Finding 561631 (2024-001)

2024-001 The District did not have adequate internal controls and did not comply with federal procurement requirements. Assistance Listing Number and Title: 10.553 School Breakfast Program 10.555 National School Lunch Program 10.582 Fresh Fruit and Vegetable Program Federal Grantor Name: Department of Agriculture Federal Award/Contract Number: N/A Pass-through Entity Name: Office of Superintendent of Public Instruction 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, National School Lunch Program and Fresh Fruits and Vegetables Program. These programs provide free and reduced-price meals to students from low-income families. The District received $383,210 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. When using federal funds to purchase goods and services, governments must apply the more restrictive federal, state or local laws by obtaining quotes or following a competitive bidding process, depending on the estimated cost of the purchase. Federal regulations and District policy require the District to solicit sealed bids or competitive proposals for personal services more than $250,000. The District may procure goods using noncompetitive proposals when the good is only available from a single source. The District must also keep documentation supporting the procurement method used. Description of Condition Our audit found the District’s internal controls were ineffective for ensuring compliance with federal procurement requirements. Specifically, for two food and dairy vendors, the District did not follow its policy by obtaining at least three quotes or have documentation to support noncompetitive procurement for goods. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition Because the District is in a remote location, employees used their knowledge and previous experience to select food vendors that could deliver the specific products they needed timely. Staff did not know they needed to retain written documentation to show how they complied with District policies when selecting vendors. Effect of Condition The District paid one vendor $57,635 and a second vendor $11,809 using federal program funds without documenting it obtained three quotes as required by District policy. Without competitively procuring these purchases, the District cannot demonstrate it received the best price and complied with federal procurement requirements and its own policy. Recommendation We recommend the District: • Dedicate the necessary time and resources to ensure all staff responsible for procuring goods and services are fully familiar with federal procurement requirements and District policy • Follow its procurement policy and federal regulations for services and purchases made with federal funds • Maintain documentation to demonstrate compliance with federal requirements District’s Response The Darrington School District acknowledges that we did not retain documentation to demonstrate compliance with federal procurement requirements for the child nutrition cluster. However, we dispute the auditors’ assertion that we did not comply with federal procurement requirements. The district sought quotes from at least three vendors via phone calls per our policy. Unfortunately, several vendors were either unable to provide the products specified in our request for quotes or do not deliver to our area, and therefore did not provide written quotes. The district documented the quotes from responsive vendors. In the future, the district will document all efforts to obtain quotes from both responsive and nonresponsive vendors. Auditor’s Remarks We appreciate the District’s commitment to resolve this finding and thank the District for its cooperation and assistance during the audit. As noted in the finding above and acknowledged in the District’s response, the District did not maintain documentation to show it obtained three quotes or documentation to show all other potential vendors were unwilling to provide quotes. Therefore, we could not verify that it complied with procurement requirements. We reaffirm our finding and 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 200, Uniform Guidance, section 319, Competition, establishes the requirement that all procurement transactions with Federal funds be conducted in a manner providing full and open competition consistent with standards of this section. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services, including noncompetitive procurement.