Finding 396738 (2023-001)

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Vancouver School District No. 37 September 1, 2022 through August 31, 2023 2023-001 The District’s internal controls were inadequate for ensuring it complied with federal procurement requirements. Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program 10.582 – Fresh Fruit and Vegetable Program Federal Grantor Name: U.S. Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The District participates in the Child Nutrition Program, which includes the School Breakfast Program, National School Lunch Program, and Fresh Fruit and Vegetable Program. These programs provide free or reduced-price meals to students from low-income families. The District received $8,659,125 to administer these programs during the 2022–23 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Description of Condition When using federal funds to purchase goods or services, certain types of contracts for food services can be obtained through a competitive proposal process. In this process, the government establishes evaluation factors, scores bidders based on these factors, and must award contracts to the highest scoring bidder for any given product or service. When the District solicitated for food purchases, it included yogurt and sour cream in two bid categories for dairy products and awarded contracts for these products to two vendors. Consequently, the District did not award the contract solely to the highest scoring bidder. We consider this deficiency in internal controls to be a significant deficiency. The issue was not reported as a finding in the prior audit. Cause of Condition District employees were not aware that including the same items in multiple bid categories did not meet federal procurement requirements. Effect of Condition The District did not comply with federal procurement requirements. The District purchased dairy products from two different vendors totaling $680,142, and cannot demonstrate it received goods solely from the highest scoring bidder for these contracts. Recommendation We recommend the District strengthen internal controls to ensure it follows applicable laws and requirements when using federal funds to procure goods or services. District’s Response Although the District concurs there was a duplication in two items between separate bid requests, it believes the following to be the relevant facts related to this issue: -Less than 10% of the purchases made under the $680,142 contract award were related to the duplicated items which resulted in the non-compliance. -Even the less than 10% in non-compliant purchases were still made under a competitive procurement action. The fact that the two items in question were duplicated between two separate requests for bids did not create excessive costs to the program nor were purchases made from any non-competitive vendors. - The duplication of similar products in two bid solicitations was only done to mitigate frequent supply chain challenges compromising our ability to meet our students’ needs. Auditor’s Remarks We thank the District for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the District’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring with Federal funds by nonfederal entities.