that the financial management system of each non-Federal entity must provide for the following: written procedures to implement the requirements of ? 200.305, and written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 establish that 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); (b) comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards; (c) evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards; (d) take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; and (e) take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. 2 CFR 200.318 (a) establishes 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 2 CFR 200.317 through 200.327. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) the non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices; (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award; (c) the non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award; (d) the application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal award. Cause The Institution?s federal programs received prior the fiscal year ended July 31, 2020 did not require the implementation of written procedures as mentioned in the condition and context section, except for Cash Management policies and procedures for the Student Financial Assistance Programs Cluster for which the Institution has designed and implemented written procedures for such compliance requirement. The Covid-19 pandemic related programs were the reason why this new federal program funds were received, and the entity failed to design and implement on a timely basis the required written documentation and procedures. Effect Noncompliance with the above-mentioned requirement could lead to administrative sanctions by the grantor, including disallowance of costs. It could also be interpreted as a failure to achieve the program?s objectives. Questioned costs None. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to implement written policies and procedures needed for the administration of federal grants before the acceptance of new grants. Having well sounded policies and procedures will reduce the Institution risk of non-compliance with federal regulations and grants terms and conditions. Also, they will provide guidance to the Institution?s personnel on how to carry-out their responsibilities and functions in relation to the administration of federal programs transactions. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Federal programs: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) CFDA Number: 84.425E / 84.425F Federal award identification number: P425E205418 / P425F204999 Grant period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Material Weakness Compliance requirement: Other ? Policies and procedures requirements Condition and context When obtaining an understanding of the internal controls, policies, and procedures regarding the administration of federal programs, and grant term and conditions, we noted the following deficiencies: a. There is no written policy, nor the procedures designed and implemented by the Institution related to Cash Management were documented. The Institution opted to request the funds on a reimbursement basis. b. There were no written procedures for determining the allowability of costs in accordance with 2 CFR 200 subpart E of this part and the terms and conditions of the Federal award. c. After examination of the Institution procurement policy, we noted that the document was not signed by all members required from management and was not dated. Upon inquiry, we noted that the procurement policy was drafted and submitted to the Institution for review in February 2023. Therefore, no written policy and formal procedures were designed and implemented for the procurement transactions tested for the fiscal year ended July 31, 2022 and thereafter. Criteria 2 CFR 200.302 (b) (6) and (7) establish that the financial management system of each non-Federal entity must provide for the following: written procedures to implement the requirements of ? 200.305, and written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 establish that 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); (b) comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards; (c) evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards; (d) take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; and (e) take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. 2 CFR 200.318 (a) establishes 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 2 CFR 200.317 through 200.327. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) the non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices; (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award; (c) the non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award; (d) the application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal award. Cause The Institution?s federal programs received prior the fiscal year ended July 31, 2020 did not require the implementation of written procedures as mentioned in the condition and context section, except for Cash Management policies and procedures for the Student Financial Assistance Programs Cluster for which the Institution has designed and implemented written procedures for such compliance requirement. The Covid-19 pandemic related programs were the reason why this new federal program funds were received, and the entity failed to design and implement on a timely basis the required written documentation and procedures. Effect Noncompliance with the above-mentioned requirement could lead to administrative sanctions by the grantor, including disallowance of costs. It could also be interpreted as a failure to achieve the program?s objectives. Questioned costs None. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to implement written policies and procedures needed for the administration of federal grants before the acceptance of new grants. Having well sounded policies and procedures will reduce the Institution risk of non-compliance with federal regulations and grants terms and conditions. Also, they will provide guidance to the Institution?s personnel on how to carry-out their responsibilities and functions in relation to the administration of federal programs transactions. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Federal programs: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) CFDA Number: 84.425E / 84.425F Federal award identification number: P425E205418 / P425F204999 Grant period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Material Weakness Compliance requirement: Other ? Policies and procedures requirements Condition and context When obtaining an understanding of the internal controls, policies, and procedures regarding the administration of federal programs, and grant term and conditions, we noted the following deficiencies: a. There is no written policy, nor the procedures designed and implemented by the Institution related to Cash Management were documented. The Institution opted to request the funds on a reimbursement basis. b. There were no written procedures for determining the allowability of costs in accordance with 2 CFR 200 subpart E of this part and the terms and conditions of the Federal award. c. After examination of the Institution procurement policy, we noted that the document was not signed by all members required from management and was not dated. Upon inquiry, we noted that the procurement policy was drafted and submitted to the Institution for review in February 2023. Therefore, no written policy and formal procedures were designed and implemented for the procurement transactions tested for the fiscal year ended July 31, 2022 and thereafter. Criteria 2 CFR 200.302 (b) (6) and (7) establish that the financial management system of each non-Federal entity must provide for the following: written procedures to implement the requirements of ? 200.305, and written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 establish that 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); (b) comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards; (c) evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards; (d) take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; and (e) take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. 2 CFR 200.318 (a) establishes 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 2 CFR 200.317 through 200.327. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) the non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices; (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award; (c) the non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award; (d) the application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal award. Cause The Institution?s federal programs received prior the fiscal year ended July 31, 2020 did not require the implementation of written procedures as mentioned in the condition and context section, except for Cash Management policies and procedures for the Student Financial Assistance Programs Cluster for which the Institution has designed and implemented written procedures for such compliance requirement. The Covid-19 pandemic related programs were the reason why this new federal program funds were received, and the entity failed to design and implement on a timely basis the required written documentation and procedures. Effect Noncompliance with the above-mentioned requirement could lead to administrative sanctions by the grantor, including disallowance of costs. It could also be interpreted as a failure to achieve the program?s objectives. Questioned costs None. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to implement written policies and procedures needed for the administration of federal grants before the acceptance of new grants. Having well sounded policies and procedures will reduce the Institution risk of non-compliance with federal regulations and grants terms and conditions. Also, they will provide guidance to the Institution?s personnel on how to carry-out their responsibilities and functions in relation to the administration of federal programs transactions. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Federal programs: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) CFDA Number: 84.425E / 84.425F Federal award identification number: P425E205418 / P425F204999 Grant period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Material Weakness Compliance requirement: Other ? Policies and procedures requirements Condition and context When obtaining an understanding of the internal controls, policies, and procedures regarding the administration of federal programs, and grant term and conditions, we noted the following deficiencies: a. There is no written policy, nor the procedures designed and implemented by the Institution related to Cash Management were documented. The Institution opted to request the funds on a reimbursement basis. b. There were no written procedures for determining the allowability of costs in accordance with 2 CFR 200 subpart E of this part and the terms and conditions of the Federal award. c. After examination of the Institution procurement policy, we noted that the document was not signed by all members required from management and was not dated. Upon inquiry, we noted that the procurement policy was drafted and submitted to the Institution for review in February 2023. Therefore, no written policy and formal procedures were designed and implemented for the procurement transactions tested for the fiscal year ended July 31, 2022 and thereafter. Criteria 2 CFR 200.302 (b) (6) and (7) establish that the financial management system of each non-Federal entity must provide for the following: written procedures to implement the requirements of ? 200.305, and written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 establish that 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); (b) comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards; (c) evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards; (d) take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; and (e) take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. 2 CFR 200.318 (a) establishes 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 2 CFR 200.317 through 200.327. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) the non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices; (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award; (c) the non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award; (d) the application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal award. Cause The Institution?s federal programs received prior the fiscal year ended July 31, 2020 did not require the implementation of written procedures as mentioned in the condition and context section, except for Cash Management policies and procedures for the Student Financial Assistance Programs Cluster for which the Institution has designed and implemented written procedures for such compliance requirement. The Covid-19 pandemic related programs were the reason why this new federal program funds were received, and the entity failed to design and implement on a timely basis the required written documentation and procedures. Effect Noncompliance with the above-mentioned requirement could lead to administrative sanctions by the grantor, including disallowance of costs. It could also be interpreted as a failure to achieve the program?s objectives. Questioned costs None. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to implement written policies and procedures needed for the administration of federal grants before the acceptance of new grants. Having well sounded policies and procedures will reduce the Institution risk of non-compliance with federal regulations and grants terms and conditions. Also, they will provide guidance to the Institution?s personnel on how to carry-out their responsibilities and functions in relation to the administration of federal programs transactions. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
2022 ? 001: Procurement Federal Agency: U.S. Department of Justice Federal Program Name: Crime Victim Services Assistance Listing Number: 16.575 Pass-Through Agency: Minnesota Department of Public Safety Office of Justice Programs Pass-Through Number(s): A-CVS-2020-CADA-00030 Award Period: October 1, 2019 through September 30, 2021 Type of Finding: ? Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR section 200.318(a) - The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in ?? 200.317 through 200.327. Condition: The Organization's procurement policy is limited in terms of documented procurement procedures must conform to the procurement standards identified in ?? 200.317 through 200.327. Questioned costs: None Context: We noted the Organization?s current policy states ?expenditures in excess of $5,000 for the purchase of a single item is required to have bids from three suppliers if possible.? However, the federal guidelines have increased those same thresholds to $10,000 for quotations and $250,000 for sealed bids. The policy is silent as to when sealed bids are required. Cause: The process of ensuring grant requirements are understood. Effect: Procurement transactions may be not be compliant with Uniform Guidance. Repeat Finding: No Recommendation: We recommend the Organization update the purchasing section of its current Fiscal Policies and Procedures manual. The updated procedures should at a minimum address general procurement standards. Views of responsible officials: There is no disagreement with the audit finding.
2022 ? 001: Procurement Federal Agency: U.S. Department of Justice Federal Program Name: Crime Victim Services Assistance Listing Number: 16.575 Pass-Through Agency: Minnesota Department of Public Safety Office of Justice Programs Pass-Through Number(s): A-CVS-2020-CADA-00030 Award Period: October 1, 2019 through September 30, 2021 Type of Finding: ? Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR section 200.318(a) - The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in ?? 200.317 through 200.327. Condition: The Organization's procurement policy is limited in terms of documented procurement procedures must conform to the procurement standards identified in ?? 200.317 through 200.327. Questioned costs: None Context: We noted the Organization?s current policy states ?expenditures in excess of $5,000 for the purchase of a single item is required to have bids from three suppliers if possible.? However, the federal guidelines have increased those same thresholds to $10,000 for quotations and $250,000 for sealed bids. The policy is silent as to when sealed bids are required. Cause: The process of ensuring grant requirements are understood. Effect: Procurement transactions may be not be compliant with Uniform Guidance. Repeat Finding: No Recommendation: We recommend the Organization update the purchasing section of its current Fiscal Policies and Procedures manual. The updated procedures should at a minimum address general procurement standards. Views of responsible officials: There is no disagreement with the audit finding.
2022-001 - Procurement Contracts Federal Program Information: Department of Housing and Urban Development: ALN - 14.900 - Lead Hazard Reduction Grant Program Criteria: The following CFR(s) apply to this finding: 2 CFR 200.327. Condition: During audit procedures, it was identified that the City of Lewiston did not include the required contract provisions as specified in the criteria above and included in the City?s procurement policy. Cause: The City does not have the necessary internal controls to ensure compliance with the City?s procurement policy. Effect: Procurement contracts were not executed in compliance with both the criteria above and the City?s procurement policy. Identification of Questioned Costs: None identified. Context: Three procurement contracts were reviewed out of a population of 11. It was determined that the three procurement contracts reviewed did not include the required contract provisions. This was a statisically valid sample. Repeat Finding: This is not a repeat finding. Recommendation: It is recommended that the City of Lewiston implement internal control processes and procedures to ensure that they are following both the criteria above and the City?s procurement policy. Views of Responsible Officials and Corrective Action Plan: Please see the Corrective Action Plan issued by the City of Lewiston.
Identification of the Federal Program: U.S. Department of Agriculture ? Community Facilities Loans and Grants Cluster, Community Facilities Loans and Grants ? 10.766 Special Tests and Provisions Material Weakness in Internal Control Over Compliance and Noncompliance Criteria: The Hospital must establish and maintain effective internal control over federal awards that provides reasonable assurance that the Hospital is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. 2 CFR 200.327 and 2 CFR 200.328 require the auditee to collect financial information and monitor its activities under federal awards to assure compliance with applicable federal requirements and performance expectations are being achieved and report these items in accordance with program requirements. Terms and conditions of the federal award require the Hospital to maintain a reserve fund at specified balance levels. Condition: During 2022, the accounts that represented the reserve fund had a balance below that required by the loan resolution agreements and required deposits were not being made to restore the balances to required levels. Cause: The Hospital did not have an effective internal control process in place to ensure the reserve fund had an adequate balance. Effect: The required reserve fund balance at June 30, 2022 is $245,553 and the balance of the Hospital?s reserve funds at year end is $240,166, a shortage of $5,387. Questioned Costs: None reported. Context: Sampling was not used. Recommendation: We recommend that management continue to monitor and enhance its internal controls over federal award compliance and establish a process to review the reserve balance on a recurring basis to determine if additional reserves are needed. Views of Responsible Officials: Management agrees with the finding. See Corrective Action Plan.
Condition and Context ? Two of three monthly programmatic reports tested were submitted past the deadline for the WIOA Cluster. Specifically, the January 2022 and June 2022 reports were submitted 9 days late and 26 days late, respectively. Effect ? The effect of the reporting delays is that funding agencies are receiving untimely information. Cause ? The cause is insufficient monitoring of reporting deadlines. Criteria ? Federal regulations (2 CFR ?200.327) and the terms of the federal grants and contracts require that financial reports be filed in a timely manner. Recommendation ? We recommend that Pinal County improve controls over grant reporting that includes a process for identifying reporting requirements and monitoring the timely grant reporting. The system of control should include evaluating and documenting the reporting requirements of each grant and, assignment of both the employees responsible for preparation of the grant reports and a secondary employee assignment for overall monitoring of the timeliness of all grant reports.
Condition and Context ? Two of three monthly programmatic reports tested were submitted past the deadline for the WIOA Cluster. Specifically, the January 2022 and June 2022 reports were submitted 9 days late and 26 days late, respectively. Effect ? The effect of the reporting delays is that funding agencies are receiving untimely information. Cause ? The cause is insufficient monitoring of reporting deadlines. Criteria ? Federal regulations (2 CFR ?200.327) and the terms of the federal grants and contracts require that financial reports be filed in a timely manner. Recommendation ? We recommend that Pinal County improve controls over grant reporting that includes a process for identifying reporting requirements and monitoring the timely grant reporting. The system of control should include evaluating and documenting the reporting requirements of each grant and, assignment of both the employees responsible for preparation of the grant reports and a secondary employee assignment for overall monitoring of the timeliness of all grant reports.
Condition and Context ? Two of three monthly programmatic reports tested were submitted past the deadline for the WIOA Cluster. Specifically, the January 2022 and June 2022 reports were submitted 9 days late and 26 days late, respectively. Effect ? The effect of the reporting delays is that funding agencies are receiving untimely information. Cause ? The cause is insufficient monitoring of reporting deadlines. Criteria ? Federal regulations (2 CFR ?200.327) and the terms of the federal grants and contracts require that financial reports be filed in a timely manner. Recommendation ? We recommend that Pinal County improve controls over grant reporting that includes a process for identifying reporting requirements and monitoring the timely grant reporting. The system of control should include evaluating and documenting the reporting requirements of each grant and, assignment of both the employees responsible for preparation of the grant reports and a secondary employee assignment for overall monitoring of the timeliness of all grant reports.
Finding 2022-001 - Procurement Federal Agency: U.S. Department of Health and Human Services Passed through City of Boston Commission on Affairs of the Elderly Federal Program Title: National Family Caregiver Support, Title III, Part E Assistance Listing Number: 93.052 Type of Finding: Material Instance of Noncompliance and Significant Deficiency in Internal Controls over Compliance. Criteria: BSHC is required to maintain policies and procedures over the procurement of goods and services with Federal funds in accordance with 2 CFR Part 200.318 through 200.327. Additionally, the City of Boston requires Title III grantees to comply with the Boston Age Strong Commission?s contract manual, which contains specific procurement requirements. Condition: During our testing of 22 purchases charged to Title III funds, we noted that BSHC did not have supporting documentation or evidence that the Federal and City of Boston procurement procedures were followed. Cause: Fiscal year 2022 was the first year BSHC was subject to a Federal Uniform Guidance audit. Accordingly, management had not instituted separate procurement procedures over Federal and non-Federal procurements. All purchases were subject to BSHC?s general procurement/purchasing procedures. Effect: BSHC procured goods and services using Federal funds under their internal policy that was not in full compliance with the requirements set forth by the Uniform Guidance which could affect future Title III funding. Questioned Costs: None Recommendation: BSHC should implement a formal, Board approved, procurement policy and procedures which encompass the requirements in Federal CFR Part 200.318 through 200.327 and the Boston Age Strong Commission contract manual requirements. These procedures should be applied to any purchases made with Federal funds. In addition, BSHC should review its vendor files to ensure that appropriate procurement documentation exists throughout. Repeated finding: No Management?s Response: Management is in agreement with the recommendation. Subsequent to the Board review of the fiscal year 2022 audit package, Boston Senior Home Care?s procurement policy will be revised to align with Federal guidelines. The policy will go to the Audit Committee or full Board for approval.
FINDING NO. 2022-001 FINANCIAL STATEMENTS Federal programs All federal financial assistance programs Category Internal control Condition found. The Organization accounted for its activities based on the services provided, which are educational services and food services. During our financial and compliance audit procedures for the fiscal year ended June 30, 2022, we noted the following conditions related to the accounting procedures and financial reporting practices of the Organization: a. Accounting and interim financial reports are not executed on a current (month-to-month) basis. Accounting journals, general ledger and interim financial reports, such as Balance Sheet, Statement of Activities and Bank Reconciliations, monthly analysis of certain accounts are executed after the end of the related accounting year. Criteria 2 CFR 200.302 (b) (2), (4), (5) and (7) establish that the financial management system of each nonFederal entity must provide for the following: i. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.327 Financial reporting and 200.328 Monitoring and reporting program performance. Cause Contracted outsource for the general accounting of the institution have been unable to prepare the monthly accounting and the related interim financial reports on a current basis. Effect Weaknesses in the internal controls of the institution, requiring extra efforts from the administration to compensate for the lack of current accountability with additional alternative measures and procedures. Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. Questioned costs None Identification as a Repeated Finding Included in prior years Findings No. 2017-001,2018-001, 2019-001,2020-001 and 2021-001. Recommendations The Organization should enforce its policies and procedures in order to accurately maintain its financial information, and on a timely basis, assuring that they reflect its assets and liabilities, and to maintain an appropriate control over its revenues and the amounts expended, which will allow a proper management and monitoring of operations. These policies and procedures should be enforced to consider the following: ? Establish monthly and year end closing procedures. ? Prepare monthly or quarterly financial reports for management evaluation and analysis. Views of Responsible Officials The Organization agrees with the finding. Executed actions have substantially improved their year-end closing procedures. They contracted a new accounting firm to improve their accounting and the interim financial reporting. Also, during the year ended June 30, 2022, an internal accountant was hired, who among other things, is coordinating and supervising the record keeping and compilation of interim and year end closing and reporting process. Subsequent to June 30, 2022, the institution decided to perform the accounting and reporting function internally, commencing on July 1, 2022.
FINDING NO. 2022-001 FINANCIAL STATEMENTS Federal programs All federal financial assistance programs Category Internal control Condition found. The Organization accounted for its activities based on the services provided, which are educational services and food services. During our financial and compliance audit procedures for the fiscal year ended June 30, 2022, we noted the following conditions related to the accounting procedures and financial reporting practices of the Organization: a. Accounting and interim financial reports are not executed on a current (month-to-month) basis. Accounting journals, general ledger and interim financial reports, such as Balance Sheet, Statement of Activities and Bank Reconciliations, monthly analysis of certain accounts are executed after the end of the related accounting year. Criteria 2 CFR 200.302 (b) (2), (4), (5) and (7) establish that the financial management system of each nonFederal entity must provide for the following: i. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.327 Financial reporting and 200.328 Monitoring and reporting program performance. Cause Contracted outsource for the general accounting of the institution have been unable to prepare the monthly accounting and the related interim financial reports on a current basis. Effect Weaknesses in the internal controls of the institution, requiring extra efforts from the administration to compensate for the lack of current accountability with additional alternative measures and procedures. Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. Questioned costs None Identification as a Repeated Finding Included in prior years Findings No. 2017-001,2018-001, 2019-001,2020-001 and 2021-001. Recommendations The Organization should enforce its policies and procedures in order to accurately maintain its financial information, and on a timely basis, assuring that they reflect its assets and liabilities, and to maintain an appropriate control over its revenues and the amounts expended, which will allow a proper management and monitoring of operations. These policies and procedures should be enforced to consider the following: ? Establish monthly and year end closing procedures. ? Prepare monthly or quarterly financial reports for management evaluation and analysis. Views of Responsible Officials The Organization agrees with the finding. Executed actions have substantially improved their year-end closing procedures. They contracted a new accounting firm to improve their accounting and the interim financial reporting. Also, during the year ended June 30, 2022, an internal accountant was hired, who among other things, is coordinating and supervising the record keeping and compilation of interim and year end closing and reporting process. Subsequent to June 30, 2022, the institution decided to perform the accounting and reporting function internally, commencing on July 1, 2022.
FINDING NO. 2022-001 FINANCIAL STATEMENTS Federal programs All federal financial assistance programs Category Internal control Condition found. The Organization accounted for its activities based on the services provided, which are educational services and food services. During our financial and compliance audit procedures for the fiscal year ended June 30, 2022, we noted the following conditions related to the accounting procedures and financial reporting practices of the Organization: a. Accounting and interim financial reports are not executed on a current (month-to-month) basis. Accounting journals, general ledger and interim financial reports, such as Balance Sheet, Statement of Activities and Bank Reconciliations, monthly analysis of certain accounts are executed after the end of the related accounting year. Criteria 2 CFR 200.302 (b) (2), (4), (5) and (7) establish that the financial management system of each nonFederal entity must provide for the following: i. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.327 Financial reporting and 200.328 Monitoring and reporting program performance. Cause Contracted outsource for the general accounting of the institution have been unable to prepare the monthly accounting and the related interim financial reports on a current basis. Effect Weaknesses in the internal controls of the institution, requiring extra efforts from the administration to compensate for the lack of current accountability with additional alternative measures and procedures. Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. Questioned costs None Identification as a Repeated Finding Included in prior years Findings No. 2017-001,2018-001, 2019-001,2020-001 and 2021-001. Recommendations The Organization should enforce its policies and procedures in order to accurately maintain its financial information, and on a timely basis, assuring that they reflect its assets and liabilities, and to maintain an appropriate control over its revenues and the amounts expended, which will allow a proper management and monitoring of operations. These policies and procedures should be enforced to consider the following: ? Establish monthly and year end closing procedures. ? Prepare monthly or quarterly financial reports for management evaluation and analysis. Views of Responsible Officials The Organization agrees with the finding. Executed actions have substantially improved their year-end closing procedures. They contracted a new accounting firm to improve their accounting and the interim financial reporting. Also, during the year ended June 30, 2022, an internal accountant was hired, who among other things, is coordinating and supervising the record keeping and compilation of interim and year end closing and reporting process. Subsequent to June 30, 2022, the institution decided to perform the accounting and reporting function internally, commencing on July 1, 2022.
FINDING NO. 2022-001 FINANCIAL STATEMENTS Federal programs All federal financial assistance programs Category Internal control Condition found. The Organization accounted for its activities based on the services provided, which are educational services and food services. During our financial and compliance audit procedures for the fiscal year ended June 30, 2022, we noted the following conditions related to the accounting procedures and financial reporting practices of the Organization: a. Accounting and interim financial reports are not executed on a current (month-to-month) basis. Accounting journals, general ledger and interim financial reports, such as Balance Sheet, Statement of Activities and Bank Reconciliations, monthly analysis of certain accounts are executed after the end of the related accounting year. Criteria 2 CFR 200.302 (b) (2), (4), (5) and (7) establish that the financial management system of each nonFederal entity must provide for the following: i. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.327 Financial reporting and 200.328 Monitoring and reporting program performance. Cause Contracted outsource for the general accounting of the institution have been unable to prepare the monthly accounting and the related interim financial reports on a current basis. Effect Weaknesses in the internal controls of the institution, requiring extra efforts from the administration to compensate for the lack of current accountability with additional alternative measures and procedures. Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. Questioned costs None Identification as a Repeated Finding Included in prior years Findings No. 2017-001,2018-001, 2019-001,2020-001 and 2021-001. Recommendations The Organization should enforce its policies and procedures in order to accurately maintain its financial information, and on a timely basis, assuring that they reflect its assets and liabilities, and to maintain an appropriate control over its revenues and the amounts expended, which will allow a proper management and monitoring of operations. These policies and procedures should be enforced to consider the following: ? Establish monthly and year end closing procedures. ? Prepare monthly or quarterly financial reports for management evaluation and analysis. Views of Responsible Officials The Organization agrees with the finding. Executed actions have substantially improved their year-end closing procedures. They contracted a new accounting firm to improve their accounting and the interim financial reporting. Also, during the year ended June 30, 2022, an internal accountant was hired, who among other things, is coordinating and supervising the record keeping and compilation of interim and year end closing and reporting process. Subsequent to June 30, 2022, the institution decided to perform the accounting and reporting function internally, commencing on July 1, 2022.
FINDING 2022-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2020-2021, FY2021-2022, FY2021, FY2022 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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. 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. The School Corporation did not obtain price or rate quotes for all seven vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the School Corporation did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Additionally, the School Corporation did not enter into a contract with four vendors as required by Indiana Code for purchases between $50,000 and $150,000. As such, the School Corporation did not verify that these vendors were not excluded or disqualified from participation in federal assistance programs or activities. In addition, the School Corporation was a member of the Region 8 Educational Service Center (Service Center). The Service Center completed the Procurement and Suspension and Debarment compliance requirement on behalf of the School Corporation. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the suspension and debarment requirement of the Procurement and Suspension and Debarment compliance requirement. The bids for bread and milk were originally awarded for fiscal year 2018-2019 and were renewed for 2020-2021. The Service Center could not provide documentation that procedures were performed to verify the vendors were not suspended or debarred from participation in federal programs prior to entering into covered transactions with these vendors. INDIANA STATE BOARD OF ACCOUNTS 14 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 confirm 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(b) (Uniform Guidance) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 200.320 (Revised Uniform Guidance) 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 15 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT 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. . . ." Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 16 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2020-2021, FY2021-2022, FY2021, FY2022 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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. 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. The School Corporation did not obtain price or rate quotes for all seven vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the School Corporation did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Additionally, the School Corporation did not enter into a contract with four vendors as required by Indiana Code for purchases between $50,000 and $150,000. As such, the School Corporation did not verify that these vendors were not excluded or disqualified from participation in federal assistance programs or activities. In addition, the School Corporation was a member of the Region 8 Educational Service Center (Service Center). The Service Center completed the Procurement and Suspension and Debarment compliance requirement on behalf of the School Corporation. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the suspension and debarment requirement of the Procurement and Suspension and Debarment compliance requirement. The bids for bread and milk were originally awarded for fiscal year 2018-2019 and were renewed for 2020-2021. The Service Center could not provide documentation that procedures were performed to verify the vendors were not suspended or debarred from participation in federal programs prior to entering into covered transactions with these vendors. INDIANA STATE BOARD OF ACCOUNTS 14 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 confirm 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(b) (Uniform Guidance) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 200.320 (Revised Uniform Guidance) 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 15 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT 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. . . ." Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 16 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2020-2021, FY2021-2022, FY2021, FY2022 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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. 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. The School Corporation did not obtain price or rate quotes for all seven vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the School Corporation did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Additionally, the School Corporation did not enter into a contract with four vendors as required by Indiana Code for purchases between $50,000 and $150,000. As such, the School Corporation did not verify that these vendors were not excluded or disqualified from participation in federal assistance programs or activities. In addition, the School Corporation was a member of the Region 8 Educational Service Center (Service Center). The Service Center completed the Procurement and Suspension and Debarment compliance requirement on behalf of the School Corporation. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the suspension and debarment requirement of the Procurement and Suspension and Debarment compliance requirement. The bids for bread and milk were originally awarded for fiscal year 2018-2019 and were renewed for 2020-2021. The Service Center could not provide documentation that procedures were performed to verify the vendors were not suspended or debarred from participation in federal programs prior to entering into covered transactions with these vendors. INDIANA STATE BOARD OF ACCOUNTS 14 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 confirm 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(b) (Uniform Guidance) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 200.320 (Revised Uniform Guidance) 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 15 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT 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. . . ." Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 16 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2020-2021, FY2021-2022, FY2021, FY2022 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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. 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. The School Corporation did not obtain price or rate quotes for all seven vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the School Corporation did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Additionally, the School Corporation did not enter into a contract with four vendors as required by Indiana Code for purchases between $50,000 and $150,000. As such, the School Corporation did not verify that these vendors were not excluded or disqualified from participation in federal assistance programs or activities. In addition, the School Corporation was a member of the Region 8 Educational Service Center (Service Center). The Service Center completed the Procurement and Suspension and Debarment compliance requirement on behalf of the School Corporation. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the suspension and debarment requirement of the Procurement and Suspension and Debarment compliance requirement. The bids for bread and milk were originally awarded for fiscal year 2018-2019 and were renewed for 2020-2021. The Service Center could not provide documentation that procedures were performed to verify the vendors were not suspended or debarred from participation in federal programs prior to entering into covered transactions with these vendors. INDIANA STATE BOARD OF ACCOUNTS 14 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 confirm 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(b) (Uniform Guidance) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 200.320 (Revised Uniform Guidance) 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 15 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT 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. . . ." Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 16 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2020-2021, FY2021-2022, FY2021, FY2022 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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. 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. The School Corporation did not obtain price or rate quotes for all seven vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the School Corporation did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Additionally, the School Corporation did not enter into a contract with four vendors as required by Indiana Code for purchases between $50,000 and $150,000. As such, the School Corporation did not verify that these vendors were not excluded or disqualified from participation in federal assistance programs or activities. In addition, the School Corporation was a member of the Region 8 Educational Service Center (Service Center). The Service Center completed the Procurement and Suspension and Debarment compliance requirement on behalf of the School Corporation. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the suspension and debarment requirement of the Procurement and Suspension and Debarment compliance requirement. The bids for bread and milk were originally awarded for fiscal year 2018-2019 and were renewed for 2020-2021. The Service Center could not provide documentation that procedures were performed to verify the vendors were not suspended or debarred from participation in federal programs prior to entering into covered transactions with these vendors. INDIANA STATE BOARD OF ACCOUNTS 14 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 confirm 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(b) (Uniform Guidance) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 200.320 (Revised Uniform Guidance) 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 15 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT 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. . . ." Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 16 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2020-2021, FY2021-2022, FY2021, FY2022 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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. 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. The School Corporation did not obtain price or rate quotes for all seven vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the School Corporation did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Additionally, the School Corporation did not enter into a contract with four vendors as required by Indiana Code for purchases between $50,000 and $150,000. As such, the School Corporation did not verify that these vendors were not excluded or disqualified from participation in federal assistance programs or activities. In addition, the School Corporation was a member of the Region 8 Educational Service Center (Service Center). The Service Center completed the Procurement and Suspension and Debarment compliance requirement on behalf of the School Corporation. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the suspension and debarment requirement of the Procurement and Suspension and Debarment compliance requirement. The bids for bread and milk were originally awarded for fiscal year 2018-2019 and were renewed for 2020-2021. The Service Center could not provide documentation that procedures were performed to verify the vendors were not suspended or debarred from participation in federal programs prior to entering into covered transactions with these vendors. INDIANA STATE BOARD OF ACCOUNTS 14 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 confirm 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(b) (Uniform Guidance) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 200.320 (Revised Uniform Guidance) 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 15 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT 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. . . ." Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 16 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2020-2021, FY2021-2022, FY2021, FY2022 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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. 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. The School Corporation did not obtain price or rate quotes for all seven vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the School Corporation did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Additionally, the School Corporation did not enter into a contract with four vendors as required by Indiana Code for purchases between $50,000 and $150,000. As such, the School Corporation did not verify that these vendors were not excluded or disqualified from participation in federal assistance programs or activities. In addition, the School Corporation was a member of the Region 8 Educational Service Center (Service Center). The Service Center completed the Procurement and Suspension and Debarment compliance requirement on behalf of the School Corporation. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the suspension and debarment requirement of the Procurement and Suspension and Debarment compliance requirement. The bids for bread and milk were originally awarded for fiscal year 2018-2019 and were renewed for 2020-2021. The Service Center could not provide documentation that procedures were performed to verify the vendors were not suspended or debarred from participation in federal programs prior to entering into covered transactions with these vendors. INDIANA STATE BOARD OF ACCOUNTS 14 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 confirm 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(b) (Uniform Guidance) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 200.320 (Revised Uniform Guidance) 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 15 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT 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. . . ." Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 16 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-001 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National School Lunch Program, COVID-19 - National School Lunch Program, Summer Food Service Program for Children, COVID-19 - Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2020-2021, FY2021-2022, FY2021, FY2022 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. 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. 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. The School Corporation did not obtain price or rate quotes for all seven vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. The micro-purchase threshold may be increased, but the School Corporation did not provide documentation that the threshold had been increased. Documentation detailing the history of procurement, which must include the reason for the procurement method used, was not available for audit. Additionally, the School Corporation did not enter into a contract with four vendors as required by Indiana Code for purchases between $50,000 and $150,000. As such, the School Corporation did not verify that these vendors were not excluded or disqualified from participation in federal assistance programs or activities. In addition, the School Corporation was a member of the Region 8 Educational Service Center (Service Center). The Service Center completed the Procurement and Suspension and Debarment compliance requirement on behalf of the School Corporation. Because the grant agreements were between the Indiana Department of Education and the School Corporation, the School Corporation was ultimately responsible for compliance with the grant agreement and the suspension and debarment requirement of the Procurement and Suspension and Debarment compliance requirement. The bids for bread and milk were originally awarded for fiscal year 2018-2019 and were renewed for 2020-2021. The Service Center could not provide documentation that procedures were performed to verify the vendors were not suspended or debarred from participation in federal programs prior to entering into covered transactions with these vendors. INDIANA STATE BOARD OF ACCOUNTS 14 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) (Uniform Guidance) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.318(a) (Revised Uniform Guidance) 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 confirm 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(b) (Uniform Guidance) states: "Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources." 2 CFR 200.320 (Revised Uniform Guidance) 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 15 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT 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. . . ." Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 16 DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
2 CFR ? 400.1 gives regulatory effect to the Department of Agriculture and 2 CFR 3474.1 gives regulatory effect for the Department of Education for 2 CFR ? 200.317 through 200.327 which describe specific procedures non-Federal entities must follow when making procurement transactions using Federal funds. 2 CFR ? 200.318(a) indicates a non-Federal entity must use its own documented procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law and standards. 2 CFR ? 200.320 indicates the non-Federal entity must use the following methods of procurement: (a) Procurement by micro-purchases, which the aggregate dollar amount does not exceed the dollar threshold; (b) Procurement by small purchase procedures, which are procurements of relatively simple and informal nature, which do 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; (c) Procurement by sealed bids, are purchases made with publicly solicited and a firm fixed price contract (lump-sum or unit price) is awarded to the responsible bidder whose bid, conforming with all material terms and conditions in the invitations to bid, is the lowest in price. In order to be feasible, a complete, adequate and realistic specification or purchase description is available, two or more responsible bidders are willing and able to compete effectively for the business, and the procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on cost; (d) Procurement by competitive proposals, which is appropriate when purchases are large and competitive bidding is not appropriate, or (e) Procurement by non-competitive proposals, which are appropriate when an item can be obtained only from a sole source, the non-competitive proposals are specifically authorized in the Federal award, after solicitation through competitive means, competition is deemed in adequate, and/or the item must be purchased without delay due to an emergency or exigent circumstances. 2 CFR ? 200.318(i) indicates 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. Maple Heights City School District Board Policy EAG- Administration of Federal Grant Funds indicates all purchases of property and services using Federal funds must be conducted in accordance with all applicable Federal, State, and local laws and regulations, the Uniform Guidance, and the District's written policies and procedures. The District will perform a cost and price analysis for every procurement over the established simplified acquisition threshold. Purchasing records will be sufficiently maintained to detail the history of all procurements and must include at least the rationale for the method of procurement, selection of contract type, and contractor selection or rejection; the basis for the contract price; and verification that the contractor is not suspended or debarred. The District?s procurement policy does not indicate the number of quotations required when using the simplified acquisition threshold. Ohio Rev. Code ? 3313.46 indicates when a Board of Education determines to build, repair, enlarge, or demolish any school building with a cost in excess of $50,000, the Board is required to: 1. Prepare plans and specifications; 2. Advertised for bids once a week for not less than two consecutive weeks or as provided in Ohio Rev. Code ? 7.16, in a newspaper in general circulation in the district before the date specified for receiving bids. The board may also cause notice to be inserted in trade papers or other publications designated by it or to be distributed by electronic means, including posting the notice on the board?s internet web site. If the board posts the notice on its web site, it may eliminate the second notice otherwise required to be published in a newspaper of general circulation within the school district, provided that the first notice published in such newspaper meets all of the following requirements: (a) It is published at least two weeks before the opening of bids; (b) It includes a statement that the notice is posted on the board of education?s internet web site; (c) It includes the internet address of the board?s internet web site; and (d) It includes instructions describing how the notice may be accessed on the board?s internet web site; 3. Open the bids at the time and place specified by the Board in the advertisement for bids; 4. The award of the contract is to the lowest responsible bidder; 5. The contract is between the board and the bidders. The board is required to approve and retain estimates and make them available to the Auditor of State upon request; and, 6. If two or more bids are equal and are lower than any others, either may be accepted. However, the work is not to be divided among the bidders. The above requirements do not apply to: ? an urgent necessity; ? acquisition of educational materials used for teaching; ? any item which the Board, by a two-thirds vote, determines is available and can be obtained only through a single source; ? energy conservation measures, with the approval of two-thirds of the Board; ? acquisition of computer software or hardware for instructional purposes; or, ? School districts that participate in a joint purchasing contract are exempt from using competitive bidding. For one out of four vendors tested during our procurement testing of the Nutrition Cluster, the District did not maintain written justification documenting the history of the procurement. The vendor performed repairs on kitchen equipment totaling $37,382. The procurement was within the simplified acquisition threshold and quotes should have been obtained. The justification for using the vendor was provided verbally during the audit, with the District indicating the vendor was selected because of quick response time, past visits, and availability. Additionally, the District paid $303,004 for a roof replacement using Education Stabilization Fund- Elementary and Secondary School Emergency Relief (ESSER II) funds, which would be required to be competitively bid under the Ohio Rev. Code ? 3313.46 and 2 CFR 200.320. The District could not provide us with the following documentation: proof of the advertisement for bids of the project in a newspaper of general circulation in the District and/or advertisement of the project on the District?s website, the Board resolution approving the award of the contract, and the bid packages submitted from the losing bidders. Because of the lack of available documentation, the District was in non-compliance of the Federal procurement and Ohio competitive bidding requirements. Both of the issues noted above were due to a lack of internal controls regarding Federal procurement at the District. The District should adopt procedures to ensure the history of the procurement, including the rationale for the purchase method, selection of vendors, cost/price analysis (if applicable) and the reason for limiting competition, either because they are from a sole source provider or due to emergency or exigent circumstances are documented and maintain written documentation of such procedures. The District should also amend their procurement policy to indicate the number of quotations required when using the simplified acquisition threshold.
2 CFR ? 400.1 gives regulatory effect to the Department of Agriculture and 2 CFR 3474.1 gives regulatory effect for the Department of Education for 2 CFR ? 200.317 through 200.327 which describe specific procedures non-Federal entities must follow when making procurement transactions using Federal funds. 2 CFR ? 200.318(a) indicates a non-Federal entity must use its own documented procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law and standards. 2 CFR ? 200.320 indicates the non-Federal entity must use the following methods of procurement: (a) Procurement by micro-purchases, which the aggregate dollar amount does not exceed the dollar threshold; (b) Procurement by small purchase procedures, which are procurements of relatively simple and informal nature, which do 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; (c) Procurement by sealed bids, are purchases made with publicly solicited and a firm fixed price contract (lump-sum or unit price) is awarded to the responsible bidder whose bid, conforming with all material terms and conditions in the invitations to bid, is the lowest in price. In order to be feasible, a complete, adequate and realistic specification or purchase description is available, two or more responsible bidders are willing and able to compete effectively for the business, and the procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on cost; (d) Procurement by competitive proposals, which is appropriate when purchases are large and competitive bidding is not appropriate, or (e) Procurement by non-competitive proposals, which are appropriate when an item can be obtained only from a sole source, the non-competitive proposals are specifically authorized in the Federal award, after solicitation through competitive means, competition is deemed in adequate, and/or the item must be purchased without delay due to an emergency or exigent circumstances. 2 CFR ? 200.318(i) indicates 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. Maple Heights City School District Board Policy EAG- Administration of Federal Grant Funds indicates all purchases of property and services using Federal funds must be conducted in accordance with all applicable Federal, State, and local laws and regulations, the Uniform Guidance, and the District's written policies and procedures. The District will perform a cost and price analysis for every procurement over the established simplified acquisition threshold. Purchasing records will be sufficiently maintained to detail the history of all procurements and must include at least the rationale for the method of procurement, selection of contract type, and contractor selection or rejection; the basis for the contract price; and verification that the contractor is not suspended or debarred. The District?s procurement policy does not indicate the number of quotations required when using the simplified acquisition threshold. Ohio Rev. Code ? 3313.46 indicates when a Board of Education determines to build, repair, enlarge, or demolish any school building with a cost in excess of $50,000, the Board is required to: 1. Prepare plans and specifications; 2. Advertised for bids once a week for not less than two consecutive weeks or as provided in Ohio Rev. Code ? 7.16, in a newspaper in general circulation in the district before the date specified for receiving bids. The board may also cause notice to be inserted in trade papers or other publications designated by it or to be distributed by electronic means, including posting the notice on the board?s internet web site. If the board posts the notice on its web site, it may eliminate the second notice otherwise required to be published in a newspaper of general circulation within the school district, provided that the first notice published in such newspaper meets all of the following requirements: (a) It is published at least two weeks before the opening of bids; (b) It includes a statement that the notice is posted on the board of education?s internet web site; (c) It includes the internet address of the board?s internet web site; and (d) It includes instructions describing how the notice may be accessed on the board?s internet web site; 3. Open the bids at the time and place specified by the Board in the advertisement for bids; 4. The award of the contract is to the lowest responsible bidder; 5. The contract is between the board and the bidders. The board is required to approve and retain estimates and make them available to the Auditor of State upon request; and, 6. If two or more bids are equal and are lower than any others, either may be accepted. However, the work is not to be divided among the bidders. The above requirements do not apply to: ? an urgent necessity; ? acquisition of educational materials used for teaching; ? any item which the Board, by a two-thirds vote, determines is available and can be obtained only through a single source; ? energy conservation measures, with the approval of two-thirds of the Board; ? acquisition of computer software or hardware for instructional purposes; or, ? School districts that participate in a joint purchasing contract are exempt from using competitive bidding. For one out of four vendors tested during our procurement testing of the Nutrition Cluster, the District did not maintain written justification documenting the history of the procurement. The vendor performed repairs on kitchen equipment totaling $37,382. The procurement was within the simplified acquisition threshold and quotes should have been obtained. The justification for using the vendor was provided verbally during the audit, with the District indicating the vendor was selected because of quick response time, past visits, and availability. Additionally, the District paid $303,004 for a roof replacement using Education Stabilization Fund- Elementary and Secondary School Emergency Relief (ESSER II) funds, which would be required to be competitively bid under the Ohio Rev. Code ? 3313.46 and 2 CFR 200.320. The District could not provide us with the following documentation: proof of the advertisement for bids of the project in a newspaper of general circulation in the District and/or advertisement of the project on the District?s website, the Board resolution approving the award of the contract, and the bid packages submitted from the losing bidders. Because of the lack of available documentation, the District was in non-compliance of the Federal procurement and Ohio competitive bidding requirements. Both of the issues noted above were due to a lack of internal controls regarding Federal procurement at the District. The District should adopt procedures to ensure the history of the procurement, including the rationale for the purchase method, selection of vendors, cost/price analysis (if applicable) and the reason for limiting competition, either because they are from a sole source provider or due to emergency or exigent circumstances are documented and maintain written documentation of such procedures. The District should also amend their procurement policy to indicate the number of quotations required when using the simplified acquisition threshold.
2 CFR ? 400.1 gives regulatory effect to the Department of Agriculture and 2 CFR 3474.1 gives regulatory effect for the Department of Education for 2 CFR ? 200.317 through 200.327 which describe specific procedures non-Federal entities must follow when making procurement transactions using Federal funds. 2 CFR ? 200.318(a) indicates a non-Federal entity must use its own documented procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law and standards. 2 CFR ? 200.320 indicates the non-Federal entity must use the following methods of procurement: (a) Procurement by micro-purchases, which the aggregate dollar amount does not exceed the dollar threshold; (b) Procurement by small purchase procedures, which are procurements of relatively simple and informal nature, which do 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; (c) Procurement by sealed bids, are purchases made with publicly solicited and a firm fixed price contract (lump-sum or unit price) is awarded to the responsible bidder whose bid, conforming with all material terms and conditions in the invitations to bid, is the lowest in price. In order to be feasible, a complete, adequate and realistic specification or purchase description is available, two or more responsible bidders are willing and able to compete effectively for the business, and the procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on cost; (d) Procurement by competitive proposals, which is appropriate when purchases are large and competitive bidding is not appropriate, or (e) Procurement by non-competitive proposals, which are appropriate when an item can be obtained only from a sole source, the non-competitive proposals are specifically authorized in the Federal award, after solicitation through competitive means, competition is deemed in adequate, and/or the item must be purchased without delay due to an emergency or exigent circumstances. 2 CFR ? 200.318(i) indicates 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. Maple Heights City School District Board Policy EAG- Administration of Federal Grant Funds indicates all purchases of property and services using Federal funds must be conducted in accordance with all applicable Federal, State, and local laws and regulations, the Uniform Guidance, and the District's written policies and procedures. The District will perform a cost and price analysis for every procurement over the established simplified acquisition threshold. Purchasing records will be sufficiently maintained to detail the history of all procurements and must include at least the rationale for the method of procurement, selection of contract type, and contractor selection or rejection; the basis for the contract price; and verification that the contractor is not suspended or debarred. The District?s procurement policy does not indicate the number of quotations required when using the simplified acquisition threshold. Ohio Rev. Code ? 3313.46 indicates when a Board of Education determines to build, repair, enlarge, or demolish any school building with a cost in excess of $50,000, the Board is required to: 1. Prepare plans and specifications; 2. Advertised for bids once a week for not less than two consecutive weeks or as provided in Ohio Rev. Code ? 7.16, in a newspaper in general circulation in the district before the date specified for receiving bids. The board may also cause notice to be inserted in trade papers or other publications designated by it or to be distributed by electronic means, including posting the notice on the board?s internet web site. If the board posts the notice on its web site, it may eliminate the second notice otherwise required to be published in a newspaper of general circulation within the school district, provided that the first notice published in such newspaper meets all of the following requirements: (a) It is published at least two weeks before the opening of bids; (b) It includes a statement that the notice is posted on the board of education?s internet web site; (c) It includes the internet address of the board?s internet web site; and (d) It includes instructions describing how the notice may be accessed on the board?s internet web site; 3. Open the bids at the time and place specified by the Board in the advertisement for bids; 4. The award of the contract is to the lowest responsible bidder; 5. The contract is between the board and the bidders. The board is required to approve and retain estimates and make them available to the Auditor of State upon request; and, 6. If two or more bids are equal and are lower than any others, either may be accepted. However, the work is not to be divided among the bidders. The above requirements do not apply to: ? an urgent necessity; ? acquisition of educational materials used for teaching; ? any item which the Board, by a two-thirds vote, determines is available and can be obtained only through a single source; ? energy conservation measures, with the approval of two-thirds of the Board; ? acquisition of computer software or hardware for instructional purposes; or, ? School districts that participate in a joint purchasing contract are exempt from using competitive bidding. For one out of four vendors tested during our procurement testing of the Nutrition Cluster, the District did not maintain written justification documenting the history of the procurement. The vendor performed repairs on kitchen equipment totaling $37,382. The procurement was within the simplified acquisition threshold and quotes should have been obtained. The justification for using the vendor was provided verbally during the audit, with the District indicating the vendor was selected because of quick response time, past visits, and availability. Additionally, the District paid $303,004 for a roof replacement using Education Stabilization Fund- Elementary and Secondary School Emergency Relief (ESSER II) funds, which would be required to be competitively bid under the Ohio Rev. Code ? 3313.46 and 2 CFR 200.320. The District could not provide us with the following documentation: proof of the advertisement for bids of the project in a newspaper of general circulation in the District and/or advertisement of the project on the District?s website, the Board resolution approving the award of the contract, and the bid packages submitted from the losing bidders. Because of the lack of available documentation, the District was in non-compliance of the Federal procurement and Ohio competitive bidding requirements. Both of the issues noted above were due to a lack of internal controls regarding Federal procurement at the District. The District should adopt procedures to ensure the history of the procurement, including the rationale for the purchase method, selection of vendors, cost/price analysis (if applicable) and the reason for limiting competition, either because they are from a sole source provider or due to emergency or exigent circumstances are documented and maintain written documentation of such procedures. The District should also amend their procurement policy to indicate the number of quotations required when using the simplified acquisition threshold.
2 CFR ? 400.1 gives regulatory effect to the Department of Agriculture and 2 CFR 3474.1 gives regulatory effect for the Department of Education for 2 CFR ? 200.317 through 200.327 which describe specific procedures non-Federal entities must follow when making procurement transactions using Federal funds. 2 CFR ? 200.318(a) indicates a non-Federal entity must use its own documented procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law and standards. 2 CFR ? 200.320 indicates the non-Federal entity must use the following methods of procurement: (a) Procurement by micro-purchases, which the aggregate dollar amount does not exceed the dollar threshold; (b) Procurement by small purchase procedures, which are procurements of relatively simple and informal nature, which do 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; (c) Procurement by sealed bids, are purchases made with publicly solicited and a firm fixed price contract (lump-sum or unit price) is awarded to the responsible bidder whose bid, conforming with all material terms and conditions in the invitations to bid, is the lowest in price. In order to be feasible, a complete, adequate and realistic specification or purchase description is available, two or more responsible bidders are willing and able to compete effectively for the business, and the procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on cost; (d) Procurement by competitive proposals, which is appropriate when purchases are large and competitive bidding is not appropriate, or (e) Procurement by non-competitive proposals, which are appropriate when an item can be obtained only from a sole source, the non-competitive proposals are specifically authorized in the Federal award, after solicitation through competitive means, competition is deemed in adequate, and/or the item must be purchased without delay due to an emergency or exigent circumstances. 2 CFR ? 200.318(i) indicates 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. Maple Heights City School District Board Policy EAG- Administration of Federal Grant Funds indicates all purchases of property and services using Federal funds must be conducted in accordance with all applicable Federal, State, and local laws and regulations, the Uniform Guidance, and the District's written policies and procedures. The District will perform a cost and price analysis for every procurement over the established simplified acquisition threshold. Purchasing records will be sufficiently maintained to detail the history of all procurements and must include at least the rationale for the method of procurement, selection of contract type, and contractor selection or rejection; the basis for the contract price; and verification that the contractor is not suspended or debarred. The District?s procurement policy does not indicate the number of quotations required when using the simplified acquisition threshold. Ohio Rev. Code ? 3313.46 indicates when a Board of Education determines to build, repair, enlarge, or demolish any school building with a cost in excess of $50,000, the Board is required to: 1. Prepare plans and specifications; 2. Advertised for bids once a week for not less than two consecutive weeks or as provided in Ohio Rev. Code ? 7.16, in a newspaper in general circulation in the district before the date specified for receiving bids. The board may also cause notice to be inserted in trade papers or other publications designated by it or to be distributed by electronic means, including posting the notice on the board?s internet web site. If the board posts the notice on its web site, it may eliminate the second notice otherwise required to be published in a newspaper of general circulation within the school district, provided that the first notice published in such newspaper meets all of the following requirements: (a) It is published at least two weeks before the opening of bids; (b) It includes a statement that the notice is posted on the board of education?s internet web site; (c) It includes the internet address of the board?s internet web site; and (d) It includes instructions describing how the notice may be accessed on the board?s internet web site; 3. Open the bids at the time and place specified by the Board in the advertisement for bids; 4. The award of the contract is to the lowest responsible bidder; 5. The contract is between the board and the bidders. The board is required to approve and retain estimates and make them available to the Auditor of State upon request; and, 6. If two or more bids are equal and are lower than any others, either may be accepted. However, the work is not to be divided among the bidders. The above requirements do not apply to: ? an urgent necessity; ? acquisition of educational materials used for teaching; ? any item which the Board, by a two-thirds vote, determines is available and can be obtained only through a single source; ? energy conservation measures, with the approval of two-thirds of the Board; ? acquisition of computer software or hardware for instructional purposes; or, ? School districts that participate in a joint purchasing contract are exempt from using competitive bidding. For one out of four vendors tested during our procurement testing of the Nutrition Cluster, the District did not maintain written justification documenting the history of the procurement. The vendor performed repairs on kitchen equipment totaling $37,382. The procurement was within the simplified acquisition threshold and quotes should have been obtained. The justification for using the vendor was provided verbally during the audit, with the District indicating the vendor was selected because of quick response time, past visits, and availability. Additionally, the District paid $303,004 for a roof replacement using Education Stabilization Fund- Elementary and Secondary School Emergency Relief (ESSER II) funds, which would be required to be competitively bid under the Ohio Rev. Code ? 3313.46 and 2 CFR 200.320. The District could not provide us with the following documentation: proof of the advertisement for bids of the project in a newspaper of general circulation in the District and/or advertisement of the project on the District?s website, the Board resolution approving the award of the contract, and the bid packages submitted from the losing bidders. Because of the lack of available documentation, the District was in non-compliance of the Federal procurement and Ohio competitive bidding requirements. Both of the issues noted above were due to a lack of internal controls regarding Federal procurement at the District. The District should adopt procedures to ensure the history of the procurement, including the rationale for the purchase method, selection of vendors, cost/price analysis (if applicable) and the reason for limiting competition, either because they are from a sole source provider or due to emergency or exigent circumstances are documented and maintain written documentation of such procedures. The District should also amend their procurement policy to indicate the number of quotations required when using the simplified acquisition threshold.
2 CFR ? 400.1 gives regulatory effect to the Department of Agriculture and 2 CFR 3474.1 gives regulatory effect for the Department of Education for 2 CFR ? 200.317 through 200.327 which describe specific procedures non-Federal entities must follow when making procurement transactions using Federal funds. 2 CFR ? 200.318(a) indicates a non-Federal entity must use its own documented procurement procedures which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal law and standards. 2 CFR ? 200.320 indicates the non-Federal entity must use the following methods of procurement: (a) Procurement by micro-purchases, which the aggregate dollar amount does not exceed the dollar threshold; (b) Procurement by small purchase procedures, which are procurements of relatively simple and informal nature, which do 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; (c) Procurement by sealed bids, are purchases made with publicly solicited and a firm fixed price contract (lump-sum or unit price) is awarded to the responsible bidder whose bid, conforming with all material terms and conditions in the invitations to bid, is the lowest in price. In order to be feasible, a complete, adequate and realistic specification or purchase description is available, two or more responsible bidders are willing and able to compete effectively for the business, and the procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on cost; (d) Procurement by competitive proposals, which is appropriate when purchases are large and competitive bidding is not appropriate, or (e) Procurement by non-competitive proposals, which are appropriate when an item can be obtained only from a sole source, the non-competitive proposals are specifically authorized in the Federal award, after solicitation through competitive means, competition is deemed in adequate, and/or the item must be purchased without delay due to an emergency or exigent circumstances. 2 CFR ? 200.318(i) indicates 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. Maple Heights City School District Board Policy EAG- Administration of Federal Grant Funds indicates all purchases of property and services using Federal funds must be conducted in accordance with all applicable Federal, State, and local laws and regulations, the Uniform Guidance, and the District's written policies and procedures. The District will perform a cost and price analysis for every procurement over the established simplified acquisition threshold. Purchasing records will be sufficiently maintained to detail the history of all procurements and must include at least the rationale for the method of procurement, selection of contract type, and contractor selection or rejection; the basis for the contract price; and verification that the contractor is not suspended or debarred. The District?s procurement policy does not indicate the number of quotations required when using the simplified acquisition threshold. Ohio Rev. Code ? 3313.46 indicates when a Board of Education determines to build, repair, enlarge, or demolish any school building with a cost in excess of $50,000, the Board is required to: 1. Prepare plans and specifications; 2. Advertised for bids once a week for not less than two consecutive weeks or as provided in Ohio Rev. Code ? 7.16, in a newspaper in general circulation in the district before the date specified for receiving bids. The board may also cause notice to be inserted in trade papers or other publications designated by it or to be distributed by electronic means, including posting the notice on the board?s internet web site. If the board posts the notice on its web site, it may eliminate the second notice otherwise required to be published in a newspaper of general circulation within the school district, provided that the first notice published in such newspaper meets all of the following requirements: (a) It is published at least two weeks before the opening of bids; (b) It includes a statement that the notice is posted on the board of education?s internet web site; (c) It includes the internet address of the board?s internet web site; and (d) It includes instructions describing how the notice may be accessed on the board?s internet web site; 3. Open the bids at the time and place specified by the Board in the advertisement for bids; 4. The award of the contract is to the lowest responsible bidder; 5. The contract is between the board and the bidders. The board is required to approve and retain estimates and make them available to the Auditor of State upon request; and, 6. If two or more bids are equal and are lower than any others, either may be accepted. However, the work is not to be divided among the bidders. The above requirements do not apply to: ? an urgent necessity; ? acquisition of educational materials used for teaching; ? any item which the Board, by a two-thirds vote, determines is available and can be obtained only through a single source; ? energy conservation measures, with the approval of two-thirds of the Board; ? acquisition of computer software or hardware for instructional purposes; or, ? School districts that participate in a joint purchasing contract are exempt from using competitive bidding. For one out of four vendors tested during our procurement testing of the Nutrition Cluster, the District did not maintain written justification documenting the history of the procurement. The vendor performed repairs on kitchen equipment totaling $37,382. The procurement was within the simplified acquisition threshold and quotes should have been obtained. The justification for using the vendor was provided verbally during the audit, with the District indicating the vendor was selected because of quick response time, past visits, and availability. Additionally, the District paid $303,004 for a roof replacement using Education Stabilization Fund- Elementary and Secondary School Emergency Relief (ESSER II) funds, which would be required to be competitively bid under the Ohio Rev. Code ? 3313.46 and 2 CFR 200.320. The District could not provide us with the following documentation: proof of the advertisement for bids of the project in a newspaper of general circulation in the District and/or advertisement of the project on the District?s website, the Board resolution approving the award of the contract, and the bid packages submitted from the losing bidders. Because of the lack of available documentation, the District was in non-compliance of the Federal procurement and Ohio competitive bidding requirements. Both of the issues noted above were due to a lack of internal controls regarding Federal procurement at the District. The District should adopt procedures to ensure the history of the procurement, including the rationale for the purchase method, selection of vendors, cost/price analysis (if applicable) and the reason for limiting competition, either because they are from a sole source provider or due to emergency or exigent circumstances are documented and maintain written documentation of such procedures. The District should also amend their procurement policy to indicate the number of quotations required when using the simplified acquisition threshold.
Significant Deficiency ? Item No. 2022-003 Identification of the Federal Program: U.S. Department of Agriculture ? Community Facilities Loans and Grants Cluster, Community Facilities Loans and Grants ? 10.766 Criteria: The Hospital must establish and maintain effective internal control over federal awards that provides reasonable assurance that the Hospital is managing the federal awards in compliance with federal statutes, regulations and terms and conditions of the federal award. 2 CFR 200.327 and 2 CFR 200.328 require the auditee to collect financial information and monitor its activities under federal awards to assure compliance with applicable federal requirements and performance expectations are being achieved and report these items in accordance with program requirements. Terms and conditions of the federal award require the audited financial statements to be provided to the federal agency annually within 9 months of fiscal year-end, as well as an annual budget and quarterly reports. Condition: The Hospital did not submit the audited financial statements, budget, or quarterly reports within the prescribed period or request an extension. The audit financial statements are readily available to the federal agency through the federal clearinghouse website. The budget and quarterly reports were submitted late. Cause: The Hospital did not have a control in place to assure proper submission or the reports. Effect: The required reports were not submitted timely to the federal agency. Questioned Costs: None reported. Context: Sampling was not used. Recommendation: We recommend that management implement procedures to ensure that the required financial reports are submitted in a timely manner in accordance with the terms and conditions of the federal award. Views of Responsible Officials: Management agrees with the finding. See 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). All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) (40 USC 3141?3144, 3146, and 3147). Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326). 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. As such, we were unable to determine whether the required prevailing wage rate clauses were included in the contract. Further, certified payrolls could not be provided for the projects subject to the contract to indicate that the Center was properly monitoring for prevailing wage requirements. 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; and documentation is received and reviewed to monitor compliance with prevailing wage rate requirements, when applicable.
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). All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) (40 USC 3141?3144, 3146, and 3147). Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326). 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. As such, we were unable to determine whether the required prevailing wage rate clauses were included in the contract. Further, certified payrolls could not be provided for the projects subject to the contract to indicate that the Center was properly monitoring for prevailing wage requirements. 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; and documentation is received and reviewed to monitor compliance with prevailing wage rate requirements, when applicable.
FINDING NO. 2022-001 PROCUREMENT (SIGNIFICANT DEFICIENCY) FEDERAL PROGRAM OR CLUSTER: CRIME VICTIM ASSISTANCE ASSISTANCE LISTING NUMBER: 16.575 Criteria Per 2 CFR 200.318, ?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.? Condition Prevail does not have a documented procurement policy to ensure it is complying with the above standard. Cause A responsible individual is not monitoring Federal regulations to ensure Prevail?s procurement procedures are properly documented and in line with the regulations. Effect Not documenting these procedures could result in Prevail completing procurement transactions not in compliance with Federal regulations. Additionally, Prevail does not include the requirement to check for suspension or debarment of vendors, as required by Federal regulations. Recommendation We recommend Prevail develop a written procurement policy incorporating the Federal regulations identified above. Views of Responsible Officials Prevail?s Corrective Action Plan is included on page 32.
FINDING NO. 2022-001 PROCUREMENT (SIGNIFICANT DEFICIENCY) FEDERAL PROGRAM OR CLUSTER: CRIME VICTIM ASSISTANCE ASSISTANCE LISTING NUMBER: 16.575 Criteria Per 2 CFR 200.318, ?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.? Condition Prevail does not have a documented procurement policy to ensure it is complying with the above standard. Cause A responsible individual is not monitoring Federal regulations to ensure Prevail?s procurement procedures are properly documented and in line with the regulations. Effect Not documenting these procedures could result in Prevail completing procurement transactions not in compliance with Federal regulations. Additionally, Prevail does not include the requirement to check for suspension or debarment of vendors, as required by Federal regulations. Recommendation We recommend Prevail develop a written procurement policy incorporating the Federal regulations identified above. Views of Responsible Officials Prevail?s Corrective Action Plan is included on page 32.