Finding Text
FINDING 2023-001
Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
Assistance Listings Numbers: 10.553, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY 21-22, FY 22-23,
222IN059N8903, 232IN059N8903
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
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INDIANA STATE BOARD OF ACCOUNTS
15
SOUTHEAST FOUNTAIN SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Condition and Context
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. Three covered transactions, that
equaled or exceeded $25,000, were identified. All three transactions, totaling $1,408,264, were selected
for testing. For one of three vendors, 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 total amount spent with the vendor
was $169,723.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was isolated to fiscal year 2022-2023.
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 tend 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."
INDIANA STATE BOARD OF ACCOUNTS 16
SOUTHEAST FOUNTAIN SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include a 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 system of 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 were not verified by the School Corporation to not be suspended or
debarred from participating in federally funded activities. 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.
Recommendation
We recommended that the School Corporation's management establish a system of internal
controls and obtain documentation that vendors with covered transactions are not suspended or debarred.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.