FINDING 2023-008
Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment
Federal Agency: Department of Education
Federal Program: COVID-19 - Special Education Grants to States
Assistance Listings Number: 84.027X
Federal Award Number and Year (or Other Identifying Number): 22611-054-ARP
Pass-Through Entity: Indiana Department of Education
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
INDIANA STATE BOARD OF ACCOUNTS
29
WABASH CITY SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Condition and Context
Procurement
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 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.
The School Corporation did not have a procurement policy that complied with the procurement
standards. In addition, one purchase, totaling $75,387, was identified that fell within the small
purchases threshold. The purchase was selected for testing. The School Corporation did not
adequately document the history of the procurement, which would have included an awarded
contract.
Suspension and Debarment
Prior to entering into subawards and covered transactions with federal 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 vendor, or adding a clause or condition to the
covered transaction with that vendor.
Upon inquiry of the School Corporation in order to review the procedures in place for verifying
that a vendor with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded, the School Corporation disclosed there were no policies or procedures
in place to verify if vendors were suspended or debarred or otherwise excluded from
participation in federal awards. One covered transaction, totaling $75,387, was identified and
selected for testing. The School Corporation did not verify the vendor's suspension and
debarment status prior to payment.
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:
INDIANA STATE BOARD OF ACCOUNTS
30
WABASH CITY SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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.
(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. . . ."
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:
INDIANA STATE BOARD OF ACCOUNTS
31
WABASH CITY SCHOOLS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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 and 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, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, goods that fell within the small purchase threshold were not properly procured
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 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 system of internal
controls and develop policies and procedures to ensure the history of the procurement is maintained for
goods within the small purchase threshold and 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.