Finding Text
FA 2022-002 Improve Controls over Procurement
Compliance Requirement: Procurement and Suspension and Debarment
Internal Control Impact: Material Weakness
Compliance Impact: Material Noncompliance
Federal Awarding Agency: U.S. Department of Education
Pass-Through Entity: Georgia Department of Education
AL Number and Title: 84.371C – Comprehensive Literacy Development
Federal Award Number: S371C190016-19A (Years: 2017-21)
Questioned Costs: $177,213.73
Description:
A review of expenditures charged to the Comprehensive Literacy Development program revealed that the School District’s internal control procedures were not operating appropriately to ensure that the School District’s procurement procedures were followed.
Background Information:
The Comprehensive Literacy Development Program (CLD) was authorized under Sections 2222-2225 of the Elementary and Secondary Education Act of 1965 to create a comprehensive literacy program to advance literacy skills, including pre-literacy skills, reading, and writing, for children from birth to grade 12, with an emphasis on disadvantaged children, including children living in poverty, English learners, and children with disabilities.
CLD funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. CLD funds totaling $810,312.28 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2022.
Criteria:
As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to 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 200.303 – Internal Controls.
Additionally, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations and… (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.”
Furthermore, Title 2 CFR Section 180.300 states in part that the non-federal entity must “verify that the entity with whom you intend to do business is not excluded or disqualified. You can do this by: (a) Checking System for Awards Management (SAM) exclusions; or (b) Collecting a certification from the entity; or (c) Adding a clause or condition to the covered transaction with the entity.”
Condition:
A sample of twenty-one procurement transactions was randomly selected for testing using a non-statistical sampling approach. These transactions were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiency was noted:
• The School District could not provide evidence that the procurement process provided full and open competition for seven simplified acquisition purchase expenditures reviewed.
Questioned Costs:
Upon testing a sample of $210,800.91 in procurement transactions, known questioned costs
of $177,213.73 were identified for expenditures that did not follow the School District’s procurement procedures. Using the total population of $744,780.82 in procurement transactions, we project the likely questioned costs to be approximately $626,113.93.
Cause:
This issue was the result of a change in personnel in which the documentation was misplaced.
Effect or Potential Effect:
The School District is not in compliance with the Uniform Guidance and Georgia Department of Education guidance. Failure to appropriately implement procedures to address procurement compliance requirements exposes the School District to unnecessary risk of error and misuse of federal funds and could result in the expenditure of federal funds with unqualified vendors. In addition, this deficiency could lead to the return of grant funds associated with unallowable expenditures.
Recommendation:
The School District should evaluate and improve internal control procedures to ensure that required procurement methods are properly identified and followed and required procurement documentation is properly identified, safeguarded, and retained. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately.
Views of Responsible Officials:
We concur with this finding.