FINDING 2023-006
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): FY2022, FY2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
INDIANA STATE BOARD OF ACCOUNTS
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SHENANDOAH SCHOOL CORPORATION
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Condition and Context
A School Nutrition Cooperative (Co-ops, Education Service Center, Group Purchasing
Organization, etc.) that would like to be classified as a School Food Authority (SFA) Cooperative must
complete a questionnaire and submit it to the Indiana Department of Education (IDOE). Once a
questionnaire is received, the IDOE will review the answers to determine a Cooperative's classification.
Only Cooperatives that submit the questionnaire and receive an SFA-only Cooperative classification from
the IDOE in writing, will be considered an SFA only Cooperative for the purposes of the procurement
process and procurement reviews.
When the value of goods or services exceeds the simplified acquisition threshold, the proper
purchasing method would be the bidding process, unless the purchase meets certain other qualifications.
Federal regulations allow for informal procurement methods when the value of the procurement for goods
or services does not exceed the simplified acquisition threshold, which is customarily 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. If it is determined a single
source provider can be used for a small purchase, documentation must be retained supporting the
determination.
Two vendors were identified as falling within the small purchase threshold. Both vendors were
selected for testing. Supporting documentation to show that an adequate number of price or rate quotations
were obtained to ensure full and open competition could not be provided for audit.
The lack of internal controls and noncompliance were systemic issues throughout the audit.
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. . . .
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(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. . . ."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use document 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. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the School Corporation's management statements
of what should be done to effect internal controls, and procedures should consist of actions that would
implement these policies.
Effect
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. As a result, procurement procedures for goods and services were not adhered to.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management establish a proper system of internal
controls and develop policies and procedures to ensure there are appropriate procurement procedures for
goods and services.
INDIANA STATE BOARD OF ACCOUNTS
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SHENANDOAH SCHOOL CORPORATION
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Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.