Procurement Conflict of Interest (Significant Deficiency) and Compliance
Federal Agency: U.S. Department of Homeland Security
Program Title: Emergency Food & Shelter National Board Program (“EFSP”)
Assistance Listing Number: 97.024
Federal Award Source: Pass-through funding
Pass-Through Entity: Pima County
Pass-Through Identifying Number: CT-GMI.23-334
Criteria – Section §200.318, paragraph (c)(1) of the Uniform Guidance states that no employee, officer, agent or board member with a real or apparent conflict of interest may participate in the selection, award, or administration of a contract supported by the Federal award. A conflict of interest includes when the employee, officer, agent or board member, any member of their immediate family, their partner, or an organization that 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 an entity considered or a contract.
Condition – In the prior year, the Organization procured services from a vendor on an emergency basis and did not utilize a formal procurement method for selection. It was later determined that there was also a significant conflict of interest present by a former employee who procured the vendor’s services for reimbursement by the Federal program.
Cause – The finding appears to be the result of an immediate need to obtain services, an oversight to subsequently conduct a formal procurement method of vendor selection on a timely basis, and the omission, misrepresentation and/or possible collusion of certain former employee(s) to appropriately report the conflict of interest within the Organization in accordance with the Organization’s policies.
Effect and Context – By not adhering to a formal procurement method and certain employee(s) not internally reporting the conflict of interest, the Organization may or may not have chosen the best vendor to provide the services at the time and the Organization may or may not have paid more than the market rate for the services received over the term that the Organization’s received the services from the vendor.
Questioned Costs – None noted.
Recommendation – We recommend the Organization provide periodic training to its program staff regarding procurement requirements per the Uniform Guidance, including those covering conflicts of interest, and consider modifying its procurement related internal controls to ensure all staff follow the Organization’s procurement policies.
View of Responsible Officials:
We are in agreement with the finding and are in the process of updating our procedures to mitigate issues in the future. See our Corrective Action Plan for the fiscal year ended June 30, 2024 for additional detail.
Allocation of Program Payroll Costs (Significant Deficiency) and Compliance
Federal Agency: U.S. Department of Health and Human Services
Program Title: Temporary Assistance for Needy Families
Assistance Listing Number: 93.558
Federal Award Source: Pass-through funding
Pass-Through Entity: Arizona Department of Economic Security
Pass-Through Identifying Number: CTR 066191
Criteria – Section §200.405 of the Uniform Guidance states that a cost is allocable to a Federal award or other cost objective if the cost is assignable to that Federal award or other cost objective in accordance with the relative benefits received and this standard is considered to be met if the cost (a) is incurred specifically for the Federal award; (b) benefits both the Federal award and other work of the recipient or subrecipient and can be distributed in proportions that may be approximated using reasonable methods; or (c) is necessary to the overall operation of the recipient or subrecipient and is assignable in part to the Federal award in accordance with the Uniform Guidance cost principles.
Condition and Context – During our audit of allowable costs as it pertained to payroll costs, we noted the Organization could not provide adequate documentation to support the percentage of employee payroll costs allocated to the Federal program for 4 employees. This resulted in an unsupported allocation of payroll costs for 9 samples out of a total of 19 samples selected for testing, and $5,383 in payroll costs out of $14,585 total payroll costs selected for testing. Our sample was a statistically valid sample.
Cause and Effect - Due to a transition in the billing structure of the program, which was previously fee for service in nature, to being cost reimbursement in nature, the Organization did not consistently maintain adequate supporting documentation for the allocation of payroll costs to the Federal program for all employees. It is possible the allocations used were not reflective of the actual or approximate time spent by the employees on the Federal program.
Questioned Costs – Undetermined. We were unable to determine whether the allocations used were appropriate or not.
Recommendation – We recommend that the Organization improve its internal controls over the allocation of payroll costs to the Federal program and ensure any allocations are updated timely, and appropriately reviewed and approved by supervisory personnel.
View of Responsible Officials - We agree with the finding. We have implemented procedures to ensure secondary reviews of all billings. See our Corrective Action Plan for the fiscal year ended June 30, 2024 for additional detail.
Procurement Conflict of Interest (Significant Deficiency) and Compliance
Federal Agency: U.S. Department of Homeland Security
Program Title: Emergency Food & Shelter National Board Program (“EFSP”)
Assistance Listing Number: 97.024
Federal Award Source: Pass-through funding
Pass-Through Entity: Pima County
Pass-Through Identifying Number: CT-GMI.23-334
Criteria – Section §200.318, paragraph (c)(1) of the Uniform Guidance states that no employee, officer, agent or board member with a real or apparent conflict of interest may participate in the selection, award, or administration of a contract supported by the Federal award. A conflict of interest includes when the employee, officer, agent or board member, any member of their immediate family, their partner, or an organization that 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 an entity considered or a contract.
Condition – In the prior year, the Organization procured services from a vendor on an emergency basis and did not utilize a formal procurement method for selection. It was later determined that there was also a significant conflict of interest present by a former employee who procured the vendor’s services for reimbursement by the Federal program.
Cause – The finding appears to be the result of an immediate need to obtain services, an oversight to subsequently conduct a formal procurement method of vendor selection on a timely basis, and the omission, misrepresentation and/or possible collusion of certain former employee(s) to appropriately report the conflict of interest within the Organization in accordance with the Organization’s policies.
Effect and Context – By not adhering to a formal procurement method and certain employee(s) not internally reporting the conflict of interest, the Organization may or may not have chosen the best vendor to provide the services at the time and the Organization may or may not have paid more than the market rate for the services received over the term that the Organization’s received the services from the vendor.
Questioned Costs – None noted.
Recommendation – We recommend the Organization provide periodic training to its program staff regarding procurement requirements per the Uniform Guidance, including those covering conflicts of interest, and consider modifying its procurement related internal controls to ensure all staff follow the Organization’s procurement policies.
View of Responsible Officials:
We are in agreement with the finding and are in the process of updating our procedures to mitigate issues in the future. See our Corrective Action Plan for the fiscal year ended June 30, 2024 for additional detail.
Allocation of Program Payroll Costs (Significant Deficiency) and Compliance
Federal Agency: U.S. Department of Health and Human Services
Program Title: Temporary Assistance for Needy Families
Assistance Listing Number: 93.558
Federal Award Source: Pass-through funding
Pass-Through Entity: Arizona Department of Economic Security
Pass-Through Identifying Number: CTR 066191
Criteria – Section §200.405 of the Uniform Guidance states that a cost is allocable to a Federal award or other cost objective if the cost is assignable to that Federal award or other cost objective in accordance with the relative benefits received and this standard is considered to be met if the cost (a) is incurred specifically for the Federal award; (b) benefits both the Federal award and other work of the recipient or subrecipient and can be distributed in proportions that may be approximated using reasonable methods; or (c) is necessary to the overall operation of the recipient or subrecipient and is assignable in part to the Federal award in accordance with the Uniform Guidance cost principles.
Condition and Context – During our audit of allowable costs as it pertained to payroll costs, we noted the Organization could not provide adequate documentation to support the percentage of employee payroll costs allocated to the Federal program for 4 employees. This resulted in an unsupported allocation of payroll costs for 9 samples out of a total of 19 samples selected for testing, and $5,383 in payroll costs out of $14,585 total payroll costs selected for testing. Our sample was a statistically valid sample.
Cause and Effect - Due to a transition in the billing structure of the program, which was previously fee for service in nature, to being cost reimbursement in nature, the Organization did not consistently maintain adequate supporting documentation for the allocation of payroll costs to the Federal program for all employees. It is possible the allocations used were not reflective of the actual or approximate time spent by the employees on the Federal program.
Questioned Costs – Undetermined. We were unable to determine whether the allocations used were appropriate or not.
Recommendation – We recommend that the Organization improve its internal controls over the allocation of payroll costs to the Federal program and ensure any allocations are updated timely, and appropriately reviewed and approved by supervisory personnel.
View of Responsible Officials - We agree with the finding. We have implemented procedures to ensure secondary reviews of all billings. See our Corrective Action Plan for the fiscal year ended June 30, 2024 for additional detail.