FINDING 2023-003
Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, COVID-19 - Individuals
with Disabilities Education Act of 2021 (ARP)
Assistance Listings Numbers: 84.027, 84.027X
Federal Award Numbers and Years (or Other Identifying Numbers): 23611-048-PN01, 22611-048-ARP
Pass-Through Entity: Indiana Department of Education
Compliance Requirements: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The School Corporation is a member of the Ripley-Ohio-Dearborn Special Education Cooperative
(Cooperative). As the grant agreements were between the Indiana Department of Education and each
member school, the School Corporation was responsible for ensuring and providing oversight of the
Cooperative. However, there was inadequate oversight performed by the School Corporation in order to
ensure compliance with the Procurement and Suspension and Debarment compliance requirement.
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The School Corporation did not have internal controls in place to ensure that the Cooperative
complied with the procurement and the suspension and debarment requirements. The Cooperative did not
have adequate procedures in place to ensure that the requirements 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
Federal regulations allow for informal procurement methods when the value of the procurement
for goods or services does not exceed the simplified acquisition threshold, which is customarily
set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000
or less for when small purchase procedures may be used. 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 micro-purchase 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. If it is
determined a single source provider can be used for a small purchase, documentation must be
retained supporting the determination.
Two vendors exceeded the small purchase threshold during the audit period. Both vendors
were selected for testing. In both cases, the Cooperative had determined the curriculum and
materials that were purchased, totaling $109,322, were to be provided by a single source
provider; however, they did not have a documented rationale or support for the decision.
Documentation detailing the history of procurement, which must include the reason for the
procurement method used, selection of the vendor, and the basis for the price, was not
available for audit for either purchase.
Suspension and Debarment
Prior to entering into subawards and covered transactions with SPED 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 SAMS
Exclusions, collecting a certification from that person, or adding a clause or condition to the
covered transaction with that person.
Two covered transactions were identified that equaled or exceeded $25,000. Both
transactions, totaling $109,322 were selected for testing. For the noted transactions, the
Cooperative did not verify the vendor's suspension and debarment status prior to payment due
to the Cooperative not having any policies or procedures in place to verify that contractors were
neither suspended nor debarred, or otherwise excluded or disqualified from participating in
federal assistance programs or activities.
The lack of internal controls and noncompliance were isolated to fiscal year 2022-2023 and the
23611-048-PN01 and 22611-048-ARP grants.
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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(i) states:
"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.
(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: . . .
(1) 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. . . . "
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
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(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 implemented 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, 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.
As a result, adequate documentation was not retained for procurements that fell within the small
purchase threshold and vendors to whom payments equal to or in excess of $25,000 were made, were not
verified to be not suspended, debarred, or otherwise excluded.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the School Corporation.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the School Corporation establish a proper system of
internal controls and develop policies and procedures to ensure all required documentation is retained and
provided for small purchases and to ensure 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.