Finding Text
FINDING 2025-004 Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Special Milk Program for Children, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.556, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024, FY2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-007. Condition and Context An effective internal control system 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. Prior to entering into subawards and covered transactions with program 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. The verification is to be done by checking the SAMs exclusion, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. The School Corporation engaged with an Education Service Center that was an approved School Food Authority (SFA) cooperative for three of its four covered transactions totaling $1,705,141 that were subject to federal suspension and debarment requirements during the audit period. All three of these transactions were tested and found to be compliant with suspension and debarment requirements for the Child Nutrition Cluster grant requirements during the 2024-2025 audit period. In addition, the School Corporation obtained goods and services from an equipment vendor that was not a part of the cooperative's procurement processes for vendor selections and use. This covered transaction totaling $110,749, that equaled or exceeded $25,000, was identified and tested for compliance with suspension and debarment grant requirements. INDIANA STATE BOARD OF ACCOUNTS 20 RUSH COUNTY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation had a process in place to verify on Sam.gov whether this equipment vendor was suspended or debarred from receiving payment from federal funds. However, there was no documentation of a second employee confirming the status of this vendor with regards to being suspended or debarred from receiving federal funds during 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). . . ." Cause A proper system of internal control was not designed by management of the School Corporation. The School Corporation had a process involving the verification of a vendor's status with regards to being suspended or debarred from receipt of federal funds. However, there was no documentation that a second employee was involved in reviewing the determination made as to the suspended or debarred status of vendors involved in food service procurement during the audit period. 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, vendors to whom payments equal or exceed $25,000 were verified to be not suspended, debarred, or otherwise excluded, but no internal control was in place to ensure that the determinations made in regards to vendor status for receiving federal funds was correct. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management strengthen its system of internal controls to ensure that all contractors paid $25,000 or more, all or in part with federal funds, are not suspended, debarred, or otherwise excluded from participation in federal program and ensure appropriate documentation for federal program 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.