FINDING 2024-001
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: 84.027; 84.173
Federal Award Numbers and Years (or Other Identifying Numbers): 22611-042-ARP; 22619-042-ARP
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The School Corporation is a member of the Northeast Indiana Special Education Cooperative
(Cooperative). During fiscal years 2022-2023 and 2023-2024, the Cooperative operated the special
education program and spent the federal money on behalf of all its members. As the grant agreement was
between the Indiana Department of Education and each member school, the School Corporation was
responsible for ensuring and providing oversight of the Cooperative.
The School Corporation did not have internal controls in place to ensure that the Cooperative
complied with the Procurement and Suspension and Debarment compliance requirement. The Cooperative
did not have adequate procedures in place to ensure that the requirements for the simplified acquisition
threshold and 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.
Procurement
When the value of the procurement for property or services exceeds the simplified acquisition
threshold (SAT), or a lower threshold established by a nonfederal entity, formal procurement
methods are required. The SAT is typically set at $250,000. However, Indiana Code 5-22-8
has a more restrictive threshold. Therefore, the SAT threshold is set at $150,000. Formal
procurement methods require adherence to documented procedures and formal methods such
as sealed bids or proposals. When the purchase value exceeds the micro-purchase threshold
but is less than the simplified acquisition threshold, a small purchase occurs. Small purchases
require documented full and open competition or a documented rationale for limited
competition.
For 2022-2023, the Cooperative had one vendor with disbursements totaling $379,313, which
exceeded the SAT threshold of $150,000. The Cooperative did not obtain sealed bids or
competitive proposals nor was there documentation detailing the history of the procurement,
which must include the reason for the procurement method used.
For 2022-2023, the Cooperative had one vendor with disbursements in the amount of $55,374,
which were less than the SAT threshold of $150,000 but exceeded the $50,000 micro-purchase
threshold and was selected for testing. The Cooperative did not obtain price or rate quotes nor
was there documentation detailing the history of the procurement, which must include the
reason for the procurement method used.
INDIANA STATE BOARD OF ACCOUNTS 16
DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
For 2023-2024, three vendors with disbursements totaling $175,125 were identified as being
less than the simplified acquisition threshold of $150,000 but exceeding the $50,000 micropurchase
threshold and were selected for testing. The Cooperative did not obtain price or rate
quotes for two of the three vendors, and there was no documentation detailing the history of
the procurement, which must include the reason for the procurement method used.
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.
Upon inquiry of the Cooperative in order to review the procedures in place for verifying that a
vendor with which it plans to enter into a covered transaction is not suspended, debarred, or
otherwise excluded, the Cooperative disclosed there were not any documented internal
controls or procedures. Nine covered transactions were identified. The covered transactions
totaling $803,836 were selected for testing. The Cooperative did not verify the suspension and
debarment status of the tested vendors prior to payment.
The lack of internal controls and noncompliance were systemic 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 200.320 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: . . .
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DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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. . . .
(b) Formal Procurement Methods. When the value of the procurement for property or
services under a Federal financial assistance award exceeds the SAT, or a lower threshold
established by a non-Federal entity, formal procurement methods are required. Formal
procurement methods require following documented procedures. Formal procurement
methods also require public advertising unless a non-competitive procurement can be used
in accordance with § 200.319 or paragraph (c) of this section. The following formal
methods of procurement are used for procurement of property or services above the
simplified acquisition threshold or a value below the simplified acquisition threshold the
non-Federal entity determines to be appropriate: . . .
(1) Sealed bids. A procurement method in which bids are publicly solicited and a firm
fixed-price contract (lump sum or unit price) is awarded to the responsible bidder
whose bid, conforming with all the material terms and conditions of the invitation
for bids, is the lowest in price. The sealed bids method is the preferred method for
procuring construction, if the conditions. . . .
(2) Proposals. A procurement method in which either a fixed price or costreimbursement
type contract is awarded. Proposals are generally used when
conditions are not appropriate for the use of sealed bids. . . ."
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 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 Cooperative noted that the American Rescue Plan (ARP) portion of the Special Education
grant was new for 2022-2023 and 2023-2024. The ARP funding gave opportunity for types of expenditures
that do not typically get expensed using Special Education funding. The transactions noted within the
Condition and Context were from the ARP portion of the grant, which provided property or services that
exceeded the micro-purchase threshold. Management of the Cooperative was unaware of the procurement
requirements when property or services exceed the micro-purchase threshold. In addition, management
of the Cooperative was unaware of the suspension and debarment requirements when a covered
transaction is expected to equal or exceed $25,000.
INDIANA STATE BOARD OF ACCOUNTS 18
DEKALB COUNTY EASTERN COMMUNITY SCHOOL DISTRICT
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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.
Without following the required methods for procurement, the Cooperative could be overpaying for
services. Unverified vendors to whom payments equal to or in excess of $25,000 could be suspended,
debarred, or otherwise excluded.
Noncompliance with the provisions of federal statutes, regulations, and terms and conditions of the
federal award could result in the reduction of future federal funding to the Cooperative.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the Cooperative's management design and implement a system of internal
controls related to procurement and suspension and debarment procedures to ensure procurement requirements
are met and to ensure entities are neither suspended nor debarred, or otherwise excluded or
disqualified, prior to entering into any covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.