Finding Text
Mary M. Knight School District No. 311 September 1, 2021 through August 31, 2022 2022-001 The District?s internal controls were inadequate for ensuring compliance with federal procurement requirements. Assistance Listing Number and Title: 10.553 ? School Breakfast Program 10.555 ? National School Lunch 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 Description of Condition The District participates in the Child Nutrition Program, which includes the National School Lunch Program and the School Breakfast Program. These programs provide free or reduced-price meals to low-income students. During the 2021?22 school year, the District received $139,458 to administer these programs. Federal regulations require recipients to establish and follow internal controls that ensure compliance with procurement requirements. These controls include understanding award requirements and monitoring the effectiveness of established controls. State and federal requirements allow local entities to bypass normal procurement laws through a process commonly referred to as ?piggybacking.? This process allows entities to purchase goods and services using contracts awarded by another government or group of governments via an interlocal agreement or cooperative. To comply with piggybacking law, the entity must enter into this interlocal agreement before it purchases goods or services from another entity?s contract. If the District uses such an agreement, federal regulations require it to confirm the awarding entity followed all procurement laws and regulations applicable to the District when selecting the contractor. In order to make a valid piggybacking transaction, the District must purchase goods or services from the contractor that was awarded the contract through the original entity?s procurement process. Our audit found the District did not have adequate internal controls for ensuring compliance with federal procurement requirements. Specifically, the District used program funds to procure $65,614 in food items from two vendors. District officials claimed to have used the piggybacking method, but they could not demonstrate the District used piggybacked contracts for these purchases. We consider this deficiency in internal controls to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The District has experienced turnover in staff positions responsible for ensuring compliance with procurement requirements under the Child Nutrition Program. Current staff also did not know the District must maintain documentation to demonstrate it used a master agreement to procure items at the established prices. Effect of Condition Without effective internal controls that ensure the District followed piggybacking procedures, the District cannot ensure it allowed for full and open competition. Further, the District cannot demonstrate it complied with applicable federal procurement requirements when purchasing items with program funds. Recommendation We recommend the District strengthen internal controls that ensure compliance with federal procurement requirements. This should include maintaining documentation that demonstrates the District?s use of piggybacked contracts. We also recommend the District provide training to staff responsible for the procurement process, including piggybacking purchases. District?s Response The Mary M. Knight School District used a purchasing cooperative for procuring food supplies from two vendors. Mary M. Knight School District used this and other cooperative purchasing groups under RCW 39.34 for the stated purpose of ?public benefit? to procure goods and services at a low or reduced cost to public schools. Our assumption was that by using this cooperative purchasing contract we were meeting the procurement guidelines. Due to staff turnover the District was not able to locate information referencing the Cooperative in our purchase order process or documentation that pricing was being checked regularly. 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 318, General procurement standards, establishes requirements for written procedures and 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.