Finding Text
The District lacked adequate internal controls for ensuring compliance with federal suspension and debarment requirements. Assistance Listing Number and Title: 10.553 ? School Breakfast Program 10.555 ? National School Lunch 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 Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Description of Condition The District participates in the Child Nutrition Cluster program, which includes the School Breakfast and National School Lunch programs. These programs provide funding for free and reduced-price meals to students from low-income families. During fiscal year 2022, the District received $375,866 in federal funds to administer the programs. Federal regulations require recipients to establish and maintain internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Federal requirements prohibit grant recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever a government enters into contracts or purchases food or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractors have not been suspended, debarred, or otherwise excluded from participating in federal programs. The District may accomplish this verification by obtaining a written certification from the contractor, inserting a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The District must perform this verification before entering into the contract or charging costs to a federal award, and it must retain documentation to demonstrate compliance. Our audit found the District?s controls were ineffective for ensuring it verified all contractors receiving $25,000 or more in federal funds were not suspended or debarred. The District did not obtain a written certification, include a clause in the contract, or document a search for exclusion records in SAM.gov to verify that all contractors receiving $25,000 or more in program funds were not suspended or debarred before entering into the contracts or charging costs to the federal award. The District paid the contractors $74,862 and $29,209 in fiscal year 2022. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The District has experienced turnover in the Food Services Director position, and could not provide documentation demonstrating compliance with this requirement. Effect of Condition Without adequate internal controls, the District cannot ensure the contractors paid with federal funds are eligible to participate in federal programs. Any program funds the District used to pay contractors that haven been suspended or debarred would be unallowable, and the grantor could potentially recover them. After the audit period, the District verified the contractors were not suspended, debarred or excluded from doing business with the federal government. Therefore, we are not questioning any costs. Recommendation We recommend the District strengthen internal controls to ensure that all contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into the contract or charging costs to the federal award, and retain documentation demonstrating compliance with this requirement. District?s Response The San Juan Island School District agrees with the finding. We have revised our procedures to ensure a two person control on the completion and documentation of compliance with federal suspension and debarment requirements. Auditor?s Remarks We appreciate the steps the District has taken to address this issue. We will review the condition in our next single 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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.