2024-001The District did not have adequate internal controls for ensuring compliance with federal procurement requirements.
Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program
Federal Grantor Name: U.S. Department of Agriculture
Federal Award/Contract Number: N/A
Pass-through Entity Name: Office of Superintendent of Public Instruction (OSPI)
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The District participates in the Child Nutrition Cluster program, which includes the School Breakfast and National School Lunch programs. These programs provide free and reduced-price meals to students from low-income families. The District received $2,055,851 to administer the programs during the 2023-2024 school year.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Description of Condition
When using federal funds to purchase goods or services, governments must apply the most restrictive of federal requirements, state law or local policies by obtaining quotes or following a competitive bid process, depending on the estimated purchase cost. Federal regulations require the District to solicit sealed bids or competitive proposals for purchases more than $250,000. District policy requires it to obtain at least three quotes for purchases between $10,000 and $75,000, and use formal bidding or proposals for purchases $75,000 and more.
The District’s internal controls were ineffective for ensuring compliance with procurement requirements. The District did not competitively procure food purchases from one vendor.
We consider this deficiency in internal controls to be a significant deficiency.
Cause of Condition
District staff responsible for procuring nutrition services’ contracts misunderstood federal procurement requirements and the District’s procurement policy. The District had competitively procured these food purchases in 2021. However, when the vendor informed the District they were unable to provide the goods during the current school year, the District relied on the 2021 request for proposals and selected a new vendor from that list.
Effect of Condition
The District spent $137,007 of federal funds to purchase food products from one vendor without a competitive procurement process. Without effective internal controls, the District cannot demonstrate it complied with federal procurement requirements and its own policy, allowed for full and open competition, and received the best price for the food purchases.
Recommendation
We recommend the District:
• Dedicate the necessary time and resources to ensure staff responsible for procuring goods and services with federal funds are knowledgeable about federal procurement requirements and District policy
• Follow its procurement policy and federal regulations for purchases made with federal funds
• Maintain documentation to demonstrate compliance with federal requirements
District’s Response
The District acknowledges the audit finding related to federal procurement compliance within the Child Nutrition Cluster program and appreciates the State Auditor’s Office for their thorough review and recommendations.
In this instance, a competitive procurement process was not conducted following the unavailability of a previously contracted vendor for pizza services just prior to the start of the 2023–24 school year. Due to the timing and urgency to ensure uninterrupted student meal service, the District engaged a vendor that had previously responded to a 2021 RFP, without initiating a new competitive process. While the intent was to maintain service continuity, we recognize that this approach did not meet the standards required under federal Uniform Guidance or District policy.
The District takes this finding seriously and views it as an opportunity to strengthen internal controls and reinforce understanding of procurement requirements. This issue stemmed from a misinterpretation of applicable guidelines rather than from any misconduct or misuse of funds.
To prevent future occurrences and enhance compliance, the District has taken the following corrective actions:
• Staff training: The District is providing targeted training on federal procurement requirements, internal controls, and accountability practices to all federal program leads and purchasing staff. This includes comprehensive orientation for new purchasing leadership to support continuity and compliance. The recent incident is being used as a case study to strengthen shared understanding and reinforce best practices across departments.
•New protocols: The District is developing updated emergency procurement protocols that include required documentation, vendor outreach logs, and pre-approval processes to ensure adherence to federal and District requirements.
Although the amount in question totaled $137,007, there was no loss or misappropriation of funds, and this issue did not result in any findings related to the District’s financial statements.
We remain committed to continuous improvement, transparency, and stewardship of public resources, and we appreciate the opportunity to enhance our practices through this process.
Auditor’s Remarks
We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our net regular audit.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
Title 2 CFR 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section.
Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.