Finding Text
FINDING 2024-004
Subject: Child Nutrition Cluster - Suspension and Debarment
Federal Agency: Department of Agriculture
Federal Programs: School Breakfast Program, National School Lunch Program
Assistance Listings Numbers: 10.553, 10.555
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 Findings: Material Weakness, Other Matters
Condition and Context
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 nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000.
The verification is to be done by checking the SAM exclusions, collecting a certification from that person,
or adding a clause or condition to the covered transaction with that person.
Upon inquiry of the School Corporation, it was determined that the School Corporation ensures all
service contracts include a provision regarding suspension and debarment. The contracts are reviewed
and signed by a knowledgeable member of the School Corporation.
Two vendors with covered transactions for goods or services that equaled or exceeded $25,000
paid from Child Nutrition Cluster funds during the audit period were identified at the School Corporation
level and tested. For one of the two vendors, the School Corporation did not verify that the contract included
the provision regarding suspension and debarment or otherwise verify the vendor's suspension and
debarment status prior to payment.
The lack of effective internal controls and noncompliance were systemic issues throughout the
audit period.
Criteria
2 CFR 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 award 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 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 SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management statements of what should be done to effect internal controls, and
procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the internal
control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of internal
controls and develop policies and procedures to ensure contractors and subrecipients, as appropriate,
are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.