Finding 388501 (2023-005)

Material Weakness Repeat Finding
Requirement
I
Questioned Costs
-
Year
2023
Accepted
2024-03-29

AI Summary

  • Core Issue: The School Corporation lacked an effective internal control system for compliance with federal procurement and suspension/debarment requirements.
  • Impacted Requirements: Noncompliance with 2 CFR 200.303, 200.318, and 200.320 regarding documented procurement procedures and internal controls.
  • Recommended Follow-Up: Develop and implement a robust internal control system to ensure compliance with procurement regulations and maintain proper documentation for all transactions.

Finding Text

FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070- PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: 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 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. • 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 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." Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls that would have ensured compliance with the Procurement and Suspension and Debarment compliance requirement. Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the School Corporation. Questioned Costs: There were no questioned costs identified. Context: 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 $50,000 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, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation 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 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation 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, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation 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. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Identification as a repeat finding, if applicable: Yes, See Finding 2021-005. Recommendation: We recommended that the School Corporation's management establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include documenting the procurement process taken by management for transactions with vendors exceeding the simplified acquisition and small purchase thresholds. When utilizing vendors providing specialized services, documentation should be prepared and maintained by management to support sole source procurement decisions when competitive is limited due to the nature of the service. We also recommend implement an annual control to review and document suspension and debarment checks for all vendors funded with Special Education grant funds that meet the covered transaction threshold of $25,000. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Corrective Action Plan

FINDING 2023-005 Information on the federal program: Subject: Special Education Cluster (IDEA) – Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (Or Other Identifying Number): 19611-067-PN01, 20611-070-PN01, 21611-070-PN01, 22611-02-CEIS, 22611-070-PN01, 22611-070-ARP, 23611-067-PN01, 21619-070-PN01, 22619-070-ARP, 22619-070-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Qualified Opinion Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreements and Procurement and Suspension and Debarment compliance requirements. Context: 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 $50,000 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. For fiscal year 2022, the School Corporation had one vendor, with disbursements totaling $199,713 for the fiscal year, which exceeds the simplified acquisition threshold of $150,000. The School Corporation 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 2022, three vendors, totaling $228,079, were identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold. One of the three vendors was selected for testing. The School Corporation 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, one vendor, totaling $65,861, was identified as being less than the simplified acquisition threshold of $150,000, but exceeding the $50,000 micro-purchase threshold and was selected for testing. The School Corporation 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. During the audit period, there were six vendors identified which exceeded $25,000 in disbursements on an annual basis. Two vendors were selected for testing. In both instances, the School Corporation’s contract with the vendor did not include any suspension and debarment clause and the School Corporation did not verify the vendor’s suspension and debarment status prior to payment. The lack of internal controls and noncompliance was systemic issues throughout the audit period. Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding. Specifically, regarding Suspension and Debarment, for contracts over $25,000, MSD of Pike Township will obtain a Certification or include a Suspension and Debarment clause in the contract. Absent Certification, the Director of Grants will review for “Suspension and debarment” and maintain documentation. The Special Education Department will work with the Grant Manager and will review contracts over $50,000 to follow the appropriate procurement policy to obtain quotes. Where specialized services are being solicited, we will maintain a procurement file memo documenting the process and the reasons for vendor selection. Responsible Party and Timeline for Completion: Greg A. Foster, Chief Financial Officer, will oversee the corrective action plan. Plan will be implemented by June 30, 2024.

Categories

Procurement, Suspension & Debarment

Other Findings in this Audit

  • 388489 2023-001
    Material Weakness Repeat
  • 388490 2023-001
    Material Weakness Repeat
  • 388491 2023-001
    Material Weakness Repeat
  • 388492 2023-001
    Material Weakness Repeat
  • 388493 2023-001
    Material Weakness Repeat
  • 388494 2023-003
    Material Weakness Repeat
  • 388495 2023-003
    Material Weakness Repeat
  • 388496 2023-003
    Material Weakness Repeat
  • 388497 2023-003
    Material Weakness Repeat
  • 388498 2023-003
    Material Weakness Repeat
  • 388499 2023-002
    Material Weakness Repeat
  • 388500 2023-004
    Material Weakness Repeat
  • 388502 2023-005
    Material Weakness Repeat
  • 388503 2023-005
    Material Weakness Repeat
  • 388504 2023-005
    Material Weakness Repeat
  • 388505 2023-005
    Material Weakness Repeat
  • 388506 2023-005
    Material Weakness Repeat
  • 388507 2023-005
    Material Weakness Repeat
  • 388508 2023-005
    Material Weakness Repeat
  • 388509 2023-005
    Material Weakness Repeat
  • 388510 2023-005
    Material Weakness Repeat
  • 964931 2023-001
    Material Weakness Repeat
  • 964932 2023-001
    Material Weakness Repeat
  • 964933 2023-001
    Material Weakness Repeat
  • 964934 2023-001
    Material Weakness Repeat
  • 964935 2023-001
    Material Weakness Repeat
  • 964936 2023-003
    Material Weakness Repeat
  • 964937 2023-003
    Material Weakness Repeat
  • 964938 2023-003
    Material Weakness Repeat
  • 964939 2023-003
    Material Weakness Repeat
  • 964940 2023-003
    Material Weakness Repeat
  • 964941 2023-002
    Material Weakness Repeat
  • 964942 2023-004
    Material Weakness Repeat
  • 964943 2023-005
    Material Weakness Repeat
  • 964944 2023-005
    Material Weakness Repeat
  • 964945 2023-005
    Material Weakness Repeat
  • 964946 2023-005
    Material Weakness Repeat
  • 964947 2023-005
    Material Weakness Repeat
  • 964948 2023-005
    Material Weakness Repeat
  • 964949 2023-005
    Material Weakness Repeat
  • 964950 2023-005
    Material Weakness Repeat
  • 964951 2023-005
    Material Weakness Repeat
  • 964952 2023-005
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
10.553 School Breakfast Program $3.85M
84.010 Title I Grants to Local Educational Agencies $1.38M
10.555 National School Lunch Program $1.13M
84.027 Special Education_grants to States $1.08M
10.558 Child and Adult Care Food Program $996,393
84.027 Covid-19 - Special Education_grants to States $368,874
93.778 Medical Assistance Program $312,407
10.559 Summer Food Service Program for Children $307,268
84.287 Twenty-First Century Community Learning Centers $306,142
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $212,820
84.425 Covid-19 - Education Stabilization Fund $148,668
84.184 Safe and Drug-Free Schools and Communities_national Programs $127,061
84.367 Improving Teacher Quality State Grants $114,709
84.365 English Language Acquisition State Grants $111,355
84.424 Student Support and Academic Enrichment Program $95,022
84.196 Education for Homeless Children and Youth $78,246
84.173 Special Education_preschool Grants $69,986
84.173 Covid-19 - Special Education_preschool Grants $21,952
10.649 Pandemic Ebt Administrative Costs $11,764
93.575 Child Care and Development Block Grant $5,748
84.048 Career and Technical Education -- Basic Grants to States $2,209
96.001 Social Security_disability Insurance $84