Finding 976855 (2023-002)

FA 2023-002 Improve Controls over Procurement Compliance Requirement: Procurement and Suspension and Debarment Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 84.027 – Special Education Grants to States COVID-19 – 84.027 – Special Education Grants to States 84.173 – Special Education Preschool Grants COVID-19 – 84.173 – Special Education Preschool Grants Federal Award Numbers: H027A210073 (Year: 2022), H027A220073 (Year: 2023), H027X220073 (Year: 2023), H173A210081 (Year: 2022), H173A220081 (Year: 2023), H173X220081 (Year: 2023) Questioned Costs: $88,074 Repeat of Prior Year Finding: FA 2022-001 Description: A review of expenditures charged to the Special Education Cluster (Assistance Listing Numbers 84.027 and 84.173) revealed that the School District’s internal control procedures were not operating appropriately to ensure that the School District’s procurement procedures were followed. Background: The Special Education Cluster, which is comprised of the Special Education Grants to States (IDEA, Part B) and Special Education Preschool Grants (IDEA Preschool) programs, was created by the Individuals with Disabilities Education Act (IDEA). Special Education Cluster funding is available to ensure that all children with disabilities have available to them a free appropriate public education that emphasizes special education and related services designed to meet their unique needs and prepares them for further education, employment, and independent living; ensure that the rights of children with disabilities and their parents are protected; assist states, localities, educational service agencies, and federal agencies to provide for the education of all children with disabilities; and assess and ensure the effectiveness of efforts to educate children with disabilities. Special Education Cluster funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. Special Education Cluster funds totaling $1,378,390 were expended and reported on the Madison County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to 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 200.303 – Internal Controls. In addition, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures, consistent with State, local, and tribal laws and regulations and… (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” Furthermore, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources…” Condition: A sample of 35 procurement transactions was randomly selected for testing using a non-statistical sampling approach. These transactions were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. Though no problems were noted with the micro-purchase transactions tested, auditors encountered significant issues in testing small purchase transactions; therefore, the entire population of small purchase transactions was ultimately tested. Upon review of these transactions, it was noted that the School District could not provide evidence that an adequate number of rate or price quotations was obtained from qualified sources for eight vendors associated with small purchase expenditures. Questioned Costs: Questioned costs of $88,074 were identified for all small purchase expenditures that did not follow the School District’s procurement procedures. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: In discussing the deficiencies with management, they stated that internal control procedures related to procurement were not being followed appropriately. In addition, management did not adequately monitor the procurement internal control procedures. Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to appropriately implement procedures to address procurement compliance requirements exposes the School District to unnecessary risk of error and misuse of Federal funds. In addition, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should evaluate and improve internal control procedures to ensure that required procurement procedures are followed, and appropriate documentation is obtained and retained on-file. In addition, management should develop a monitoring process to ensure that these procedures are operating effectively and as designed. Views of Responsible Officials: We concur with this finding.