Finding 525767 (2024-002)

Material Weakness Repeat Finding
Requirement
I
Questioned Costs
-
Year
2024
Accepted
2025-03-06

AI Summary

  • Core Issue: The School Corporation lacks effective internal controls for procurement and vendor compliance, leading to a repeat audit finding.
  • Impacted Requirements: Noncompliance with federal procurement standards and suspension/debarment verification as outlined in 2 CFR 200.303 and 2 CFR 180.300.
  • Recommended Follow-Up: Implement a robust internal control system to ensure compliance with procurement procedures and verify vendor eligibility to prevent future findings.

Finding Text

FINDING 2024-002 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024, FY23/FY24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-003. Condition and Context An effective internal control system, which would include segregation of duties, was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 17 SOUTH VERMILLION COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 $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 of $10,000 or under, and small purchase procedures for those purchases above the micro-purchases threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. There were no internal controls in place to ensure that the School Corporation complied with the small purchase requirements. The School Corporation obtained quotes for the two vendors that qualified for the small purchase threshold, but there was no review or oversight process performed. Suspension and Debarment There were no internal controls in place to ensure that the School Corporation complied with the suspension and debarment requirements. The School Corporation did not verify that the two vendors were not suspended or debarred. They did not have a contract with the vendors that included the suspension and debarment clause, did not collect a certification from the vendors, and did not check the Sam.gov website to verify that vendors were not suspended or debarred. The lack of internal controls and noncompliance were systemic 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 the 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 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 the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price." INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH VERMILLION COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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. (a) 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.gov Exclusions, or (b) Collecting a certification from that person, or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed or implemented a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. The School Corporation obtained quotes for the two vendors that qualified for the small purchase threshold, but there was not a review or oversight performed. The School Corporation was unaware of the requirement to provide documentation to show that a verification was done to determine that the two vendors were not suspended or debarred. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation could have used a vendor that charged more than the lowest quote for small purchases or could have entered into transaction with vendors that were excluded from participating in federal transactions. Noncompliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement could result in the loss of future federal funds to the School Corporation. INDIANA STATE BOARD OF ACCOUNTS 19 SOUTH VERMILLION COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Corrective Action Plan

FINDING 2024-002 Finding Subject: Child Nutrition - Procurement, Suspension, and Debarment Summary of Finding: There were no controls in place to ensure that the School Corporation complied with the small purchase requirements. The School Corporation obtained quotes for the two vendors that qualified for the small purchase threshold, but no oversight performed. There were no controls in place to ensure that the vendors included a suspension and debarment clause or check the Sam.gov website. Contact Person Responsible for Corrective Action: Micah Williams Contact Phone Number and Email Address: 765-832-2426/mwilliams@svcs.k12.in.us Views of Responsible Officials: We concur with the finding. Description of Corrective Action Plan: The finance department will work in conjunction with the Food Services Director to ensure that quotes are obtained from vendors that are listed on Sam.gov or have a suspension and debarment clause before making in purchases. There will be an email thread detailing the request, the quotes, and the process for ensuring suspension and debarment. Anticipated Completion Date: Immediate.

Categories

Procurement, Suspension & Debarment

Other Findings in this Audit

  • 525761 2024-001
    Material Weakness
  • 525762 2024-001
    Material Weakness
  • 525763 2024-001
    Material Weakness
  • 525764 2024-001
    Material Weakness
  • 525765 2024-001
    Material Weakness
  • 525766 2024-001
    Material Weakness
  • 525768 2024-002
    Material Weakness Repeat
  • 525769 2024-002
    Material Weakness Repeat
  • 525770 2024-002
    Material Weakness Repeat
  • 525771 2024-002
    Material Weakness Repeat
  • 525772 2024-002
    Material Weakness Repeat
  • 1102203 2024-001
    Material Weakness
  • 1102204 2024-001
    Material Weakness
  • 1102205 2024-001
    Material Weakness
  • 1102206 2024-001
    Material Weakness
  • 1102207 2024-001
    Material Weakness
  • 1102208 2024-001
    Material Weakness
  • 1102209 2024-002
    Material Weakness Repeat
  • 1102210 2024-002
    Material Weakness Repeat
  • 1102211 2024-002
    Material Weakness Repeat
  • 1102212 2024-002
    Material Weakness Repeat
  • 1102213 2024-002
    Material Weakness Repeat
  • 1102214 2024-002
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
10.555 National School Lunch Program 2023 $746,859
10.555 National School Lunch Program 2024 $571,854
84.425 Education Stabilization Fund 2023 $483,046
84.010 Title I Grants to Local Educational Agencies 2024 $363,174
84.010 Title I Grants to Local Educational Agencies 2023 $349,132
84.048 Career and Technical Education -- Basic Grants to States 2024 $248,251
10.553 School Breakfast Program 2023 $211,646
84.002 Adult Education - Basic Grants to States 2024 $182,991
10.553 School Breakfast Program 2024 $168,968
84.002 Adult Education - Basic Grants to States 2023 $164,998
84.048 Career and Technical Education -- Basic Grants to States 2023 $145,140
84.027 Special Education Grants to States 2023 $93,352
84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) 2023 $63,853
84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) 2024 $54,164
84.424 Student Support and Academic Enrichment Program 2023 $31,831
84.424 Student Support and Academic Enrichment Program 2024 $17,540
84.425 Education Stabilization Fund 2024 $13,631
84.173 Special Education Preschool Grants 2023 $6,974
10.559 Summer Food Service Program for Children 2024 $5,984
10.559 Summer Food Service Program for Children 2023 $5,475
93.778 Medical Assistance Program 2024 $4,994
93.778 Medical Assistance Program 2023 $3,740
84.027 Special Education Grants to States 2024 $445
84.173 Special Education Preschool Grants 2024 $28