Finding Text
2024-002 The District did not have adequate internal controls and did not comply with federal suspension and debarment requirements
Assistance Listing Number and Title: 10.553, School Breakfast Program
10.555, National School Lunch Program
Federal Grantor Name: U.S. Department of Agriculture
Federal Award/Contract Number: N/A
Pass-through Entity Name: Office of the Superintendent of Public Instruction (OSPI)
Pass-through Award/Contract Number:
N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The District participates in the Child Nutrition Cluster, which includes the School Breakfast Program and National School Lunch Program. These programs provide free and reduced-price meals to students from low-income families. The District received $3,095,746 to administer these programs during the 2023-2024 school year.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract and must maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Although the District has a process to verify the suspension and debarment status for contractors it pays more than $25,000, our audit found the District did not follow this process and did not verify one of four contractors was not suspended or debarred before purchasing from them.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
The District piggybacked on another agency’s contract. District staff said they were aware of requirements and that the lead agency renewed the contract in May 2023. However, they did not verify and retain documentation showing the contractor was not suspended or debarred at the time of the contract renewal, as required.
Effect of Condition
The District did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify the contractor it paid $233,250 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the District increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible party would be unallowable, and the awarding agency could potentially recover them.
The District subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs.
Recommendation
We recommend the District strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain documentation demonstrating compliance with this requirement.
District’s Response
Central Kitsap School District concurs with the issued finding. Although CKSD piggybacked on a contract through another district that did obtain a suspension and debarment certification, we were not provided and/or did not obtain the suspension and debarment certification. While we tried to do our own verification of the vendor’s status, the correct records were not available on the SAM.gov site for this particular vendor. Procedures will be updated to ensure suspension and debarment checks are included with contracts using federal funding sources when routed for approval and retained by the district. CKSD will provide annual training to all staff purchasing with federal funding to include how to conduct a suspension and debarment verification.
Auditor’s Remarks
We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to resolve this finding. We will review the corrective action taken during our next audit.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
Title 2 CFR Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689.