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 2023, FY 2024
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.
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. Nonfederal entities may establish a
micro-purchase threshold higher than the federal threshold of $10,000 as established in the FAR in
accordance with 2 CFR 200.320(a)(1)(iv) and (v). The School Corporation established a higher micropurchase
threshold of $50,000. The School Corporation self-certified due to meeting the classification of a
public institution and established a higher threshold consistent with state law (Indiana threshold of micropurchases
is $50,000). 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.
Adequate internal controls were not in place over procurements made under the small purchase
threshold for one of the two vendors tested during the audit period. The School Corporation made
purchases with a vendor in fiscal year 2022-2023 totaling $97,773 and 2023-2024 totaling $59,070 but did
not provide audit evidence that price quotations had been requested.
Additionally, the School Corporation was not able to provide evidence that internal controls over
suspension and debarment procedures were in place.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to procurement requirements.
INDIANA STATE BOARD OF ACCOUNTS
18
LIBERTY-PERRY COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
2 CFR 200.320 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: . . .
(1) . . .
(iv) Non-Federal entity increase to the micro-purchase threshold up to $50,000.
Non-Federal entities may establish a threshold higher than the micro-purchase
threshold identified in the FAR in accordance with the requirements of this section.
The non-Federal entity may self-certify a threshold up to $50,000 on an annual
basis and must maintain documentation to be made available to the Federal
awarding agency and auditors in accordance with § 200.334. The self-certification
must include a justification, clear identification of the threshold, and supporting
documentation of any of the following:
(A) A qualification as a low-risk auditee, in accordance with the criteria in §
200.520 for the most recent audit;
(B) An annual internal institutional risk assessment to identify, mitigate, and
manage financial risks; or,
INDIANA STATE BOARD OF ACCOUNTS
19
LIBERTY-PERRY COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(C) For public institutions, a higher threshold consistent with State law. . . ."
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."
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. . . ."
Cause
The School Corporation was not able to provide documentation to demonstrate that quotes were
obtained for purchases under the small purchase method. The School Corporation was unable to provide
documentation to demonstrate it checked SAM.gov to verify the contractor was not suspended or debarred
prior to entering into the contract. The School Corporation did not have proper policies and procedures in
place due to being unaware of the grant requirements.
Effect
Without the proper implementation of an effectively designed system of internal controls, the School
Corporation cannot ensure the contractors paid with federal funds are eligible to participate in federal
programs. Any funds the School Corporation used to pay contractors that have been suspended or
debarred would be unallowable, and the funding agency could potentially recover them. The School
Corporation cannot ensure that contractors paid under the small purchase method were awarded the best
price for their services. This could result in federal funding not providing as many services or projects as
possible.
Questioned Costs
There were no questioned costs identified.
INDIANA STATE BOARD OF ACCOUNTS
20
LIBERTY-PERRY COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Recommendation
We recommended that the School Corporation strengthen its system of internal controls to ensure
the proper procurement method is followed and documentation is retained. We recommended the School
Corporation document its internal control procedures performed to ensure that all contractors that are paid
$25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal
programs before entering into any contracts. We also recommended strengthening its policies and
procedures to ensure appropriate evidence is retained for audit.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.