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
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 compliance
requirement.
Cause: The School Corporation's management had not developed a system of internal controls that would
have ensured compliance with the Procurement 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 utilizes two vendors for the majority of food and supplies purchases for
the food service program. One vendor is procured through a purchasing cooperative, Southwest Indiana
Co-op, where the School Corporation is a member. The other vendor met the simplified acquisition
threshold for fiscal year 2023 and the small purchase threshold for fiscal year 2024. The School Corporation
was unable to provide any supporting documentation for the procurement process undertaken as required
by the School Corporation’s procurement policy. Management stated the items purchased were chosen
based on a comparison of prices with two other vendors, however, management had no documented
support for the rationale or process to determine which vendor would be selected for food and supplies
purchases.
The sample item amount disbursed was $151,511 for food purchases in FY23 and $129,583 for food
purchases in FY24. The School Corporation did properly confirm the vendor was not debarred or
suspended.
Identification as a repeat finding, if applicable: Yes, see Finding 2022-001 in the prior period audit
report.
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.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.