Finding Text
2023-001 The District lacked adequate internal controls for ensuring compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: 10.553 – School Breakfast Program
10.555 – National School Lunch Program
10.559 – Summer Food Service Program for Children
10.582 – Fresh Fruit and Vegetable Program
Federal Grantor Name: U.S. 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, Summer Food Service Program, and Fresh Fruit and Vegetable Program. These programs provide free or reduced-price meals to students from families with low incomes. In the 2022–2023 school year, the District received $1,161,452 in federal funding to administer these programs.
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.
Federal regulations prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that the contractors have not been suspended or debarred or otherwise excluded. The District may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The District must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement.
Description of Condition
Our audit found the District’s controls were ineffective for ensuring that it verified all parties receiving $25,000 or more in federal funds were not suspended or debarred. The District could not provide documentation showing it obtained a written certification, included a clause in the contract or searched for exclusion records in SAM.gov to verify that one of its three contractors we tested was not suspended or debarred before contracting.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
The District experienced turnover in the position responsible for documenting the verification. District staff was unable to find documentation showing evidence that they performed the suspension and debarment verification for one contractor.
Effect of Condition
Without adequate internal controls, the District cannot ensure the contractor it paid with federal funds is eligible to participate in federal programs. Any program funds the District used to pay contractors that have been suspended or debarred would be unallowable, and the federal awarding agency could potentially recover them.
During the 2022–2023 school year, the District paid the contractor $69,874 of program funds for food service items. We verified the contractor was not suspended or debarred, so we are not questioning these costs.
Recommendation
We recommend the District strengthen its internal controls to ensure that all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before entering into contracts with them.
District’s Response
The District was experiencing high turnover with leadership roles in both its Food Service Department and Business Office when the failure to ensure compliance with federal suspension and debarment requirements occurred with one of its procurement contracts in August 2022.
For corrective action the District put in place a requirement that all purchase order requests involving federal funds that amount to (or potentially could amount to) $25,000 or higher must include as an attachment in Skyward Financial Management the contract (when applicable) with verification that the vendor is not suspended and debarred and/or current documentation from Sam.gov verifying the vendor is not suspended or debarred.
Any requisition involving federal funds that could amount to or exceed $25,000 that does not also include suspension and debarment verification will not be approved by the finance director and Business Office staff who process purchase order requests (as a control, both the finance director and the accounts payable technician must approve the request).
Further, by requiring the suspension and debarment verification in Skyward as an attachment with the purchase order request, Business Office staff (regardless of staff turnover) will be able quickly locate and retrieve the documentation as needed for future audits and other external or internal purposes.
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. We will review the corrective action taken during our next regular 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 Part 180, OMB Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes nonprocurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689.