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
Assistance Listings Numbers: 10.553, 10.555
Federal Award Numbers and Years (or Other Identifying Numbers): SY2022-2023, SY2023-2024
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
2022-001.
Condition and Context
The School Corporation had not properly designed or implemented a system of internal controls,
which would include appropriate segregation of duties, that would likely be effective in preventing, or
detecting and correcting, noncompliance related to the purchase of goods and services that fell within the
small purchase threshold or were considered covered transactions.
Procurement - Small Purchases
When the value of goods or services exceeds the simplified acquisition threshold, the proper
purchasing method would be the bidding process, unless the purchase meets certain other
qualifications. Federal regulations allow for informal procurement methods when the value of
the procurement for goods 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 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. If it is determined a single source provider can be used for a small purchase,
documentation must be retained supporting the determination.
The School Corporation had not designed or implemented internal controls, which would
consist of policies and procedures, to ensure that proper procurement procedures for small
purchases were followed. A population of two small purchase vendors for fiscal year ending
June 30, 2023; and a population of three small purchase venders for fiscal year ending June
30, 2024, were identified. All five were selected for testing. For three of the five small purchase
transactions, totaling $102,026, 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.
INDIANA STATE BOARD OF ACCOUNTS
16
METROPOLITAN SCHOOL DISTRICT OF BOONE TOWNSHIP
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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 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 vendor, or adding a clause or condition to the
covered transaction with that vendor.
The School Corporation had not designed or implemented internal controls, which would
consist of policies and procedures, to ensure that vendors were not suspended or debarred
prior to entering into a covered transaction. The School Corporation had three covered
transactions that equaled or exceeded $25,000 during the audit period that were identified and
selected for testing. Payments to the vendors, totaling $194,537, were made without verifying
if the vendors were suspended, debarred, or otherwise excluded from participation in federal
awards.
The lack of 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 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 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."
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 Code 5-22-8-3(d) states: "If the purchasing agent receives a satisfactory quote, the
purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or
class of supplies required."
INDIANA STATE BOARD OF ACCOUNTS
17
METROPOLITAN SCHOOL DISTRICT OF BOONE TOWNSHIP
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
A proper system of internal controls was not designed and implemented by management of the
School Corporation, which would include segregation of key functions. The School Corporation did not
adequately perform suspension and debarment procedures and were not aware of small purchase
requirements.
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, price or rate quotes were not obtained for small purchases and vendors to
whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or
otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and
conditions of the federal award could result in the loss of future federal funding to the School Corporation.
INDIANA STATE BOARD OF ACCOUNTS
18
METROPOLITAN SCHOOL DISTRICT OF BOONE TOWNSHIP
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a system of internal
controls and develop policies and procedures to ensure rate or price quotes are obtained for small
purchases and 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.