FINDING 2024-003
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY 23, FY 24
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 was not in place at the School Corporation to ensure
compliance with requirements related to the grant agreement and the Procurement and Suspension and
Debarment compliance requirement.
Procurement
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$150,000 per Indiana Code. This informal process allows for methods other than the formal
bid process. The informal process is divided between two methods based on thresholds:
micro-purchases, typically for those purchases of $10,000 or under, and small purchase
procedures for those purchases above the micro-purchase threshold but below the simplified
acquisition threshold. Micro-purchases may be awarded without soliciting competitive price
rate quotations. If small purchase procedures are used, then price or rate quotations must be
obtained from an adequate number of qualified sources.
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases were followed. The School
Corporation did not obtain price or rate quotes from multiple vendors for its audit period contract
with Coca-Cola. Documentation detailing the history of procurement, including rationale to limit
competition at the time of purchase was not provided for audit.
Suspension and Debarment
Nonfederal entities and contractors are subject to nonprocurement debarment and suspension
regulations. These regulations restrict awards, subawards, and contracts with certain parties
that are debarred, suspended, or otherwise excluded from or are ineligible for participation in
federal assistance programs or activities. This is done by checking SAM Exclusions, collecting
a certification from that entity, or adding a clause or condition to the covered transaction with
that entity.
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that applicable vendors who received federal funds over certain thresholds were not
suspended or debarred from participating in federal awards programs.
There was one vendor (Coca-Cola) subject to suspension and debarment requirements during
the audit period that was not procured through the School Corporation's affiliated Educational
Services Center for cooperative purchasing. The School Corporation did not perform procedures
to ensure the vendor was not suspended, debarred, or otherwise excluded from or
eligible for participation in federal assistance programs or activities.
The lack of internal controls was a systemic issue throughout the audit period. Noncompliance was
isolated to one vendor (and related purchases) for both procurement and suspension and debarment
requirements.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
2 CFR 200.318(i) states:
"The non-Federal entity must maintain records sufficient to detail the history of procurement.
These records will include, but are not necessarily limited to the following: Rationale for the
method of procurement, selection of contract type, contractor selection or rejection, and the
basis for the contract price."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement 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.
. . ."
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). . . .
(b) A purchasing agent may purchase supplies under this section by inviting quotes from at
least three (3) persons known to deal in the lines or classes of supplies to be purchased.
(c) The purchasing agent shall mail an invitation to quote to the persons described in
subsection (b) at least seven (7) days before the time fixed for receiving quotes.
(d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a
contract to the lowest responsible and responsive offeror for each line or class of supplies
required."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified. You
do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
The Superintendent of Schools indicated that alternative vendor(s) had left the local geographical
area and no longer attempted to submit quotes or bids for services as it had done in prior years.
Additionally, School Corporation officials were unaware of the requirement to verify that all vendors over
$25,000 were not suspended or debarred from receiving federal grant funds.
Effect
The lack of an effective internal control system enabled material noncompliance to occur and
remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance
requirement could enable small purchases made by the School Corporation to be uncompetitive and could
lead to contracting with vendors who are suspended or debarred from receiving federal grant funding.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of future federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended the School Corporation's management strengthen its system of internal controls
over small purchase requirements to ensure that an adequate number price or rate quotes are obtained
before purchase. Additionally, we recommended that vendors with a single or aggregate transaction
amounts over $25,000 per fiscal year are verified for suspension and debarment prior to entering into the
transaction and/or contract.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.