Finding Text
Meridian School District No. 505 September 1, 2021 through August 31, 2022 2022-002 The District did not have adequate internal controls for ensuring compliance with federal procurement requirements. CFDA Number and Title: 10.553 ? School Breakfast Program 10.555 ? National School Lunch Program 10.559 ? Summer Food Service Program for Children Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: 699800 619803 Questioned Cost Amount: $0 Background The District participates in the School Breakfast Program, National School Lunch Program, and the Summer Food Service Program for Children. During the 2021?2022 school year, the District spent $939,498 in federal funding to administer these programs. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. When using federal funds to purchase goods or services, governments must apply the more restrictive of federal requirements, state law or local policies by obtaining quotes or following a competitive bidding process, depending on the purchase amount. 20 Office of the Washington State Auditor sao.wa.gov Additionally, state and federal requirements allow local entities to bypass normal procurement laws through a process commonly referred to as ?piggybacking.? This process allows entities to purchase goods and services using contracts awarded by another government or group of governments via an interlocal agreement or cooperative. To comply with piggybacking requirements under state law, the entity must ensure it purchases the same goods or services at the same price in the awarding entity?s specifications. Description of Condition Our audit found the District?s control procedures were ineffective for ensuring compliance with federal procurement and state piggybacking requirements. Specifically, the District piggybacked onto a purchasing cooperative?s contract for the installation of a portable building to be used as a cafeteria. However, the awarding entity?s contract specifications were for the purchase and installation of a portable building and did not allow for only the installation. This resulted in the District not performing competitive procurement procedures when paying $226,612 for installation services for a portable building that was to be used as a cafeteria. Therefore, the District did not comply with all the applicable federal procurement requirements. We consider this internal control deficiency to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The District did not properly evaluate the contract to ensure its specifications appropriately matched the services it was procuring. Effect of Condition The District spent $226,612 in program funds on a contract that it did not properly procure. Since the District did not purchase the same services that were detailed in the awarding entity?s contract, federal procurement requirements would have required it to competitively procure the installation of the portable building. Without effective internal controls that ensure it follows procurement or piggybacking procedures, the District cannot demonstrate it complied with applicable procurement requirements and received the best price for the public works project. 21 Office of the Washington State Auditor sao.wa.gov Recommendation We recommend the District strengthen internal controls to ensure it complies with applicable procurement requirements, including purchasing the same goods or services for the same specified price when piggybacking onto a contract from another government or group of governments. District?s Response The district disagrees with the findings by the auditor in all areas related to the Scheduled of Federal Award Findings and Questioned Costs. The district prides itself on developing and implementing effective internal controls. The district has effective internal controls to ensure that we meet procurement and piggybacking requirements. Through the audit process the district has demonstrated that it complied with applicable procurement process and received the best price for the portable relocation project. The Director of Business and Finance and Director of Maintenance and Operations are knowledgeable of state and federal procurement requirements. They meet on a regular basis to evaluate the best method to obtain the lowest pricing while also meeting all state and federal requirements. In this instance, contract KCDA #19-255 was reviewed, and it was determined that piggybacking for relocation and installation services were allowable within the contract. The finding states that ?the awarding entity?s contract specifications were for the purchase and installation of a portable building and did not allow for only the installation.? We disagree with the auditor?s stance. The contract has language that allows for relocation and installation services and does not specify that a building is required to be purchased to obtain those services. The district reviewed the contract and noted that section (D) specifically states relocation pricing. The district also noted that section (F) details ?any additions that are specific to a project/building installation may be covered by R.S. Means.? The finding states ?Since the District did not purchase the same services that were detailed in the awarding entity?s contract, federal procurement requirements would have required it to competitively procure the installation of the portable building.? As noted above, section (F) allows for project specific installation costs to be determined using R.S. Means price listing. As was the case for the scope of this project. The project specific R.S. Means price list was provided to the auditors as well as the accompanying invoices that detail the district received pricing within the contract limits. 22 Office of the Washington State Auditor sao.wa.gov Auditor?s Remarks State law allows for piggybacking on contracts when the specifications and price are the same. The contract the District piggybacked did not clearly identify the specifications and price but instead referenced ?any additions that are specific to a project/building installation.? This is not specific enough to be an allowable piggybacking method.We reaffirm our finding and will review the corrective action taken during our next 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 Part 200, Section 319 ? Competition, establishes all procurement transactions are to be conducted in a manner providing full and open competition, and requires non-federal entities to have written procedures for procurement transactions. Title 2 CFR Part 200, Section 320 ? Methods of procurement to be followed, describes each allowable procurement method.