Finding Text
2022-001 The District?s internal controls were inadequate for ensuring it complied with federal procurement requirements and its own policy. Assistance Listing 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: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Background The District participates in the Child Nutrition Program, which includes the School Breakfast Program, National School Lunch Program and Summer Food Service Program. These programs provide free or reduced-price meals to students from low-income families. The District received $1,054,229 to administer these programs during the 2021?2022 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 more restrictive of federal requirements, state law or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. District policy conforms to the most restrictive laws for purchases. It requires written quotations from three or more qualified sources for purchases of goods and services less than $75,000 and a formal bid process for purchases of $75,000 or more. During the audit period, the District purchased services from a contractor to install a dishwasher for less than $75,000, but it did not obtain three written quotes from qualified sources, as policy requires. We consider this deficiency in internal controls to be a significant deficiency. The issue was not reported as a finding in the prior audit. Cause of Condition District officials did not know that all purchased goods or services paid out of the school food accounts needed to follow the most restrictive procurement requirements, regardless of the funding source. District officials also thought procurement requirements did not apply because the manufacturer installed the dishwasher. Effect of Condition The District did not comply with federal procurement requirements and its own policy. The District paid one contractor a total of $53,759 to install a dishwasher without obtaining three written quotes, which policy requires. Therefore, the District cannot demonstrate it received the best price for the services provided. Recommendation We recommend the District strengthen its internal controls over procuring goods and services to ensure compliance with federal procurement requirements and its own policy. District?s Response The District did contract with Hobart Corp. to install a new dishwasher. The installation expenditure was coded to the Food Service Department. The district used local state dollars for the installation, therefore District Management did not obtain 3 quotes. The original quote from Hobart was in the amount of $81,466.36 which included electrical and plumbing. The district used Hobart only for the dishwasher installation and used a local plumbing and electrical company that saved the district $17,176.94. In the future district management will follow District federal requirements for goods and services. Auditor?s Remarks We thank the District for its cooperation and assistance during the audit, and acknowledge its commitment to improving the condition described. We will review the status of this issue 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, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.