Board of Education of the City of Chicago

FINDING 2022-002, 2021-001 ? REPEAT FINDING Information on the Federal Program: Federal Agencies: U.S. Department of Education Federal Programs: 84.027/84.173 Special Education Cluster (IDEA) 84.377 School Improvement Grants (Title 1003a IL-Empower) 93.323 Epidemiology and Lab Capacity (ELC) Pass-Through Entity: Illinois State Board of Education; City of Chicago Department of Public Health (CDPH) Pass-Through Entity Award Numbers: H027A210072; S377A160014 Criteria: Procurement Standards of Title 2 of the Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance) state that all non-federal entities will follow Sections 200.318 through Section 200.327. A. Section 200.320 identifies five methods of procurement to be followed: a. Informal ? micro-purchases b. Informal ? small purchases c. Formal ? sealed bids d. Formal ? competitive proposals e. Noncompetitive proposals Section 200.318 states that non-federal entities must have and use documented procurement procedures that are consistent with State and local laws in addition to the requirements of the Uniform Guidance. B. Per Section 200.320(b) if small purchases are used, price or rate quotations must be obtained from an adequate number of qualified sources. C. Title 2 CFR section 200.303 states the following regarding internal control: ?The auditee shall maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with law, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs.? D. The Chicago Public Schools Procurement Manual requires the collection of three quotes for any purchase between $2,000.01 and $25,000 for any purchase with federal grant funds. Condition/Context: For the three programs referenced, we tested one-hundred and five (105) purchase orders totaling $31,156,308. Thirty-four (34) purchase orders totaling $523,384 were purchases greater than $2,000 but less than $25,000, and for which CPS did not obtain and/or document an adequate number of price or rate quotations as required by CPS? procurement policies. Our samples were not statistically valid. Cause: CPS employees at the program/school level may not be following the CPS Procurement Manual due to the decentralized nature of the process and the high number of purchases that can fall under the $2,000.01-$25,000 threshold. Questioned Costs: Questioned costs, if any, are unable to be determined, however, actual purchase orders that did not comply with the small purchase requirements of the CPS Policy Manual totaled $133,788 for Assistance Listing Number 84.027/84.173, $376,459 for Assistance Listing Number 84.377, and $13,137 for Assistance Listing Number 93.323. Effect: Chicago Public Schools did not document compliance with the requirements of the CPS Policy Manual as it relates to small purchases that fall between $2,000.01 and $25,000. Recommendation: We recommend that CPS communicate and re-enforce its procurement policies and procedures and any changes thereto in order to comply with the purchase requirements of the CPS Procurement Manual. Ensure proper communication is delivered to relevant employees regarding any changes to the CPS Procurement Manual and the CPS Procurement Manual. In addition, we recommend the consideration of implementing a system control that requires the recording of three quotes for purchases between $2,000.01 and $25,000. The system may be the permanent record. Views of Responsible Officials: Based on the prior year recommendation to the FY21 finding, dated December 15, 2021, in April, 2022, CPS revised the policies in the Procurement Manual to reflect the current standard. The Oracle procurement module was tested and upgraded to implement further controls to require the collection of three quotes for any purchase using federal grant funds between $2,000.01 and $25,000 in value. In addition, communication and reenforcement of the procurement policies in the CPS Procurement Manual at the program and school level has been completed through the mandatory training and district wide announcement. On May 9, 2022, US department of Education issued the determination letter concluding this finding resolved and closed.

FINDING 2022-003 Information on the Federal Program: Federal Agencies: U.S Department of Health and Human Services Federal Programs: 93.778 Medical Assistance Program (Medicaid; Title XIX) Pass-Through Entity: Illinois Department of Healthcare and Family Services (HFS) Pass-Through Entity Award Numbers: 95-4900-00 Criteria: A. Per the Illinois Guide for School-Based Health Services Administrative Claiming Guide Section 740: "Payment will not be made to any entity in which a terminated or suspended or barred individual is serving as an employee, administrator, operator or in any other capacity for any services, including administrative and management services furnished, ordered or prescribed on or after the effective date of the sanction or voluntary withdrawal" and "In addition, no claim may be made for payments made for items or services provided by an individual or entity that has been barred or suspended or who has voluntarily withdrawn from the program" Furthermore, the Guide states that it is the responsibility of the LEA to assure that all claims for federal funds meet the requirement. B. Title 2 CFR section 200.303 states the following regarding internal control: ?The auditee shall maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with law, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs.? Condition/Context: We tested a sample of twenty-five licensed medical professionals participating in medical services. For all twentyfive licensed medical professionals, documentation demonstrating that debarment and suspension searches were performed could not be provided by Chicago Public Schools. Our samples were not statistically valid. Cause: Chicago Public Schools? medical assistance policies do not include processes pertaining to conducting, monitoring, reviewing and documenting debarment and suspension checks for any licensed medical professional serving as an employee, operator or in any other capacity for any [Medicaid-related] service. Questioned Costs: Questioned costs, if any, are unable to be determined, however, actual expenditures that did not comply with debarment and suspension check requirement totaled $122,257. Effect: Chicago Public Schools is not in compliance with the Illinois Guide for School-Based Health Services Administrative Claiming Guide as it relates to debarment and suspension. Additionally, the effect of noncompliance can result in questioned costs. Recommendation: We recommend for Chicago Public Schools? Medical Assistance Program policies to include processes pertaining to conducting, monitoring, reviewing and documenting debarment and suspension checks in order to comply with the Illinois Guide for School-Based Health Services Administrative Claiming Guide. Ensure proper communication is delivered to relevant employees regarding any changes to policies and procedures. Views of Responsible Officials: CPS will implement a policy to verify practitioner credential records twice a year with the IL HFS and Federal Healthcare and Human Services (HHS) OIG websites as outlined in the LEA handbook. The Medicaid team will document the verification and obtain review and approval from the Medicaid Director. CPS will start the verification process in April, 2023 after the policy and procedure are finalized.

Information on the Federal Program: Federal Agencies: U.S Department of Education U.S. Department of Agriculture Federal Programs: 84.165 Magnet Schools Assistance Program 10.559 Child Nutrition Cluster ? Summer Food Service Program Pass-Through Entity: Illinois State Board of Education Pass-Through Entity Award Numbers: U165A170071-19 and U165A170071-20 21-4225-00 Criteria: Procurement Standards of Title 2 of the Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance) state that all non-federal entities will follow Sections 200.318 through Section 200.327. A. Section 200.320 identifies five methods of procurement to be followed: (a) Informal ? micro-purchases (b) Informal ? small purchases (c) Formal ? sealed bids (d) Formal ? competitive proposals (e) Noncompetitive proposals Section 200.318 states that non-federal entities must have and use documented procurement procedures that are consistent with State and local laws in addition to the requirements of the Uniform Guidance. B. Per Section 200.320(b) if small purchases are used, price or rate quotations must be obtained from an adequate number of qualified sources. C. Title 2 CFR section 200.303 states the following regarding internal control: ?The auditee shall maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with law, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs.? D. The Chicago Public Schools Procurement Manual requires the collection of three quotes for any purchase between $2,000.01 and $25,000 for any purchase with federal grant funds. Condition/Context: For the two programs referenced, we tested fifty purchase orders totaling $17,352,640. Seventeen (17) purchase orders totaling $175,224 were purchases greater than $2,000 but less than $25,000, and for which CPS did not obtain and/or document an adequate number of price or rate quotations as required by CPS? procurement policies. Our samples were not statistically valid. Cause: CPS employees at the program/school level may not be following the CPS Procurement Manual due to the decentralized nature of the process and the high number of purchases that can fall under the $2,000.01-$25,000 threshold. Questioned Costs: Questioned costs, if any, are unable to be determined, however, actual purchase orders that did not comply with the small purchase requirements of the CPS Policy Manual totaled $171,324 for Assistance Listing Number 84.165 and $3,900 for Assistance Listing Number 10.559. Effect: CPS did not document compliance with the requirements of the CPS Policy Manual as it relates to small purchases that fall between $2,000.01 and $25,000. Recommendation: We recommend that CPS communicate and re-enforce its procurement policies and procedures and any changes thereto in order to comply with the purchase requirements of the CPS Procurement Manual. Ensure proper communication is delivered to relevant employees regarding any changes to the CPS Procurement Manual and the CPS Procurement Manual. In addition, we recommend the consideration of implementing a system control that requires the recording of three quotes for purchases between $2,000.01 and $25,000. The system may be the permanent record. Views of Responsible Officials: CPS will revise the policies in the CPS Procurement Manual to reflect the current standards. In addition, CPS will implement further controls to require the collection of three quotes for any purchase using federal grant funds between $2,000.01 and $25,000 in value. The various departments will ensure further communication and re-enforcement of the procurement policies in the CPS Procurement Manual at the program and school level.

Information on the Federal Program: Federal Agency: U.S. Department of Education Federal Program Title: School Improvement Grants CFDA Number: 84.377 Pass-Through Entity: Illinois State Board of Education Pass-Through Entity Identification Number: 19-4339-16 Criteria: Procurement Standards of Title 2 of the Code of Federal Regulations (CFR) Part 200 Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance) state that all non-federal entities will follow Sections 200.318 through Section 200.326. Section 200.320 identifies four methods of procurement to be followed: (a) Procurement by micro-purchases (b) Procurement by small purchases procedures (c) Procurement by sealed bids (formal advertising) (d) Procurement by competitive proposals (e) Procurement by noncompetitive proposals Per Section 320(b) if small purchases procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. Title 2 CFR section 200.303 states the following regarding internal control: ?The auditee shall maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with law, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs.? Condition/Context: Chicago Public Schools? (CPS) procurement policies and procedures state that no purchases shall be made except as provided by applicable Illinois law, federal law and the Board of Education of the City of Chicago. The procurement policy also states that all purchases for Biddable Items and Non-biddable Items that do not exceed $25,000 shall be completed via a purchase order, however, our procedures revealed that the purchase order process does not require solicitation of an adequate number of price or rate quotations for such purchases that exceed the micro-purchase threshold of $3,500 as established by the Uniform Guidance. We tested nine purchase orders totaling $527,347. Two purchase orders totaling $16,066 were purchases greater than $3,500 but less than $25,000, and for which CPS did not obtain an adequate number of price or rate quotations as required by the Uniform Guidance. Cause: CPS procurement policies and procedures do not account for the small purchase requirements of 2 CFR section 200.320(b) of the Uniform Guidance. Questioned Costs: Questioned costs are unable to be determined, however, actual purchase orders that did not comply with the small purchase requirements of the Uniform Guidance totaled $16,066 for CFDA Number 84.377. Effect: CPS has not complied with the requirements of the Uniform Guidance as it relates to small purchases that fall between $3,500 and $25,000. Recommendation: We recommend that CPS review and revise its procurement policies and procedures in order to comply with the small purchase requirements of the Uniform Guidance. Views of Responsible Officials: The Department of Procurement and Business Diversity will update the CPS Procurement Manual to require that all departments using designated Federal Funds to procure goods or services between $10,000 (as allowed by exception in advance of revisions to FAR) and $25,000 in value will do so after requesting and evaluating quotes from at least three prospective suppliers.

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