FINDING 2023-006
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): 2021-2022, 2022-2023
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
An effective system of internal controls, which would include segregation of duties, that would likely
be effective in preventing, or detecting and correcting, noncompliance should be designed and implemented
to ensure expenditures charged to the food service program fund (fund 800) are in adherence with the
federal and state procurement regulations and requirements. In addition, an effective system of internal
controls, which would include segregation of duties, that would likely be effective in preventing, or detecting
and correcting, noncompliance should be designed and implemented to ensure covered transactions paid
with child nutrition award funds are neither suspended or debarred or otherwise excluded from participating
in federal awards.
INDIANA STATE BOARD OF ACCOUNTS
26
COMMUNITY SCHOOLS OF FRANKFORT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Procurement - Internal Control over Small Purchases
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases were adhered to. 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, or documentation
to support limited procurement procedures were conducted and maintained for small
purchases.
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 nonprocurement 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 School Corporation disclosed procedures had not been performed
to ensure vendors were not suspended or debarred prior to entering into covered transaction.
One covered transaction that equaled or exceeded $25,000 was identified. The one transaction,
totaling $40,325, was selected for testing. For the one covered transaction, the School
Corporation had not performed procedures to ensure the vendor was not suspended or
debarred, or otherwise excluded or disqualified from participating in federal assistance programs
or activities for suspension or debarment.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to fiscal year 2021-2022.
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 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:
INDIANA STATE BOARD OF ACCOUNTS
27
COMMUNITY SCHOOLS OF FRANKFORT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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."
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.
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, 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 provisions of federal statutes, regulations, and the terms and conditions
or 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 design and implement a proper
system of internal controls, including policies and procedures that would provide segregation of duties to
ensure appropriate reviews, approvals, and oversight are taking place and that contractors are not
suspended, debarred, or otherwise excluded prior to entering into any covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.