FINDING 2022-002
Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment
Federal Agency: Department of Education
Federal Program: Special Education Grants to States
Assistance Listings Number: 84.027
Federal Award Numbers and Years (or Other Identifying Numbers): 21611-034-PN01, 22611-034-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2021-003.
Condition and Context
The School Corporation had not designed or implemented adequate policies or procedures to
ensure that proper procurement procedures for small purchases and simplified acquisitions were followed.
There was no documented oversight, review, or approval process in place at the School Corporation to
ensure proper procedures were followed and price or rate quotations were obtained, or documentation to
support limited procurement procedures were conducted and maintained.
Federal regulations allow for informal procurement methods when the value of the procurement for
property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless
a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive
threshold of $150,000, informal procurement methods are permitted when the value of the procurement
does not exceed $150,000. 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 micropurchase
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.
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The School Corporation did not obtain price or rate quotes for the five vendors tested that were
less than the simplified acquisition threshold of $150,000 but exceeded the $10,000 micro-purchase
threshold. Documentation detailing the history of procurement, which must include the reason for the
procurement method used, was not available for audit.
The School Corporation also did not follow procurement requirements for contracted services which
exceeded the simplified acquisition threshold of $150,000. The School Corporation did not correctly
procure a contract for the one vendor that exceeded the simplified acquisition threshold. Additionally, the
School Corporation did not adequately maintain documentation detailing the history of the procurement or
the rationale to limit competition. Finally, the School Corporation did not verify that this vendor was not
excluded or disqualified from participation in federal assistance programs or activities.
The lack of internal controls and noncompliance were systemic issues 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 200.318 states in part:
"(a) The non-Federal entity must have and use documented procurement procedures,
consistent with State, local, and tribal laws and regulations and the standards of this section,
for the acquisition of property or services required under a Federal award or subaward. The
non-Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327. . . .
(i) 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.
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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.
(ii) Simplified acquisition thresholds. The non-Federal entity is responsible for
determining an appropriate simplified acquisition threshold based on internal
controls, an evaluation of risk and its documented procurement procedures which
must not exceed the threshold established in the FAR. When applicable, a lower
simplified acquisition threshold used by the non-Federal entity must be authorized
or not prohibited under State, local, or tribal laws or regulations.
(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.
(i) In order for sealed bidding to be feasible, the following conditions should be
present:
(A) A complete, adequate, and realistic specification or purchase description
is available;
(B) Two or more responsible bidders are willing and able to compete
effectively for the business; and
(C) The procurement lends itself to a firm fixed price contract and the selection
of the successful bidder can be made principally on the basis of price.
(ii) If sealed bids are used, the following requirements apply:
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(A) Bids must be solicited from an adequate number of qualified sources,
providing them sufficient response time prior to the date set for opening
the bids, for local, and tribal governments, the invitation for bids must be
publicly advertised;
(B) The invitation for bids, which will include any specifications and pertinent
attachments, must define the items or services in order for the bidder to
properly respond;
(C) All bids will be opened at the time and place prescribed in the invitation for
bids, and for local and tribal governments, the bids must be opened
publicly;
(D) A firm fixed price contract award will be made in writing to the lowest
responsive and responsible bidder. Where specified in bidding documents,
factors such as discounts, transportation cost, and life cycle costs
must be considered in determining which bid is lowest. Payment discounts
will only be used to determine the low bid when prior experience indicates
that such discounts are usually taken advantage of; and. . . ."
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 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
A proper system of internal controls was not designed by management of the School Corporation,
which would include segregation of key functions. Embedded within a properly designed and implemented
internal control system should be internal controls consisting of policies and procedures. Policies reflect
the School Corporation's management statements of what should be done to effect internal controls, and
procedures should consist of actions that would implement these policies.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, procurement procedures for goods and services were not adhered to and
vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended,
debarred, or otherwise excluded.
Noncompliance with the grant agreement and the compliance requirement could result in the loss
of future federal funds to the School Corporation.
Questioned Costs
There were no questioned costs identified.
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure there are appropriate procurement
procedures for goods and services and 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.