Audit 367716

CONDITION 2024-1 THE ORGANIZATION USED CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS (SLFRF) TO PARTIALLY FUND A MULTI-MILLION DOLLAR CONSTRUCTION PROJECT. HOWEVER, THE GENERAL CONTRACTOR WAS SELECTED WITHOUT A COMPETITIVE PROCUREMENT PROCESS, AS REQUIRED UNDER UNIFORM GUIDANCE. THE ORGANIZATION DID NOT DOCUMENT A PROCUREMENT PROCESS, JUSTIFICATION FOR NON-COMPETITIVE SELECTION, OR A COST OR PRICE ANALYSIS. CRITERIA UNDER 2 CFR SECTION 200.320, RECIPIENTS OF FEDERAL FUNDS MUST FOLLOW FEDERAL PROCUREMENT STANDARDS, INCLUDING COMPETITIVE BIDDING FOR CONSTRUCTION PROJECTS THAT EXCEED THE SIMPLIFIED ACQUISITION THRESHOLD (CURRENTLY $250,000). THESE PROCEDURES HELP ENSURE FULL AND OPEN COMPETITION AND PROPER STEWARDSHIP OF FEDERAL FUNDS. CAUSE AT THE TIME THE GENERAL CONTRACTOR WAS SELECTED, THE ORGANIZATION INTENDED TO FUND THE CONSTRUCTION PROJECT USING INTERNAL RESOURCES OR PRIVATE DONATIONS AND DID NOT ANTICIPATE RECEIVING FEDERAL FUNDS. AS A RESULT, MANAGEMENT DID NOT INITIATE A FEDERAL PROCUREMENT PROCESS. WHEN SLFRF FUNDS BECAME AVAILABLE LATER IN THE PROJECT, THE ORGANIZATION APPLIED THEM TO COSTS ALREADY INCURRED OR COMMITTED UNDER THE EXISTING ARRANGEMENT, WITHOUT REASSESSING COMPLIANCE WITH FEDERAL PROCUREMENT REQUIREMENTS. WHILE THE ORGANIZATION HAS A WRITTEN PROCUREMENT POLICY THAT ALIGNS WITH FEDERAL STANDARDS, IT WAS NOT FOLLOWED IN THIS INSTANCE DUE TO THE INITIAL FUNDING ASSUMPTIONS. EFFECT APPLYING FEDERAL FUNDS TO EXPENDITURES THAT WERE NOT PROCURED IN ACCORDANCE WITH 2 CFR PART 200 RESULTED IN NONCOMPLIANCE WITH FEDERAL PROCUREMENT REQUIREMENTS. EVEN THOUGH THE ORIGINAL FUNDING SOURCE WAS EXPECTED TO BE NON-FEDERAL, THE USE OF FEDERAL FUNDS ON A NON-COMPLIANT PROCUREMENT INCREASED THE RISK OF UNALLOWABLE COSTS AND REFLECTS A MATERIAL WEAKNESS IN INTERNAL CONTROLS OVER COMPLIANCE WITH FEDERAL AWARD REQUIREMENTS. CONTEXT THE CONSTRUCTION PROJECT HAD ALREADY COMMENCED PRIOR TO THE ORGANIZATION'S RECEIPT OF SLFRF FUNDS. THE GENERAL CONTRACTOR WAS SELECTED BASED ON PRIOR EXPERIENCE WITH THE ORGANIZATION AND WITHOUT COMPETITIVE BIDDING. THE ORGANIZATION DID NOT REASSESS THE PROCUREMENT ONCE IT BECAME CLEAR THAT FEDERAL FUNDS WOULD BE USED. RECOMMENDATION WE RECOMMEND THAT THE ORGANIZATION IMPLEMENT ADDITIONAL CONTROLS TO ASSESS FEDERAL COMPLIANCE REQUIREMENTS WHEN FUNDING SOURCES CHANGE OR ARE SUPPLEMENTED. MANAGEMENT SHOULD ENSURE THAT ANY EXPENDITURES REIMBURSED OR FUNDED WITH FEDERAL DOLLARS MEET APPLICABLE UNIFORM GUIDANCE REQUIREMENTS, INCLUDING PROCUREMENT. STAFF INVOLVED IN FINANCIAL PLANNING AND GRANT ADMINISTRATION SHOULD BE TRAINED TO EVALUATE COMPLIANCE RISKS WHEN ALLOCATING FEDERAL RESOURCES TO PRE-EXISTING OBLIGATIONS. VIEWS OF RESPONSIBLE OFFICIALS THE ORGANIZATION CONCURS WITH THE CONDITION.