FINDING 2024-001
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, Summer Food Program,
School Summer Food Service Program
Assistance Listing Number: 10.553, 10.555, 10.559
Federal Award Numbers and Years (or Other Identifying Numbers): FY 2023, FY 2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Finding: Material Weakness
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 states in part:
"(a) The non-Federal entity must have and use documented procurement procedures, consistent with State,
local, and tribal laws and regulations and the standards of this section, for the acquisition of property or
services required under a Federal award or subaward. The non-Federal entity's documented procurement
procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . .
(i) 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 the method of
procurement, selection of contract type, contractor selection or rejection, and the basis for the contract
price. . . .”
2 CFR 200.320 states in part:
“The non-Federal entity must have and use documented procurement procedures, consistent with the
standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of
procurement used for the acquisition of property or services required under a Federal award or sub-award.
Informal procurement methods. When the value of the procurement for property or services 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 informal procurement methods to expedite the completion
of its transactions and minimize the associated administrative burden and cost. The informal
methods used for procurement of property or services at or below the SAT include: . . .
(2) Small purchases —
(i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of
which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold.
If small purchase procedures are used, price or rate quotations must be obtained from an adequate number
of qualified sources as determined appropriate by the non-Federal entity. . . . “
2 CFR 180.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must verify that
the person with whom you intend to do business is not excluded or disqualified.
You do this by:
(a) Checking the SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Condition: An effective internal control system was not in place at the School Corporation to ensure
compliance with requirements related to the Child Nutrition Program and Procurement and Suspension and
Debarment compliance requirements.
Cause: The School Corporation's management had not developed a system of internal controls that would
have ensured compliance with the Procurement and Suspension and Debarment compliance requirement.
Effect: The failure to establish internal controls enabled noncompliance to go undetected. The failure to
comply with the grant agreement and the compliance requirement could have resulted in the loss of federal
funds to the School Corporation.
Questioned Costs: There were no questioned costs identified.
Context:
Procurement
Federal regulations allow for informal procurement methods when the value of the procurement for property
or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower,
more restrictive threshold is set by a non-Federal entity. As Indiana Code has set a more restrictive
threshold of $150,000, informal procurement methods are permitted when the value of the procurement
does not exceed $150,000. This informal process allows for methods other than the formal bid process.
The informal process is divided between two methods based on thresholds. Micro-purchases, typically for
those purchases $50,000 or under, and small purchase procedures for those purchases above the micropurchase
threshold, but below the simplified acquisition threshold. The School Corporation’s policy states
that the small purchase threshold is between $10,000 and $150,000. If small purchase procedures are
used, then price or rate quotations must be obtained from an adequate number of qualified sources.
For fiscal year 2023, two vendors, totaling $109,657 and $53,441, were selected for testing at the small
purchase threshold. The School Corporation did not obtain price or rate quotes nor was there
documentation detailing the history of procurement, which must include the reason for the procurement
method used.
The lack of internal controls and noncompliance was isolated to fiscal year 2023.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal award funds, recipients are required
to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded.
“Covered transactions” include but are not limited to contracts for goods and services awarded under a
non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The
verification is to be done by checking the SAMs exclusions, collecting a certification from that vendor, or
adding a clause or condition to the covered transaction with that vendor.
During the audit period, there were ten vendors identified which exceeded $25,000 in disbursements on an
annual basis. Six vendors were selected for testing. In one instance, the School Corporation’s contract with
the vendor did not include any suspension and debarment clause and the School Corporation did not verify
the vendor’s suspension and debarment status prior to payment.
The lack of internal controls and noncompliance was systemic issues throughout the audit period.
Identification as a repeat finding, if applicable: No.
Recommendation: We recommended that the School Corporation's management establish and implement
control procedures to ensure compliance with the grant agreement and the Procurement and Suspension
and Debarment compliance requirement. This should include documenting the procurement process taken
by management for transactions with vendors exceeding the simplified acquisition and small purchase
thresholds. When utilizing vendors providing specialized services, documentation should be prepared and
maintained by management to support sole source procurement decisions when competitive is limited due
to the nature of the service. We also recommend implement an annual control to review and document
suspension and debarment checks for all vendors funded with Child Nutrition Cluster grant funds that meet
the covered transaction threshold of $25,000.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.