Finding Text
FINDING 2024-002
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024, FY23/FY24
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-003.
Condition and Context
An effective internal control system, which would include segregation of duties, was not in place at
the School Corporation in order to ensure compliance with requirements related to the grant agreement
and the Procurement and Suspension and Debarment compliance requirement.
INDIANA STATE BOARD OF ACCOUNTS
17
SOUTH VERMILLION COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Procurement
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$150,000. This informal process allows for methods other than the formal bid process. The
informal process is divided between two methods based on thresholds: Micro-purchases,
typically for those purchases of $10,000 or under, and small purchase procedures for those
purchases above the micro-purchases 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.
There were no internal controls in place to ensure that the School Corporation complied with
the small purchase requirements. The School Corporation obtained quotes for the two vendors
that qualified for the small purchase threshold, but there was no review or oversight process
performed.
Suspension and Debarment
There were no internal controls in place to ensure that the School Corporation complied with
the suspension and debarment requirements. The School Corporation did not verify that the
two vendors were not suspended or debarred. They did not have a contract with the vendors
that included the suspension and debarment clause, did not collect a certification from the
vendors, and did not check the Sam.gov website to verify that vendors were not suspended or
debarred.
The lack of internal controls and noncompliance were systemic throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in compliance
with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
2 CFR 200.318(i) states:
"The non-Federal entity must maintain records sufficient to detail the history of procurement.
These records will include, but are not necessarily limited to, the following: Rationale for the
method of procurement, selection of contract type, contractor selection or rejection, and the
basis for the contract price."
INDIANA STATE BOARD OF ACCOUNTS
18
SOUTH VERMILLION COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal
procurement methods to expedite the completion of its transactions and minimize the
associated administrative burden and cost. The informal methods used for procurement
of property or services at or below the SAT include: . . .
(2) Small purchases —
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold but
does not exceed the simplified acquisition threshold. If small purchase procedures
are used, price or rate quotations must be obtained from an adequate number of
qualified sources as determined appropriate by the non-Federal entity. . . ."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM.gov 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 or implemented a system of internal controls that would have
ensured compliance with the grant agreement and the Procurement and Suspension and Debarment
compliance requirement. The School Corporation obtained quotes for the two vendors that qualified for the
small purchase threshold, but there was not a review or oversight performed. The School Corporation was
unaware of the requirement to provide documentation to show that a verification was done to determine
that the two vendors were not suspended or debarred.
Effect
Without the proper implementation of an effectively designed system of internal controls, the School
Corporation could have used a vendor that charged more than the lowest quote for small purchases or
could have entered into transaction with vendors that were excluded from participating in federal transactions.
Noncompliance with the grant agreement and the Procurement and Suspension and Debarment
compliance requirement could result in the loss of future federal funds to the School Corporation.
INDIANA STATE BOARD OF ACCOUNTS
19
SOUTH VERMILLION COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management establish a system of internal controls
to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment
compliance requirement.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.