Finding 975626 (2023-001)

Material Weakness
Requirement
I
Questioned Costs
-
Year
2023
Accepted
2024-05-31

AI Summary

  • Core Issue: The District lacked adequate internal controls to verify that contractors were not suspended or debarred before entering contracts worth $25,000 or more, leading to material noncompliance.
  • Impacted Requirements: Federal regulations mandate that recipients must ensure contractors are eligible to participate in federal programs, including checks against the SAM.gov database.
  • Recommended Follow-Up: Strengthen internal controls by implementing a process to verify contractor eligibility for all relevant contracts, including documentation of checks against SAM.gov.

Finding Text

The District’s internal controls were inadequate 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 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: 207WAWA3N1099 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, and Summer Food Service Program for Children. These programs provide free or reduced-price meals to students from low-income families. The District received $3,656,339 to administer these programs during the 2022-2023 school year. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding the program requirements and monitoring the effectiveness of established controls. Description of Condition Federal requirements prohibit recipients from contracting with parties that are suspended or debarred from doing business with the federal government. Whenever the District contracts for goods and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify that contractors have not been suspended or debarred, other 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 it must maintain documentation to demonstrate compliance. Our audit found the District did not have adequate internal controls for verifying contractors have not been suspended or debarred before entering into contracts with or purchasing from them. Specifically, the District did not verify two contractors it paid $25,000 or more during fiscal year 2023 were not suspended or debarred. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The District did not anticipate payments to either of these contractors reaching $25,000 and did not monitor total expenditures. As a result, the District did not perform suspension and debarment verification for the 2022-2023 school year. Effect of Condition The District did not obtain written certifications, insert clauses into the contracts, or check SAM.gov to verify two contractors paid $46,195 and $28,543 in part with federal funds were not suspended or debarred before contracting or purchasing. Without adequate internal controls, the District cannot ensure the contractors were 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 funding agency could potentially recover them. Because we subsequently verified the contractor was not suspended or debarred, we are not questioning costs. Recommendation We recommend that the District strengthen its internal controls to ensure 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 or purchasing from them. District’s Response Wenatchee School District agrees with the Office of the State Auditor’s recommendation. The District has implemented a process to ensure compliance. Purchase orders for Nutrition Services will have an electronic attachment showing a suspension and debarment check from SAM.gov. All purchase orders will be reviewed by the finance department prior to approval. 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.

Categories

Procurement, Suspension & Debarment School Nutrition Programs Subrecipient Monitoring

Other Findings in this Audit

  • 399184 2023-001
    Material Weakness
  • 399185 2023-001
    Material Weakness
  • 399186 2023-001
    Material Weakness
  • 399187 2023-001
    Material Weakness
  • 399188 2023-002
    Material Weakness
  • 975627 2023-001
    Material Weakness
  • 975628 2023-001
    Material Weakness
  • 975629 2023-001
    Material Weakness
  • 975630 2023-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
84.425 Covid 19 - Education Stabilization Fund $4.33M
84.010 Title I Grants to Local Educational Agencies $2.42M
84.027 Special Education_grants to States $1.52M
84.011 Migrant Education_state Grant Program $1.27M
10.553 School Breakfast Program $795,555
84.287 Twenty-First Century Community Learning Centers $715,849
93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response $350,000
10.555 National School Lunch Program $347,262
10.665 Schools and Roads - Grants to States $301,086
84.367 Supporting Effective Instruction State Grants $243,540
10.558 Child and Adult Care Food Program $125,882
93.778 Medical Assistance Program $121,780
84.424 Student Support and Academic Enrichment Program $99,246
84.425 Covid 19 - Education Stabilization Fund $95,143
84.173 Special Education_preschool Grants $72,485
12.556 Competitive Grants: Promoting K-12 Student Achievement at Military-Connected Schools $71,432
84.027 Covid 19 - Special Education_grants to States $71,413
84.365 English Language Acquisition State Grants $67,483
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $66,999
84.048 Career and Technical Education -- Basic Grants to States $66,123
84.196 Education for Homeless Children and Youth $42,120
10.559 Summer Food Service Program for Children $11,928
10.579 Child Nutrition Discretionary Grants Limited Availability $11,850
84.173 Covid 19 - Special Education_preschool Grants $10,930
11.429 Marine Sanctuary Program $9,619