Finding 538097 (2024-003)

Material Weakness
Requirement
I
Questioned Costs
-
Year
2024
Accepted
2025-03-27

AI Summary

  • Core Issue: The School Corporation failed to provide adequate oversight of the Cooperative's compliance with procurement and suspension/debarment requirements.
  • Impacted Requirements: Lack of internal controls led to noncompliance with federal regulations regarding procurement documentation and vendor verification.
  • Recommended Follow-Up: Implement robust internal controls and procedures to ensure compliance with procurement standards and verify vendor eligibility before transactions.

Finding Text

FINDING 2024-003 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Numbers and Years (or Other Identifying Numbers): 23611-048-PN01, 22611-048-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation is a member of the Ripley-Ohio-Dearborn Special Education Cooperative (Cooperative). As the grant agreements were between the Indiana Department of Education and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Procurement and Suspension and Debarment compliance requirement. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the procurement and the suspension and debarment requirements. The Cooperative did not have adequate procedures in place to ensure that the requirements for small purchases were met for each applicable procured good or service or to ensure that vendors were not suspended or debarred prior to entering into a covered transaction. INDIANA STATE BOARD OF ACCOUNTS 16 SOUTH DEARBORN 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 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 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. If it is determined a single source provider can be used for a small purchase, documentation must be retained supporting the determination. Two vendors exceeded the small purchase threshold during the audit period. Both vendors were selected for testing. In both cases, the Cooperative had determined the curriculum and materials that were purchased, totaling $109,322, were to be provided by a single source provider; however, they did not have a documented rationale or support for the decision. Documentation detailing the history of procurement, which must include the reason for the procurement method used, selection of the vendor, and the basis for the price, was not available for audit for either purchase. Suspension and Debarment Prior to entering into subawards and covered transactions with SPED 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 transaction with that person. Two covered transactions were identified that equaled or exceeded $25,000. Both transactions, totaling $109,322, were selected for testing. For the noted transactions, the Cooperative did not verify the vendor's suspension and debarment status prior to payment due to the Cooperative not having any policies or procedures in place to verify that contractors were neither suspended nor debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities. The lack of internal controls and noncompliance were isolated to fiscal year 2022-2023. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 17 SOUTH DEARBORN COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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." 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." INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH DEARBORN COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause Management had not established a system of internal control to ensure that rationale was properly documented when purchases were made by the Cooperative from a single source provider and to ensure the Cooperative verified the suspension and debarment status of the vendors. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, adequate documentation was not retained for procurements that fell within the small purchase threshold and vendors to whom payments equal to or in excess of $25,000 were made, 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. 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 all required documentation is retained and provided for small purchases and to 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.

Corrective Action Plan

FINDING 2024-003 Finding Subject: Special Education Cluster – Procurement and Suspension and Debarment Contact Person Responsible for Corrective Action: Marcia Fullenkamp, Treasurer Contact Phone Number and Email Address: (812) 623-2212; mfullenkamp@rodspecialed.org Views of Responsible Officials: We concur with the finding. Description of Corrective Action Plan: The ROD Special Education Cooperative will make notes in the Board Minutes regarding the fact that only one vendor can provide specific services prior to entering into a contract or purchasing said services. Each company providing services will be checked on the SAM.gov website to ensure that the vendor has not been suspended or debarred. Anticipated Completion Date: February 1, 2024

Categories

Procurement, Suspension & Debarment Subrecipient Monitoring

Other Findings in this Audit

  • 538091 2024-001
    Material Weakness
  • 538092 2024-001
    Material Weakness
  • 538093 2024-002
    Material Weakness
  • 538094 2024-002
    Material Weakness
  • 538095 2024-002
    Material Weakness
  • 538096 2024-002
    Material Weakness
  • 538098 2024-003
    Material Weakness
  • 538099 2024-004
    Material Weakness
  • 538100 2024-004
    Material Weakness
  • 1114533 2024-001
    Material Weakness
  • 1114534 2024-001
    Material Weakness
  • 1114535 2024-002
    Material Weakness
  • 1114536 2024-002
    Material Weakness
  • 1114537 2024-002
    Material Weakness
  • 1114538 2024-002
    Material Weakness
  • 1114539 2024-003
    Material Weakness
  • 1114540 2024-003
    Material Weakness
  • 1114541 2024-004
    Material Weakness
  • 1114542 2024-004
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
10.555 National School Lunch Program 2023 $925,155
10.555 National School Lunch Program 2024 $685,538
84.425 Education Stabilization Fund 2023 $655,616
84.010 Title I Grants to Local Educational Agencies 2024 $515,201
84.010 Title I Grants to Local Educational Agencies 2023 $490,838
84.027 Special Education Grants to States 2024 $388,585
84.425 Education Stabilization Fund 2024 $300,208
10.553 School Breakfast Program 2023 $171,626
10.553 School Breakfast Program 2024 $129,955
93.778 Medical Assistance Program 2024 $84,801
84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) 2023 $77,938
84.367 Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) 2024 $73,570
93.778 Medical Assistance Program 2023 $67,698
84.027 Special Education Grants to States 2023 $47,549
84.424 Student Support and Academic Enrichment Program 2024 $39,946
84.424 Student Support and Academic Enrichment Program 2023 $31,424
84.173 Special Education Preschool Grants 2023 $31,080
84.173 Special Education Preschool Grants 2024 $1,421
10.649 Pandemic Ebt Administrative Costs 2023 $628