Finding 381060 (2023-004)

Material Weakness
Requirement
I
Questioned Costs
-
Year
2023
Accepted
2024-03-19

AI Summary

  • Core Issue: The School Corporation lacks effective internal controls for procurement and vendor verification, leading to noncompliance with federal regulations.
  • Impacted Requirements: Failure to document procurement processes and verify vendor suspension/debarment status violates 2 CFR 200.303 and 2 CFR 200.318.
  • Recommended Follow-Up: Implement a robust system for internal controls, including proper documentation and vendor verification procedures to ensure compliance.

Finding Text

FINDING 2023-004 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment 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 INDIANA STATE BOARD OF ACCOUNTS 22 GREATER JASPER CONSOLIDATED SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. Procurement 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. During fiscal year 2021-2022, the School Corporation had 119 disbursements to 5 vendors, totaling $95,842, that were considered small purchases. There were12 transactions from 5 vendors that were selected for testing. For 3 transactions, from 1 vendor, the School Corporation could not provide the procurement history or the rationale for the method of procurement, selection of vendor, and basis for price. The total dollar amount spent with the vendor was $20,777. During fiscal year 2022-2023, the School Corporation elected to increase its micro-purchase threshold from $10,000 to $50,000. As such micro-purchases were those goods or services purchased that were $50,000 or under. The School Corporation had 193 disbursements to 23 vendors, totaling $115,779, that were considered micro-purchases. A total of 20 transactions from 14 vendors were selected for testing. For 2 transactions, from 1 vendor, the School Corporation did not have adequate documentation, including the rationale for the method of procurement, selection of vendor, and basis of price. The total dollar amount spent with the vendor was $43,928. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. INDIANA STATE BOARD OF ACCOUNTS 23 GREATER JASPER CONSOLIDATED SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed that the Treasurer or Food Service Director verified vendors were not suspended or debarred by either printing a verification from SAM.gov or, if applicable, including a clause in the vendor contract. Three covered transactions that equaled or exceeded $25,000 were identified. All three transactions, totaling $389,898, were selected for testing. Two of the three transactions, totaling $72,883, did not have documentation to show that the School Corporation verified the vendor's suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic throughout the audit period. 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 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) 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: . . . INDIANA STATE BOARD OF ACCOUNTS 24 GREATER JASPER CONSOLIDATED SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (1) Micro-purchases – (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotation if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. . . . (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. . . ." 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 the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed by management of the School Corporation. 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, 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, and vendors to whom payments are equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. 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. INDIANA STATE BOARD OF ACCOUNTS 25 GREATER JASPER CONSOLIDATED SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services and 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 that is part of this report.

Categories

Procurement, Suspension & Debarment Subrecipient Monitoring

Other Findings in this Audit

  • 381056 2023-003
    Material Weakness
  • 381057 2023-003
    Material Weakness
  • 381058 2023-003
    Material Weakness
  • 381059 2023-004
    Material Weakness
  • 381061 2023-004
    Material Weakness
  • 381062 2023-004
    Material Weakness
  • 381063 2023-004
    Material Weakness
  • 381064 2023-004
    Material Weakness
  • 381065 2023-005
    Material Weakness
  • 381066 2023-005
    Material Weakness
  • 381067 2023-006
    Material Weakness
  • 381068 2023-006
    Material Weakness
  • 381069 2023-006
    Material Weakness
  • 381070 2023-006
    Material Weakness
  • 381071 2023-006
    Material Weakness
  • 381072 2023-006
    Material Weakness
  • 381073 2023-006
    Material Weakness
  • 957498 2023-003
    Material Weakness
  • 957499 2023-003
    Material Weakness
  • 957500 2023-003
    Material Weakness
  • 957501 2023-004
    Material Weakness
  • 957502 2023-004
    Material Weakness
  • 957503 2023-004
    Material Weakness
  • 957504 2023-004
    Material Weakness
  • 957505 2023-004
    Material Weakness
  • 957506 2023-004
    Material Weakness
  • 957507 2023-005
    Material Weakness
  • 957508 2023-005
    Material Weakness
  • 957509 2023-006
    Material Weakness
  • 957510 2023-006
    Material Weakness
  • 957511 2023-006
    Material Weakness
  • 957512 2023-006
    Material Weakness
  • 957513 2023-006
    Material Weakness
  • 957514 2023-006
    Material Weakness
  • 957515 2023-006
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
10.555 National School Lunch Program 22 $1.76M
10.555 National School Lunch Program 23 $1.33M
84.425 Education Stabilization Fund 22 $1.16M
84.425 Education Stabilization Fund 23 $368,036
93.575 Child Care and Development Block Grant 22 $304,429
84.010 Title I Grants to Local Educational Agencies 22 $280,898
84.010 Title I Grants to Local Educational Agencies 23 $272,128
84.048 Career and Technical Education -- Basic Grants to States 22 $250,480
10.553 School Breakfast Program 22 $231,063
10.553 School Breakfast Program 23 $213,665
84.048 Career and Technical Education -- Basic Grants to States 23 $195,140
84.027 Special Education_grants to States 23 $112,745
84.367 Improving Teacher Quality State Grants 22 $104,608
93.778 Medical Assistance Program 23 $100,331
93.778 Medical Assistance Program 22 $91,060
84.027 Special Education_grants to States 22 $58,309
84.367 Improving Teacher Quality State Grants 23 $57,844
10.559 Summer Food Service Program for Children 22 $50,116
93.575 Child Care and Development Block Grant 23 $45,546
84.424 Student Support and Academic Enrichment Program 23 $32,248
84.365 English Language Acquisition State Grants 23 $29,743
84.365 English Language Acquisition State Grants 22 $28,397
10.559 Summer Food Service Program for Children 23 $20,604
84.424 Student Support and Academic Enrichment Program 22 $11,466
84.173 Special Education_preschool Grants 23 $11,434
10.649 Pandemic Ebt Administrative Costs 23 $3,135
10.649 Pandemic Ebt Administrative Costs 22 $3,063
84.173 Special Education_preschool Grants 22 $1,648