FINDING 2024-002
Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment
Federal Agency: Department of Education
Federal Programs: COVID-19 - Special Education Grants to States,
COVID-19 - Special Education Preschool Grants
Assistance Listings Numbers: 84.027X, 84.173X
Federal Award Numbers and Years (or Other Identifying Numbers): 22611-087-ARP, 22619-087-ARP
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
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.
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
$250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $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 $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold but below the simplified acquisition threshold. Small purchase procedures require
that price or rate quotations must be obtained from an adequate number of qualified sources
or documented reasoning to support a single source provider.
During the audit period, the School Corporation had six vendors, totaling $165,726, that were
determined to require small purchase procedures. Two vendors were selected for testing. For
the two vendors tested, the School Corporation procured $82,669 in services and could not
provide evidence of open competition or quotes for the purchases.
INDIANA STATE BOARD OF ACCOUNTS 15
WARRICK COUNTY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Additionally, the School Corporation had not established a purchasing policy that would reflect
applicable state laws and regulations, including procedures to avoid the acquisition of
unnecessary or duplicative items; procedures to ensure that all solicitations incorporate a clear
and accurate description of the technical requirements for the material, product, or service to
be procured; procedures ensure that all solicitations identify all requirements which the offerors
must fulfill and all other factors to be used in evaluating bids or proposals; and did not maintain
written standards of conduct covering conflicts of interest and governing actions of its
employees engaged in the selection, award, and administration of contracts.
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 person, or adding a clause or condition to the
covered transaction with that vendor.
Three covered transactions for goods or services that exceeded $25,000 paid from the Special
Education funds during the audit period were identified. The School Corporation did not verify
the vendor's suspension and debarment status prior to payment for any of the three vendors.
Amounts paid to the vendors totaled $131,637.
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 states in part:
"(a) 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. . . .
(i) 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
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WARRICK COUNTY 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 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
The School Corporation did not have the proper safeguards in place to ensure that the
documentation was properly maintained. As a result, the School Corporation was unable to provide
documentation to demonstrate it had properly procured services. In addition, the Treasurer and Assistant
Superintendent of Schools assumed the vendor's suspension and debarment status was verified and
quotes were being obtained or reasoning for a single source provider was being documented. There was
not adequate oversight to ensure proper procurement procedures were being followed.
Effect
The School Corporation was not able to provide the documentation that they followed the proper
procurement procedures or that they verified vendors were not suspended or debarred. By not following
proper procurement procedures, the School Corporation may not be receiving the most competitive pricing.
If the School Corporation does not verify that vendors are not suspended or debarred, the School
Corporation may be purchasing from vendors that are not eligible to receive federal funds.
INDIANA STATE BOARD OF ACCOUNTS
17
WARRICK COUNTY SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Without a proper system of internal controls in place that operated effectively, material noncompliance
remained undetected. 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.
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 there are appropriate procurement
procedures for goods and services and that contractors and subrecipients, as appropriate, are not
suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards.
Documentation of all procurement and suspension and debarment activities should be maintained.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.