Audit 309681

Criteria or specific requirement: The Code of Federal Regulations, 2 CFR 200.332, states that nonfederal entities passing federal awards through to other entities are required to ensure that subawards to subrecipients include required federal award identification and detail of all compliance and other requirements for the federal award. Condition: During our testing we noted that the Company did not include the federally required elements of the award in the subrecipient agreement. Context: For 6 of the 9 subrecipients selected, the Company did not include in their agreements the required federal award information as outlined by 2 CFR 200.332. Cause: Management was made aware of requirements during the award period and created addendums for agreements with subrecipients. For 6 of the 9 subrecipients selected, addendums with the conditions of the award were not created at the time of our review, and the required information was not provided to subrecipients. Effect: The Company is not in compliance with subrecipient monitoring requirements as outlined by 2 CFR 200.332. Recommendation: We recommend the Company to include all guidance under 2 CFR 200.332 in the agreements entered with subrecipients. Views of responsible officials: There is no disagreement with the audit finding. The company has investigated why the information was not provided, and found the cause was an isolated incident, and the error of a former employee who has since been removed from the company. Measures have been put in place to ensure future compliance.

Criteria or specific requirement: The Code of Federal Regulations, 2 CFR 200.320, requires that nonfederal entities must have and use documented procurement procedures. Such procurement procedures must reflect the standards identified in 2 CFR 200.320. These standards require various elements, such as cover conflict of interests, avoiding acquisition of unnecessary or duplicative items, maintaining records sufficient to detail the history of procurement, and conducting procurement in a manner providing full and open competition and adhering to the required methods of procurement for the acquisition of property and services. The required methods of procurement: • Micro purchases: These purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. • Small purchases: For purchases of which the dollar amount 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. • Procurement by sealed bids: A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. • Procurement by competitive proposals: A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. • Noncompetitive procurement: This procurement method is when a proposal form only one source is used. This form of procurement can only be used when an item is only available from a single source, for a public emergency, the awarding agency expressly authorizes the proposal, or, after solicitation of a number of sources, competition is determined inadequate. Condition: The Company's written procurement policy did not address the federally required elements of written procurement policies listed above. Context: Based on our review of the Company's procurement policy, we noted that the policy did not include documented procurement procedures for the required elements above. Cause: Management was unaware of the requirements that such elements should be included in their written procurement policy. Effect: The Company is not in compliance with procurement policy requirements as outlined by 2 CFR 200.320. Recommendation: We recommend the Company update its written procurement policy so that it incorporates all required procurement elements as outlined by 2 CFR 200.320. Views of responsible officials: There is no disagreement with the audit finding.

Criteria or specific requirement: The Code of Federal Regulations, 2 CFR 180.200, prohibits non-federal entities from contracting or making subawards under covered transactions to parties that are suspended or debarred. Covered transactions include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specific in 2 CFR 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR 180.215. The non-federal entity must verify when entering into a covered transaction with a lower entity, as defined in 2 CFR 180.995, that the lower entity is not suspended or debarred. This verification can be accomplished by the following methods: (1) checking SAM exclusions, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity, as defined in 2 CFR 180.300. Condition: During our testing of internal control over suspension and debarment for subrecipients, we noted that the Company did not have effective controls over compliance. Context: In our sample of 9 subaward agreements, we noted that there were 7 instances in which the Company did not have evidence of verification that the subrecipient was not suspended or debarred prior to entering into a covered transaction. Cause: Management was initially unaware of the requirements. Management was made aware of the requirements through discussions with grantor agency but was unclear on what entities should be reviewed for this compliance requirement. Effect: The Company could inappropriately disburse federal funds for subawards for entities that may be suspended or debarred. Recommendation: We recommend the Company utilize standard forms and procedures to document verification that parties are not suspended or debarred prior to entering into a covered transaction with a subrecipient. Views of responsible officials: There is no disagreement with the audit finding.

Criteria or specific requirement: The Code of Federal Regulations, 2 CFR 200.332, states that nonfederal entities passing federal awards through to other entities are required to ensure that subawards to subrecipients include required federal award identification and detail of all compliance and other requirements for the federal award. Condition: During our testing we noted that the Company did not include the federally required elements of the award in the subrecipient agreement. Context: For 6 of the 9 subrecipients selected, the Company did not include in their agreements the required federal award information as outlined by 2 CFR 200.332. Cause: Management was made aware of requirements during the award period and created addendums for agreements with subrecipients. For 6 of the 9 subrecipients selected, addendums with the conditions of the award were not created at the time of our review, and the required information was not provided to subrecipients. Effect: The Company is not in compliance with subrecipient monitoring requirements as outlined by 2 CFR 200.332. Recommendation: We recommend the Company to include all guidance under 2 CFR 200.332 in the agreements entered with subrecipients. Views of responsible officials: There is no disagreement with the audit finding. The company has investigated why the information was not provided, and found the cause was an isolated incident, and the error of a former employee who has since been removed from the company. Measures have been put in place to ensure future compliance.

Criteria or specific requirement: The Code of Federal Regulations, 2 CFR 200.320, requires that nonfederal entities must have and use documented procurement procedures. Such procurement procedures must reflect the standards identified in 2 CFR 200.320. These standards require various elements, such as cover conflict of interests, avoiding acquisition of unnecessary or duplicative items, maintaining records sufficient to detail the history of procurement, and conducting procurement in a manner providing full and open competition and adhering to the required methods of procurement for the acquisition of property and services. The required methods of procurement: • Micro purchases: These purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. • Small purchases: For purchases of which the dollar amount 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. • Procurement by sealed bids: A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. • Procurement by competitive proposals: A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. • Noncompetitive procurement: This procurement method is when a proposal form only one source is used. This form of procurement can only be used when an item is only available from a single source, for a public emergency, the awarding agency expressly authorizes the proposal, or, after solicitation of a number of sources, competition is determined inadequate. Condition: The Company's written procurement policy did not address the federally required elements of written procurement policies listed above. Context: Based on our review of the Company's procurement policy, we noted that the policy did not include documented procurement procedures for the required elements above. Cause: Management was unaware of the requirements that such elements should be included in their written procurement policy. Effect: The Company is not in compliance with procurement policy requirements as outlined by 2 CFR 200.320. Recommendation: We recommend the Company update its written procurement policy so that it incorporates all required procurement elements as outlined by 2 CFR 200.320. Views of responsible officials: There is no disagreement with the audit finding.

Criteria or specific requirement: The Code of Federal Regulations, 2 CFR 180.200, prohibits non-federal entities from contracting or making subawards under covered transactions to parties that are suspended or debarred. Covered transactions include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specific in 2 CFR 180.220. All non-procurement transactions entered into by a passthrough entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR 180.215. The non-federal entity must verify when entering into a covered transaction with a lower entity, as defined in 2 CFR 180.995, that the lower entity is not suspended or debarred. This verification can be accomplished by the following methods: (1) checking SAM exclusions, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity, as defined in 2 CFR 180.300. Condition: During our testing of internal control over suspension and debarment for subrecipients, we noted that the Company did not have effective controls over compliance. Context: In our sample of 9 subaward agreements, we noted that there were 7 instances in which the Company did not have evidence of verification that the subrecipient was not suspended or debarred prior to entering into a covered transaction. Cause: Management was initially unaware of the requirements. Management was made aware of the requirements through discussions with grantor agency but was unclear on what entities should be reviewed for this compliance requirement. Effect: The Company could inappropriately disburse federal funds for subawards for entities that may be suspended or debarred. Recommendation: We recommend the Company utilize standard forms and procedures to document verification that parties are not suspended or debarred prior to entering into a covered transaction with a subrecipient. Views of responsible officials: There is no disagreement with the audit finding.