FINDING 2025-005 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 Assistance Listings Numbers: 84.027, 84.027X, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-151-PN01, 23611-151-PN01, 24611-151-PN01, 22611-151-ARP, 23619-151-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement 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. The School Corporation procured goods totaling $60,002 from four vendors that fell under the small purchase threshold during the audit period. The School Corporation did not provide adequate documentation detailing the history of procurement, which must include the reason for the procurement method used, for all four vendors. Price or rate quotes were not obtained for three of the vendors as required. The School Corporation obtained three quotes for one vendor; however, the highest quote was selected without a documented reason. Suspension and Debarment Prior to entering into subawards and covered transactions, recipients are required to verify that 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 (e.g., grant agreement) that are expected to equal or exceed $25,000 and all subawards. The verification is to be done by checking the SAM exclusions list, collection of a certification from that person or entity, or adding a clause or condition to the covered transaction with that person or entity. There was one covered transaction over $25,000 identified during the audit period which was selected for testing. The School Corporation did not verify that the vendor was not suspended, debarred, or otherwise excluded from participation in federal assistance programs. INDIANA STATE BOARD OF ACCOUNTS 22 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were systemic issues 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(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 200.318(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." Indiana Code 5-22-8-3(d) states: "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 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— INDIANA STATE BOARD OF ACCOUNTS 23 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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. . . ." 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 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 Management had not designed or implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect Material noncompliance with the grant agreement and compliance requirements could cause federal expenditures to be unallowable which the funding agency could potentially recover. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure compliance with requirements related to procurement and suspension and debarment. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.