FINDING 2023-003
Subject: Child Nutrition Cluster - Procurement
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program,
Summer Food Service Program for Children
Assistance Listings Numbers: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY 2022, FY 2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters.
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2021-002.
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls
that would likely be effective in preventing, or detecting and correcting, noncompliance for small purchases.
Federal regulations allow for informal procurement methods when the value of the procurement for
property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless
a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive
threshold of $150,000, informal procurement methods are permitted when the value of the procurement
does not exceed $150,000. This informal process allows for methods other than the formal bid process.
The informal process is divided between two methods based on thresholds. Micro-purchases,
typically for those purchases $10,000 or under, and small purchase procedures for those purchases above
the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be
awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then
price or rate quotations must be obtained from an adequate number of qualified sources.
There was no documented oversight, review, or approval process in place at the School
Corporation to ensure proper procedures were followed and price or rate quotations were obtained from an
adequate number of qualified sources for small purchases.
The School Corporation did not obtain price or rate quotes for five of the five vendors tested. A
total of $82,230 was spent with the five vendors. Documentation detailing the history of procurement, which
must include the reason for the procurement method used, was not available for audit.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
Indiana Code 4-13.6-5-2 states:
"(a) Except as provided by this chapter and IC 16-33-4-10, if the estimated cost of a public
works project is at least one hundred fifty thousand dollars ($150,000), the division shall award
a contract for the project based on competitive bids.
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GREENCASTLE COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(b) If the estimated cost of a public works project is at least one hundred fifty thousand dollars
($150,000), the division shall develop contract documents for a public works contract and keep
the contract documents on file in its offices so that they may be inspected by contractors and
members of the public. . . ."
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). . . ."
2 CFR 200.318(i) states:
"The non-Federal entity must maintain records sufficient to detail the history of procurement.
These records will include, but are not necessarily limited to the following: Rationale for the
method of procurement, selection of contract type, contractor selection or rejection, and the
basis for the contract price."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal
procurement methods to expedite the completion of its transactions and minimize the
associated administrative burden and cost. The informal methods used for procurement
of property or services at or below the SAT include: . . .
(2) Small purchases —
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold but
does not exceed the simplified acquisition threshold. If small purchase procedures
are used, price or rate quotations must be obtained from an adequate number of
qualified sources as determined appropriate by the non-Federal entity. . . ."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management statements of what should be done to effect internal controls, and
procedures should consist of actions that would implement these policies.
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GREENCASTLE COMMUNITY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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, procurement procedures for goods and services were not adhered to.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of future federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the School Corporation's management establish a system of internal
controls and adhere to procurement procedures for all purchases of goods and services.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
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