FINDING 2023-006
Information on the federal program:
Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, Special Education Preschool Grants
Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X
Federal Award Numbers: 19611-022-PN01, 20611-022-PN01, 21611-022-PN01, 22611-022-PN01,
22611-022-ARP, 23611-022-PN01, 20619-022-PN01, 21619-022-PN01, 22619-022-PN01, 22619-022-
ARP, 23619-022-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Qualified Opinion
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 awards 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.
• 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. . . . “
2 CFR 200.320 states in part:
"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."
Condition: The School Corporation did not have internal controls in place to ensure that the Cooperative
complied with the procurement and suspension an debarment requirements. The Cooperative had not
designed or implemented adequate policies or procedures to ensure that proper procurement procedures
for micro or small purchases were followed. There was no oversight, review, or approval process in place
and documented at the Cooperative to ensure proper procedures were followed and price or rate quotations
were obtained, if required, or documentation to support limited procurement procedures.
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 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.
Context: The School Corporation is a member of the Greene-Sullivan Special Education Cooperative
(Cooperative). During fiscal year 2021-2022 and 2022-2023, the Cooperative operated the special
education programs and spent the federal money on behalf of all its members. As the grant agreements
were between the Indiana Department of Education (IDOE) 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.
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 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.
For fiscal year 2022, three vendors, totaling $88,772, were identified as being less than the simplified
acquisition threshold of $150,000, but exceeding the $10,000 micro-purchase threshold. One of the three
vendors was a bankcard used to pay several different vendors; however, individual determinations of
amount spent by vendor could not be determined, and thus it was considered under this threshold. All three
vendors were tested. For all three, the Cooperative did not obtain price or rate quotes nor was there
documentation detailing the history of procurement, which must include the reason for the procurement
method used.
For fiscal year 2023, six vendors, totaling $264,106, were identified as being less than the simplified
acquisition threshold of $150,000, but exceeding the $10,000 micro-purchase threshold. One of the six
vendors was a bankcard used to pay several different vendors; however, individual determinations of
amount spent by vendor could not be determined, and thus it was considered under this threshold. All six
vendors were tested. For five of the six, totaling $252,906, the Cooperative did not obtain price or rate
quotes nor was there documentation detailing the history of procurement, which must include the reason
for the procurement method used.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
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.
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 Cooperative disclosed they relied on a clause to be included in the vendor contracts to ensure
compliance. Two covered transactions that equaled or exceeded $25,000 were identified. Both
transactions, totaling $192,218, were selected for testing. One of the two transactions, totaling $44,883,
included the appropriate clause. For the other vendor, the Cooperative did not verify the vendor’s
suspension and debarment status prior to payment.
The lack of internal controls and noncompliance regarding suspension and debarment were isolated to
fiscal year 2023.
Identification as a repeat finding: No
Recommendation: We recommended that management of the School Corporation establish a proper
system of internal control 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 and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.