Finding Text
FINDING 2024-003
Subject: Child Nutrition Cluster - Procurement and 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 Number and Year (or Other Identifying Number): FY 2023-2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Finding: Material Weakness
Repeat Finding
This is a repeat finding pertaining to internal controls from the immediately prior audit report. The
prior audit finding number was 2022-006.
Condition and Context
An effective internal control system was not in place at the School Corporation to ensure compliance
with requirements related to the grant agreement and the Procurement and Suspension and
Debarment compliance requirement.
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
customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold
of $150,000 or less for when small purchase procedures may be used. 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 $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
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.
The School Corporation did not have effective internal controls in place to ensure that an
adequate number of price or rate quotations were obtained for all small purchases.
Suspension and Debarment
Prior to entering into subawards and covered transactions with the Child Nutrition Cluster
(CNC) 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 Excluded Parties List System (EPLS), collecting a certification from that
person, or adding a clause or condition to the covered transactions with that person. The
School Corporation did not have effective internal controls in place to ensure that the verification
was completed for all contractors prior to entering into covered transactions.
The lack of internal controls was isolated to fiscal year 2023-2024.
INDIANA STATE BOARD OF ACCOUNTS
20
MADISON CONSOLIDATED SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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). . . ."
Cause
Management had not established a system of internal controls to ensure documentation was
obtained and retained to demonstrate they had properly procured all small purchases.
Management had not established a system of internal controls to ensure that the School
Corporation's procedures for verifying a contractor's suspension and debarment status was followed for all
contractors.
Effect
Without the proper design or implementation of internal controls, the internal control system cannot
be capable of effectively preventing, or detecting and correcting, material noncompliance. This could result
in the School Corporation overpaying for goods or services or paying a contractor who has been suspended
or debarred, which would be unallowable.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation strengthen its system of internal
controls to ensure that an adequate number of price or rate quotations are obtained for all small purchases
and that suspension and debarment is verified for all covered transactions of $25,000 or more.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.