Criteria:
2 CFR 200.303 requires nonfederal entities to establish and maintain effective internal control over federal awards to provide reasonable assurance that organizations who manage the federal award:
• Understand and comply with the federal statutes, regulations, and terms and conditions of the award;
• Evaluate and monitor compliance;
• Take prompt action when instances of noncompliance is identified.
These internal controls should be in compliance with guidance in Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States, or the Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Additionally, the Uniform Guidance requires non-federal entities to develop written procedures related to the following areas:
1. Cash Management
2 CFR 200.302(b)(6) states that the financial management system of each non-Federal entity must provide for the written procedures to implement the requirements of 2 CFR 200.305 Federal Payment.
2. Allowability of Costs
2 CFR 200.302(b)(7) states that the financial management system of each non-Federal entity must provide for the Written procedures for determining the allowability of costs in accordance with Subpart E (Cost Principles) of this part and the terms and conditions of the Federal award.
3. Conflict of Interest
2 CFR 200.318(c)(1) states that the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract.
The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial, or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity.
In addition, the organizations should ensure that existing written procedures are in compliance with:
a. Equipment Management Requirements
2 CFR 200.313(b) states that “A state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures
b. General Procurement Standards
2 CFR 200.317 to 200.326 discusses that contracts must be established and managed in accordance with the procurement requirements in 2 CFR Part 200. Grantees must have written procurement policies and procedures that demonstrate a fair and reliable process, with standards of conduct addressing conflicts of interest, for obtaining grant-funded goods and services.
Condition
The Foundation does not have documented policies and procedures concerning the following key compliances areas which are required by the Uniform Guidance:
• Cash Management
• Allowability of Cost
• Conflict of Interest
• Equipment and Real Property Management
• Procurement, Suspension & Debarment
Cause
This is attributed to the insufficient resources or staffing to develop and formalize the policies and procedures.
Effect
The absence of formal policies and procedures in the key compliance areas could result in non-compliance with federal regulations, which may lead to unnecessary sanctions. Additionally, without formal written policies and procedures, it is difficult to ensure consistent practices across the organization.
Questioned Costs
None
Recommendation
The Foundation should develop and implement formal written policies and procedures for the specific areas required by the Uniform Guidance. These policies and procedures must clearly delineate the requirements of the Uniform Guidance. Personnel responsible for these areas should receive adequate training and apply the policies effectively. Regular reviews should be conducted to update the policies and procedures as needed.
Views of Responsible Officials and Planned Corrective Action
We understand how crucial it is to have strong policies and procedures in place. Here’s how we plan to move forward:
1. Review of Existing Policies and Procedures: We’re currently taking a close look at our existing policies and procedures to ensure they align with the Uniform Guidance. This will help us identify any gaps and make necessary updates so that we’re fully compliant.
2. Development of New Policies: Alongside this review, we will create clear and comprehensive written policies in key areas, such as:
• Cash Management: Setting up procedures that comply with 2 CFR 200.305 to ensure timely payments. eCFR :: 2 CFR 200.305 -- Federal payment.
• Allowability of Costs: Crafting guidelines that follow Subpart E—Cost Principles, so we can confidently determine which expenses are allowable. https://www.ecfr.gov/current/title-48/chapter-7/subchapter-E/part-731/subpart-731.7/section-731.770.
• Conflict of Interest: Establishing standards of conduct that address potential conflicts and promote transparency.
• Equipment and Real Property Management: Developing policies for managing equipment acquired under federal awards in line with 2 CFR 200.313(b). eCFR :: 2 CFR 200.313 -- Equipment.
• Procurement Procedures: Creating clear procurement guidelines that align with 2 CFR 200.318 through 200.326 to ensure fairness and oversight. eCFR :: 2 CFR 200.318 -- General procurement standards.
3. Training and Communication: The Finance Department will be responsible for training all staff involved in managing federal awards. Training sessions will ensure that everyone understands the requirements and their roles in maintaining compliance. This training will be completed by December 31, 2024.
Personnel responsible: Eduardo Cedeno, Director of Finance
Anticipated completion date: December 31, 2024
Criteria
Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow specific procurement standards set out in 2 CFR sections 200.318 through 200.326, which includes documenting the procurement methods used for vendor selection. These procedures are designed to ensure fair competition, cost-effectiveness, and federal requirements.
These procurement standards require, among other provisions, that a non-federal entity must:
1. Meet the general procurement standards in 2 CFR Section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to reliable contractors, and maintaining records to document the history of procurement.
2. Conduct all procurement transactions for the acquisition of property or services under a federal award in a manner providing full and open competition consistent with the standards of 2 CFR section 200.320.
3. Use documented procurement procedures, consistent with the standards of 2 CFR 200.317 to 320. 2 CFR 200.320 enumerates below the different procurement methods that a non-federal entity should use:
a) The micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) (1) and (2). Under the micro-purchase method, the aggregate dollar amount does not exceed $50,000.
b) Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold.
The non-Federal entity is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement procedures which must not exceed the threshold established in the FAR. When applicable, a lower simplified acquisition threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations.
c) Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)).
4. For acquisitions exceeding the simplified acquisition threshold, the non-federal entity must use one of the following procurement methods: the sealed bid method if the acquisition meets the criteria in 2 CFR section 200.320(b) (1); the competitive proposals method under the conditions specified in 2 CFR section 200.320(b) (2); or the noncompetitive proposals method (i.e., solicit a proposal from only one source) but only when one or more of four circumstances are met, in accordance with 2 CFR section 200.320(c)).
5. Perform a cost or price analysis in connection with every procurement action in excess of the simplified acquisition threshold, including contract modifications (2 CFR section 200.323(a)). The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used (2 CFR section 200.323(b)).
6. Ensure that every purchase order or other contract includes applicable provisions required by 2 CFR section 200.326. These provisions are described in Appendix II to 2 CFR Part 200, “Contract Provisions for Non-Federal Entity Contracts Under Federal Awards.”
Condition
During our audit, the Foundation was unable to provide supporting documentation to demonstrate that the required procurement methods under the Uniform Guidance were performed on three out of four vendors tested. The expenditures paid to these vendors ranged from $75,000 to $675,000 in 2023.
Cause
The lack of documentation is attributed to oversight in maintaining appropriate records of vendor selection and compliance with procurement standards.
Effect
The absence of procurement documentation raises the risk of non-compliance with federal regulations, which could lead to potential disallowances or unnecessary sanctions.
Questioned Costs
None
Recommendation
The Foundation should strengthen its internal controls over procurement by ensuring that all procurement activities, particularly significant expenditures, are properly documented. This includes retaining evidence that procurement methods required by the Uniform Guidance were followed, such as bids, contracts, or justifications for sole-source vendors. The Foundation should also conduct training for staff involved in procurement to ensure awareness and adherence to the policies. Regular internal audits may be implemented to verify compliance with procurement procedures.
Views of Responsible Officials and Planned Corrective Action
We value your guidance and are committed to enhancing our compliance with the Uniform Guidance.
In response, we will:
1. Documentation Procedures: We will implement procedures to properly document procurement activities. This will help us maintain consistency and ensure compliance with the Uniform Guidance.
2. Monitoring and Accountability: Additionally, we will establish a system to regularly monitor our compliance with these policies and procedures. This will enable us to quickly address any issues that may arise.
The Finance Department will be responsible for implementing these changes and will have everything ready before the end of 2024.
We are dedicated to making these improvements and truly value your support as we work through this process.
Personnel responsible: Eduardo Cedeno, Director of Finance
Anticipated completion date: December 31, 2024
Criteria:
2 CFR 200.303 requires nonfederal entities to establish and maintain effective internal control over federal awards to provide reasonable assurance that organizations who manage the federal award:
• Understand and comply with the federal statutes, regulations, and terms and conditions of the award;
• Evaluate and monitor compliance;
• Take prompt action when instances of noncompliance is identified.
These internal controls should be in compliance with guidance in Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States, or the Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Additionally, the Uniform Guidance requires non-federal entities to develop written procedures related to the following areas:
1. Cash Management
2 CFR 200.302(b)(6) states that the financial management system of each non-Federal entity must provide for the written procedures to implement the requirements of 2 CFR 200.305 Federal Payment.
2. Allowability of Costs
2 CFR 200.302(b)(7) states that the financial management system of each non-Federal entity must provide for the Written procedures for determining the allowability of costs in accordance with Subpart E (Cost Principles) of this part and the terms and conditions of the Federal award.
3. Conflict of Interest
2 CFR 200.318(c)(1) states that the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. No employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a Federal award if he or she has a real or apparent conflict of interest. Such a conflict of interest would arise when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract.
The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial, or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity.
In addition, the organizations should ensure that existing written procedures are in compliance with:
a. Equipment Management Requirements
2 CFR 200.313(b) states that “A state must use, manage and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures
b. General Procurement Standards
2 CFR 200.317 to 200.326 discusses that contracts must be established and managed in accordance with the procurement requirements in 2 CFR Part 200. Grantees must have written procurement policies and procedures that demonstrate a fair and reliable process, with standards of conduct addressing conflicts of interest, for obtaining grant-funded goods and services.
Condition
The Foundation does not have documented policies and procedures concerning the following key compliances areas which are required by the Uniform Guidance:
• Cash Management
• Allowability of Cost
• Conflict of Interest
• Equipment and Real Property Management
• Procurement, Suspension & Debarment
Cause
This is attributed to the insufficient resources or staffing to develop and formalize the policies and procedures.
Effect
The absence of formal policies and procedures in the key compliance areas could result in non-compliance with federal regulations, which may lead to unnecessary sanctions. Additionally, without formal written policies and procedures, it is difficult to ensure consistent practices across the organization.
Questioned Costs
None
Recommendation
The Foundation should develop and implement formal written policies and procedures for the specific areas required by the Uniform Guidance. These policies and procedures must clearly delineate the requirements of the Uniform Guidance. Personnel responsible for these areas should receive adequate training and apply the policies effectively. Regular reviews should be conducted to update the policies and procedures as needed.
Views of Responsible Officials and Planned Corrective Action
We understand how crucial it is to have strong policies and procedures in place. Here’s how we plan to move forward:
1. Review of Existing Policies and Procedures: We’re currently taking a close look at our existing policies and procedures to ensure they align with the Uniform Guidance. This will help us identify any gaps and make necessary updates so that we’re fully compliant.
2. Development of New Policies: Alongside this review, we will create clear and comprehensive written policies in key areas, such as:
• Cash Management: Setting up procedures that comply with 2 CFR 200.305 to ensure timely payments. eCFR :: 2 CFR 200.305 -- Federal payment.
• Allowability of Costs: Crafting guidelines that follow Subpart E—Cost Principles, so we can confidently determine which expenses are allowable. https://www.ecfr.gov/current/title-48/chapter-7/subchapter-E/part-731/subpart-731.7/section-731.770.
• Conflict of Interest: Establishing standards of conduct that address potential conflicts and promote transparency.
• Equipment and Real Property Management: Developing policies for managing equipment acquired under federal awards in line with 2 CFR 200.313(b). eCFR :: 2 CFR 200.313 -- Equipment.
• Procurement Procedures: Creating clear procurement guidelines that align with 2 CFR 200.318 through 200.326 to ensure fairness and oversight. eCFR :: 2 CFR 200.318 -- General procurement standards.
3. Training and Communication: The Finance Department will be responsible for training all staff involved in managing federal awards. Training sessions will ensure that everyone understands the requirements and their roles in maintaining compliance. This training will be completed by December 31, 2024.
Personnel responsible: Eduardo Cedeno, Director of Finance
Anticipated completion date: December 31, 2024
Criteria
Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow specific procurement standards set out in 2 CFR sections 200.318 through 200.326, which includes documenting the procurement methods used for vendor selection. These procedures are designed to ensure fair competition, cost-effectiveness, and federal requirements.
These procurement standards require, among other provisions, that a non-federal entity must:
1. Meet the general procurement standards in 2 CFR Section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to reliable contractors, and maintaining records to document the history of procurement.
2. Conduct all procurement transactions for the acquisition of property or services under a federal award in a manner providing full and open competition consistent with the standards of 2 CFR section 200.320.
3. Use documented procurement procedures, consistent with the standards of 2 CFR 200.317 to 320. 2 CFR 200.320 enumerates below the different procurement methods that a non-federal entity should use:
a) The micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) (1) and (2). Under the micro-purchase method, the aggregate dollar amount does not exceed $50,000.
b) Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold.
The non-Federal entity is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement procedures which must not exceed the threshold established in the FAR. When applicable, a lower simplified acquisition threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations.
c) Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)).
4. For acquisitions exceeding the simplified acquisition threshold, the non-federal entity must use one of the following procurement methods: the sealed bid method if the acquisition meets the criteria in 2 CFR section 200.320(b) (1); the competitive proposals method under the conditions specified in 2 CFR section 200.320(b) (2); or the noncompetitive proposals method (i.e., solicit a proposal from only one source) but only when one or more of four circumstances are met, in accordance with 2 CFR section 200.320(c)).
5. Perform a cost or price analysis in connection with every procurement action in excess of the simplified acquisition threshold, including contract modifications (2 CFR section 200.323(a)). The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used (2 CFR section 200.323(b)).
6. Ensure that every purchase order or other contract includes applicable provisions required by 2 CFR section 200.326. These provisions are described in Appendix II to 2 CFR Part 200, “Contract Provisions for Non-Federal Entity Contracts Under Federal Awards.”
Condition
During our audit, the Foundation was unable to provide supporting documentation to demonstrate that the required procurement methods under the Uniform Guidance were performed on three out of four vendors tested. The expenditures paid to these vendors ranged from $75,000 to $675,000 in 2023.
Cause
The lack of documentation is attributed to oversight in maintaining appropriate records of vendor selection and compliance with procurement standards.
Effect
The absence of procurement documentation raises the risk of non-compliance with federal regulations, which could lead to potential disallowances or unnecessary sanctions.
Questioned Costs
None
Recommendation
The Foundation should strengthen its internal controls over procurement by ensuring that all procurement activities, particularly significant expenditures, are properly documented. This includes retaining evidence that procurement methods required by the Uniform Guidance were followed, such as bids, contracts, or justifications for sole-source vendors. The Foundation should also conduct training for staff involved in procurement to ensure awareness and adherence to the policies. Regular internal audits may be implemented to verify compliance with procurement procedures.
Views of Responsible Officials and Planned Corrective Action
We value your guidance and are committed to enhancing our compliance with the Uniform Guidance.
In response, we will:
1. Documentation Procedures: We will implement procedures to properly document procurement activities. This will help us maintain consistency and ensure compliance with the Uniform Guidance.
2. Monitoring and Accountability: Additionally, we will establish a system to regularly monitor our compliance with these policies and procedures. This will enable us to quickly address any issues that may arise.
The Finance Department will be responsible for implementing these changes and will have everything ready before the end of 2024.
We are dedicated to making these improvements and truly value your support as we work through this process.
Personnel responsible: Eduardo Cedeno, Director of Finance
Anticipated completion date: December 31, 2024