FINDING 2024-003
Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States,
Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants
Assistance Listings Numbers: 84.027, 84.173
Federal Award Numbers and Years (or Other Identifying Numbers): H027X210084, H173X210104,
H173A210104, H027A220084,
H027A230084
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a non-federal entity. However,
Indiana Code 5-22-8 has a more restrictive threshold of $150,000. Therefore, informal
procurement methods are permitted when the value of the procurement does not exceed
$150,000. This informal process allows for methods other than the formal bid process.
INDIANA STATE BOARD OF ACCOUNTS 19
ANDERSON COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The informal process is divided between two methods based on thresholds: Micro-purchases,
typically for those purchases $10,000 or under; and small purchase procedures for those
purchases above the micro-purchase threshold but below the simplified acquisition threshold.
Micro-purchases may be awarded without soliciting competitive price rate quotations. If small
purchase procedures are used, then price or rate quotations must be obtained from an
adequate number of qualified sources. The school corporation did not have policies and
procedures with regards to purchases that exceed $10,000.
Two separate vendor transactions were identified in the range below the simplified acquisition
threshold and above the micro-purchase threshold as traditional procurement transactions. No
quotes or bids related to each transaction were presented for audit purposes, and no documentation
to support the rationale for not providing full and open competition was provided.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or
otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods
and services awarded under a nonprocurement transaction (i.e., grant agreement) that are
expected to equal or exceed $25,000. Four vendors were selected to confirm the school
corporation was verifying suspension and debarment status. The school corporation informed
examiners they confirm status to Sam.gov, a sufficient procedure, however they did not retain
documentation that this was performed prior to disbursing federal funds to the vendors.
The lack of internal controls and noncompliance were systemic throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
2 CFR 200.318 states in part:
"(a) The non-Federal entity must have and use documented procurement procedures,
consistent with State, local, and tribal laws and regulations and the standards of this section,
for the acquisition of property or services required under a Federal award or subaward. The
non-Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327. . . .
(i) The non-Federal entity must maintain records sufficient to detail the history of
procurement. These records will include, but are not necessarily limited to, the
following: Rationale for the method of procurement, selection of contract type,
contractor selection or rejection, and the basis for the contract price. . . ."
INDIANA STATE BOARD OF ACCOUNTS 20
ANDERSON 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. . . .
(b) Formal procurement methods. When the value of the procurement for property or services
under a Federal financial assistance award exceeds the SAT, or a lower threshold established
by a non-Federal entity, formal procurement methods are required. Formal procurement
methods require following documented procedures. Formal procurement methods also require
public advertising unless a non-competitive procurement can be used in accordance with
§ 200.319 or paragraph (c) of this section. The following formal methods of procurement are
used for procurement of property or services above the simplified acquisition threshold or a
value below the simplified acquisition threshold the non-Federal entity determines to be
appropriate: . . .
(1) Sealed bids. A procurement method in which bids are publicly solicited and a firm
fixed-price contract (lump sum or unit price) is awarded to the responsible bidder
whose bid, conforming with all the material terms and conditions of the invitation for
bids, is the lowest in price. The sealed bids method is the preferred method for
procuring construction, if the conditions. . . .
(2) Proposals. A procurement method in which either a fixed price or cost reimbursement
type contract is awarded. Proposals are generally used when conditions are not
appropriate for the use of sealed bids. . . ."
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."
INDIANA STATE BOARD OF ACCOUNTS 21
ANDERSON COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
Management of the School Corporation had not established policies and procedures related to
federal procurement standards or suspension and debarment verification, as such no procedures were
performed to maintain documentation related to the procurement and suspension and debarment
compliance requirement.
Effect
The failure to establish internal controls enabled noncompliance to go undetected. Without the
proper implementation of an effectively designed system of internal controls, the internal control system
cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Without
following the required methods for procurement, the School Corporation could be overpaying for services.
Unverified vendors to whom payments equal to or in excess of $25,000 could be suspended, debarred, or
otherwise excluded.
The failure to comply with the grant agreement and the compliance requirement could have resulted
in the loss of federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management establish and implement internal
control procedures to ensure compliance with the grant agreement and the procurement and suspension
and debarment compliance requirement. This should include documenting the procurement process taken
by management for transactions with vendors exceeding the simplified acquisition and small purchase
thresholds. When utilizing vendors providing specialized services, documentation should be prepared and
maintained by management to support sole source procurement decisions when competitive is limited due
to the nature of the service. We also recommend implementing an annual control to review and document
suspension and debarment checks for all vendors funded with Special Education grant funds that meet the
covered transaction threshold of $25,000.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.