Finding Text
Information on the federal program:
Subject: Child Nutrition Cluster – Internal Controls
Federal Agency: Department of Agriculture
Federal Program: School Breakfast Program, National School Lunch Program
Assistance Listing Number: 10.553, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): FY2023, FY2024
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Finding: Material Weakness
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(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part."
2 CFR 200.320 states in part:
"The non-Federal Entity must use one of the following methods of procurement. . . .
(b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. 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 an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: There were no questioned costs identified.
Context: The School Corporation had one vendor which exceeded the simplified acquisition threshold which was selected for testing. The School Corporation was unable to provide any supporting documentation for the procurement process required under School Corporation policy. The sample item amount disbursed was $160,827 for food purchases in FY23. Additionally, the School Corporation did not have any support to show the vendor was not debarred or suspended.
Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior finding number was 2022-003.
Recommendation: We recommended that the School Corporation's management establish a system of internal controls related to ensure that the School Corporation’s procurement policy is adhered to and all documentation is maintained for the procurements performed by the School Corporation. Additionally, we recommend management monitor annual vendor activity to ensure vendors that exceed small purchase threshold and suspension and debarment threshold in aggregate are reviewed for potential analysis and suspension and debarment checks required by federal and state regulations.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.