Finding Text
FINDING 2022-002 Information on the federal program: Subject: Child Nutrition Cluster ? Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement compliance requirements. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: There were two small purchase method procurements selected for sample testing for the audit period. One procurement was performed by the School?s Service Center, Wilson Education Center (Service Center). During the 2020-2021 school year, the Service Center solicited, evaluated, and awarded a bid for the milk on behalf of its members that School Corporation used. The Service Center was not audited for the 2020-2021 school year. During our testing of procurement and suspension and debarment for 2020-2021, it was noted that the School Corporation was not have a review control in place to monitor that the Service Center performed all necessary procedures to maintain compliance with federal regulations surrounding procurement and suspension and debarment. For 2020-2021, the School Corporation obtained procurement documents from the Service Center supporting procurements performed during the audit period. There was no documented review control in place at the School Corporation to ensure proper monitoring of the Service Center activities occur to verify federal procurement regulations were followed by the Service Center. There was one vendor that exceeded the $10,000 threshold for the School Corporation during fiscal year 2020-2021 that would require a procurement check. The error in the sample procurement performed by the Service Center selected for testing was isolated to fiscal year 2020-2021. The amount paid to the vendor for 2020-2021 was $22,211. The vendor did not met the suspension and debarment threshold ($25,000) for fiscal year 2020-2021. Proper controls over the same vendor selected for procurement and debarment and suspension were in place for the fiscal year 2021-2022 The second procurement selected for testing was a small purchase performed by the School Corporation for food purchases totaling $103,671 in fiscal year 2020-2021 and $142,368 in fiscal year 2021-2022. We noted that the School Corporation did not obtain three quotes from separate vendors. Additionally, the School Corporation did not perform a suspension and debarment check on the vendor sampled for fiscal years 2020-2021 and 2021-2022. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the School Corporation's management establish controls to ensure compliance with Procurement and Suspension and Debarment compliance requirement. We recommend that management meet periodically with the Wilson Education Center and review and maintain procurement contract files as evidence of proper periodic monitoring of the Service Center. Additionally, we recommended that the School Corporation's management establish a system of internal controls related to ensure that 3 quotes are obtained as required for small purchase method procurements and to ensure the vendors are not debarred or suspended for small purchases procurements performed by the School Corporation. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.