FINDING 2023-001
Information on the federal program:
Subject: Special Education Cluster (IDEA)
Federal Agency: Department of Education
Federal Programs: Special Education Preschool Grants
Assistance Listing Number: 84.173, 84.173X
Federal Award Number and Year: 23619-008-PN01; 22619-008-ARP
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Criteria: 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(b) states:
"Procurement by small purchase procedures. Small purchase procedures are those relatively simple
and informal procurement methods for securing services, supplies, or other property that do not cost
more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate
quotations must be obtained from an adequate number of qualified sources."
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you intend to do business is not excluded or disqualified.
You do this by:
(a) Checking SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Condition and Context: The School Corporation is a member of the Delaware-Blackford Special
Education Cooperative (Cooperative). During fiscal year 2022-2023, the Cooperative operated the special
education preschool program and spent the federal money on behalf of six of its seven members. As the
grant agreements were between the Indiana Department of Education and each member school, the School
Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was
inadequate oversight performed by the School Corporation in order to ensure compliance with the
Procurement and Suspension and Debarment compliance requirement.
The School Corporation did not have internal controls in place to ensure that the Cooperative complied with
the procurement and the suspension and debarment requirements. The Cooperative did not have adequate
procedures in place to ensure that the requirements for small purchases were met for each applicable
procured good or service or to ensure that vendors were not suspended or debarred prior to entering into
a covered transaction.
Procurement
Federal regulations allow for informal procurement methods when the value of the procurement for goods
or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000.
However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase
procedures may be used. 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 micropurchase
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. If it is determined a single
source provider can be used for a small purchase, documentation must be retained supporting the
determination.
Two vendors exceeded the small purchase threshold during the audit period. The Cooperative provided
evidence of a quote being obtained for the first vendor, however, evidence of obtaining multiple quotes was
not retained for audit. The chosen quote was attached to the accounts payable vouchers and provided for
audit; however, the other quotes obtained for the purchase were not maintained. For the second vendor,
the Cooperative determined psychological services were to be provided by a single source provider,
however, they did not have a documented rationale or support for the decision. Documentation detailing
the history of procurement, which must include the reason for the procurement method used, selection of
the vendor, and the basis for the price, was not available for audit for either purchase.
Suspension and Debarment
The School Corporation did not have internal controls in place to ensure compliance with the suspension
and debarment requirement. The Cooperative did not have adequate internal controls in place to ensure
all applicable vendors were not suspended or debarred prior to entering into a covered transaction. As
such, the Cooperative entered into a contract totaling $32,388, which exceeded $25,000, for psychological
services. The Cooperative did not perform procedures to ensure that the vendor was not suspended or
debarred from participation in federal programs.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Cause: A proper system of internal controls was not implemented 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.
Effect: Without the proper implementation of an effectively designed system of internal controls, including
policies and procedures that provide segregation of duties and additional oversight as needed, the internal
control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, adequate documentation was not retained for procurements that fell within the
small purchase threshold and vendors to whom payments equal to or in excess of $25,000 were made,
were not verified to be not suspended, debarred, or otherwise excluded.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the
federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Recommendation: We recommended that management of the School Corporation establish a proper
system of internal control and develop policies and procedures to ensure all required documentation is
retained and provided for small purchases and to ensure contractors and subrecipients, as appropriate are
not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards.
Views of Responsible Officials: For the views of responsible officials, refer to the Corrective Action Plan
which is part of this report.