FINDING 2023-003
Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, COVID-19 - Special Education
Grants to States, Special Education Preschool Grants,
COVID-19 - Special Education Preschool Grants
Assistance Listings Numbers: 84.027; 84.173; 84.027X; 84.173X
Federal Award Numbers and Years (or Other Identifying Numbers): 19611-058-PN01, 21611-058-PN01,
22611-058-PN01, 22611-056-ARP,
20619-056-PN01, 21619-056-PN01,
22619-056-PN01, 22619-056-ARP,
23611-056-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the prior audit report. The prior audit finding number was 2021-002.
Condition and Context
Procurement - Policy
The School Corporation had adopted a purchasing policy; however, the policy did not conform
to the procurement standards outlined in 2 CFR 200.318 through 2 CFR 200.326. The policy
did not reflect applicable state laws and regulations, avoid acquisition of unnecessary or
duplicative items, ensure that all solicitations incorporate a clear and accurate description of
the technical requirements for the material, product, or service being procured, and ensure that
all solicitations identify all requirements which the offerors must fulfill and other factors to be
used in evaluating bids or proposals.
The lack of internal controls and noncompliance were systemic issues throughout the audit
period.
Procurement - Small Purchases
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 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. If it is
determined a single source provider can be used for a small purchase, documentation must be
retained supporting the determination.
There were forty-seven vendors identified that fell within the small purchases threshold. Eight
of the vendors were selected for testing. For eight of eight vendors tested that fell within the
small purchases threshold, the School Corporation did not obtain an adequate number of price
or rate quotations to ensure the procurements provided full and open competition. In addition,
history of the procurements which would include the rationale for the method of procurement,
selection of the vendor, and basis for price was not documented.
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 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 person, or adding a clause or condition to the
covered transaction with that person.
Upon inquiry of the School Corporation, it was determined there was a process in place to
verify that vendors were not suspended or debarred, or otherwise excluded or disqualified from
participation in the federal award, prior to entering into a covered transaction. One employee
was responsible for checking SAM exclusions by running a vendor exclusion list and comparing
that list to a vendor history report from the School Corporation's financial software. However,
there was no documented oversight, review, or approval process to ensure the process was
completed and accurate.
The lack of internal controls was a systemic issue 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: . . .
(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 and 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 design or implementation of the components of a 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, goods that fell within the small purchase threshold were not properly procured.
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 controls and develop policies and procedures to ensure there are appropriate procurement procedures
for 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.