Subject: Child Nutrition Cluster - Procurement and Suspension and DebarmentFederal Agency: Department of AgricultureFederal Programs: School Breakfast Program, COVID-19 - School Breakfast Program, National SchoolLunch Program, COVID-19 - National School Lunch Program, Summer FoodService Program, COVID-19 - Summer Food Service Program for ChildrenAssistance Listings Numbers: 10.553, 10.555, 10.559Federal Award Numbers and Years (or Other Identifying Numbers): FY21, FY22Pass-Through Entity: Indiana Department of EducationCompliance Requirement: Procurement and Suspension and DebarmentAudit Findings: Material Weakness, Other MattersRepeat FindingThis is a repeat finding for suspension and debarment from the immediately prior report. The prioraudit finding number was 2020-004.INDIANA STATE BOARD OF ACCOUNTS23BLACKFORD COUNTY SCHOOLSSCHEDULE OF FINDINGS AND QUESTIONED COSTS(Continued)Condition and ContextAn effective internal control system was not in place at the School Corporation to ensurecompliance with requirements related to the grant agreement and the Procurement and Suspension andDebarment compliance requirement.Federal regulations allow for informal procurement methods when the value of the procurement forproperty or services does not exceed the simplified acquisition threshold, which is set at $250,000.However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchaseprocedures may be used. This informal process allows for methods other than the formal bid process. Theinformal process is divided between two methods based on thresholds. Micro-purchases, typically for thosepurchases $10,000 or under, and small purchase procedures for those purchases above the micropurchasethreshold, but below the simplified acquisition threshold. Micro-purchases may be awardedwithout soliciting competitive price rate quotations. If small purchase procedures are used, then price orrate quotations must be obtained from an adequate number of qualified sources.The School Corporation did not obtain price or rate quotes for six vendors tested that were lessthan the simplified acquisition threshold of $150,000 but exceeded the $10,000 micro-purchase threshold.The micro-purchase threshold may be increased, but the School Corporation did not provide documentationthat the threshold had been increased.The School Corporation engaged with an Education Service Center that was not an approvedSchool Food Authority (SFA) cooperative. Since the Education Service Center failed to meet therequirements to be an approved SFA cooperative, the obligation reverted to the School Corporation. TheSchool Corporation did not obtain price or rate quotes for purchases of milk, exceeding $10,000 from anadequate number of sources, which fell under the small purchase procedures. In addition, the SchoolCorporation did not verify the milk vendor with a contract over $25,000 was not excluded or disqualifiedfrom participation in federal award programs.The lack of internal controls and noncompliance were systemic issues throughout the audit period.Criteria2 CFR 200.303 states in part:"The non-Federal entity must:(a) Establish and maintain effective internal control over the Federal award that providesreasonable assurance that the non-Federal entity is managing the Federal award incompliance with Federal statutes, regulations, and the terms and conditions of the Federalaward. These internal controls should be in compliance with guidance in 'Standards forInternal Control in the Federal Government' issued by the Comptroller General of theUnited States or the 'Internal Control Integrated Framework', issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO). . . ."2 CFR 200.318(i) states:"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 themethod of procurement, selection of contract type, contractor selection or rejection, and thebasis for the contract price."INDIANA STATE BOARD OF ACCOUNTS24BLACKFORD COUNTY SCHOOLSSCHEDULE OF FINDINGS AND QUESTIONED COSTS(Continued)2 CFR 200.320(b) (Uniform Guidance) states:"Procurement by small purchase procedures. Small purchase procedures are those relativelysimple and informal procurement methods for securing services, supplies, or other propertythat do not cost more than the Simplified Acquisition Threshold. If small purchase proceduresare used, price or rate quotations must be obtained from an adequate number of qualifiedsources."2 CFR 200.320 (Revised Uniform Guidance) states in part:"The non-Federal entity must have and use document procurement procedures, consistent withthe standards of this section and ?? 200.317, 200.318, and 200.319 for any of the followingmethods of procurement used for the acquisition of property or services required under aFederal award or sub-award.(a) Informal procurement methods. When the value of the procurement for property orservices 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 informalprocurement methods to expedite the completion of its transactions and minimize theassociated administrative burden and cost. The informal methods used for procurementof property or services at or below the SAT include: . . .(2) Small purchases ?(i) Small purchase procedures. The acquisition of property or services, theaggregate dollar amount of which is higher than the micro-purchase threshold butdoes not exceed the simplified acquisition threshold. If small purchase proceduresare used, price or rate quotations must be obtained from an adequate number ofqualified sources as determined appropriate by the non-Federal entity. . . ."Indiana Code 5-22-8-3 states:"(a) This section applies only if the purchasing agent expects the purchase to be:(1) at least fifty thousand dollars ($50,000); and(2) not more than one hundred fifty thousand dollars ($150,000). . . ."CauseManagement had not established a system of internal controls that would have ensured compliancewith the grant agreement and the Procurement and Suspension and Debarment compliance requirement.EffectThe failure to establish an effective system of internal controls enabled noncompliance to go undetected.Noncompliance with the grant agreement and the Procurement and Suspension and Debarmentcompliance requirement could result in the loss of future federal funds to the School Corporation.INDIANA STATE BOARD OF ACCOUNTS25BLACKFORD COUNTY SCHOOLSSCHEDULE OF FINDINGS AND QUESTIONED COSTS(Continued)Questioned CostsThere were no questioned costs identified.RecommendationWe recommended that the School Corporation's management establish a system of internal controlsto ensure compliance and comply with the grant agreement and the Procurement and Suspension andDebarment compliance requirement.Views of Responsible OfficialsFor the views of responsible officials, refer to the Corrective Action Plan that is part of this report.