SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Cheney School District No. 360
September 1, 2022 through August 31, 2023
2023-001 The District’s internal controls were inadequate for ensuring compliance with federal procurement, suspension and debarment requirements.
Assistance Listing Number and Title: 84.027, Special Education Grant to States
84.027, COVID 19 - Special Education Grants to States
84.173, Special Education Preschool Grants
84.173, COVID 19 - Special Education Preschool Grants
Federal Grantor Name: U.S. Department of Education
Federal Award/Contract Number: N/A
Pass-through Entity Name: Office of Superintendent of Public Instruction
Pass-through Award/Contract Number: 0312311, 0307649, 0338442, 0371279, 0367045
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
During fiscal year 2023, the District spent $1,200,300 in federal funds from the Special Education Cluster. The objective of the Special Education program is to ensure eligible students with disabilities receive free and appropriate public education with specifically designed instruction that addresses their unique needs.
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 program controls.
Procurement
When using federal funds to purchase services, governments must apply the most restrictive of federal requirements, state laws or local policies by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. District policy conforms to the most restrictive laws and requires that it must publicly solicit services of $250,000 or more using sealed bids or requests for proposals. Additionally, federal regulations require the District to perform a cost or price analysis when formally bidding or requesting proposals.
Suspension and debarment
Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractors have not been suspended, debarred or otherwise excluded. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Procurement
The District was unsuccessful in hiring employees for its Special Education program and contracted with an external staffing agency to obtain the services of three school psychologists. The District entered into three separate contracts with the staffing agency for these services. The District paid the staffing agency for the psychology services, which then paid the psychologists for their work.
The District’s internal controls were not effective for ensuring it complied with federal procurement requirements. Specifically, it did not perform a cost or price analysis for the aggregate staffing agency services and did not follow its policy for procuring and awarding the contracts to the staffing agency. The District paid the external staffing agency $472,818 for school psychology services, of which it charged $195,475 to the federal program. We consider this internal control deficiency to be a material weakness that led to material noncompliance.
Suspension and debarment
Our audit found the District’s controls were ineffective for ensuring that it verified all parties that received $25,000 or more in federal funds were not suspended or debarred. The District did not obtain a written certification, include a clause in the contract or search for exclusion records at SAM.gov to verify that the one contractor subject to this requirement was not suspended or debarred before entering into contracts with them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
Procurement
District staff misunderstood federal procurement requirements and believed that they could procure services for each school psychologist individually based on student needs, rather than in the aggregate for external staffing agency services. Consequently, they determined that no individual school psychologist contract would exceed $250,000, and that they could procure each contract following the District’s small purchase procedures. As a result, the District obtained quotes for each school psychologist instead of soliciting sealed bids or requests for proposals for staffing agency services as required.
Suspension and debarment
The District has not regularly charged non-payroll expenditures to federal Special Education programs. Consequently, in fiscal year 2023, District personnel overlooked contracts exceeding $25,000 that were subject to federal suspension and debarment verification requirements, and therefore did not confirm the contractor’s suspension and debarment status.
Effect of Condition
Procurement
Without soliciting sealed bids or requests for proposals as required, the District cannot demonstrate that it complied with its policy and federal regulations and received the best price for the staffing agency services or selected the most qualified contractor.
Suspension and debarment
Without adequate internal controls, the District cannot ensure the contractor it paid with federal funds is eligible to participate in federal programs. Any program funds the District used to pay contractors that have been suspended or debarred would be unallowable, and the awarding agency could potentially recover them.
During fiscal year 2023, the District paid the contractor $472,818 for staffing agency services, of which it charged $195,475 to the federal program. We verified the contractor was not suspended or debarred, so we are not questioning these costs.
Recommendation
We recommend the District strengthen internal controls to ensure:
• Staff responsible for procuring services understand and follow federal procurement requirements and the District’s own procurement policies and procedures
• All contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before contracting with them
District’s Response
We acknowledge the importance of robust internal controls and adherence to federal procurement requirements. In response to the recommendations, we are committed to taking the following actions:
1) Training and Education: We will implement a comprehensive training program for all staff involved in procurement to ensure they have a clear understanding of both federal procurement requirements and our district’s policies and procedures.
2) Policy Review and Update: Our procurement policies and procedures will be reviewed and updated to align with the latest federal regulations. We will ensure these policies are easily accessible and communicated to all relevant staff members.
3) Verification Process: Before engaging with any contractor for services amounting to $25,000 or more, we will establish a verification process to check whether the contractors are in good standing and not suspended or debarred from participating in federal programs.
We appreciate the diligence of the audit that led to these recommendations and are dedicated to upholding the highest standards of integrity and compliance in our procurement processes.
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 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689.
Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures and requirements for maintaining records sufficient to detail the history of procurement.
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.