FINDING 2023-006
Subject: Special Education Cluster (IDEA) - Procurement
Federal Agency: Department of Education
Federal Programs: Special Education Grants to States, Special Education Preschool Grants
Assistance Listings Numbers: 84.027, 84.173
Federal Award Numbers and Years (or Other Identifying Numbers): 19611-158-PN01, 19619-158-PN01,
20611-158-PN01, 20619-158-PN01
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
The School Corporation was a member of the Clark County Joint Services Program (Cooperative).
During fiscal year 2021-2022, the Cooperative operated the special education programs and spent the
federal money on behalf of all its member school corporations. As the grant agreements were between the
Indiana Department of Education (IDOE) and each member school corporation, the School Corporation
was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate
oversight performed by the School Corporation to ensure compliance with the Procurement and Suspension
and Debarment compliance requirement.
INDIANA STATE BOARD OF ACCOUNTS 24
SILVER CREEK SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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 were identified as exceeding the small purchase threshold during the audit period.
Both vendors were selected for testing. For both vendors, only the quote that was utilized was retained
and no other audit evidence could be provided to show that additional quotes as required were obtained.
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 retained for audit for either
purchase.
The lack of internal controls and noncompliance were isolated to 2021-2022.
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.
INDIANA STATE BOARD OF ACCOUNTS 25
SILVER CREEK SCHOOL CORPORATION
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. . . ."
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.
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.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
INDIANA STATE BOARD OF ACCOUNTS
26
SILVER CREEK SCHOOL CORPORATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Auditor's Response
The small purchase threshold is determined based on the aggregate of similar purchases from a
single source. Although each individual purchase was below the procurement threshold for small
purchases, both vendors included in the sample were used to purchase like-items, such as technology or
furniture. When the aggregate of purchases exceeds the procurement threshold, that threshold must be
used for purchases. The small purchase threshold was exceeded for both vendors; therefore, price or rate
quotations must be obtained from an adequate number of qualified sources. Documentation supporting
the history of the procurement must be retained and presented for audit.
While the School Corporation may use IAESC as one method of procurement for small purchases,
price or rate quotes must be obtained from more than one source. If the School Corporation chooses to
use IAESC for their procurement processes, a formal agreement or contract should exist between both
governmental entities detailing the procurement agreement.