Finding 2024-01 United States Department of Treasury Federal Assistance Listing No. 21.027 American Rescue Plan Act (ARPA) Type of Finding: Internal Control and Compliance Compliance and Material Weakness Deficiency over Procurement and Suspension and Debarment Repeat Finding: No Condition: During our testing and review of the Organization’s procurement policy, we were unable to obtain documentation to support that the Organization entered into contractual agreements with vendors who had gone through a competitive bidding or procurement process, as required under applicable procurement standards. Criteria: The Uniform Guidance and 45 CF Part 75 require that non-Federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. The characteristics of internal controls are presented in the context of the components of internal controls discussed in the Internal Control-Integrated Framework (COSO Report), published by the Committee of Sponsoring Organizations of the Treadway Commission. The COSO Report provides a framework for organizations to design, implement, and evaluate controls that will facilitate compliance with the requirements of Federal laws, regulations, and program compliance requirements. Per 2 CFR 200.320 General procurement states: (a) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold .(2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation;(4) The federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Per 2 CFR 200.318 General procurement states: (b) The non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable federal law and the standards identified in this part. Per Uniform Guidance, non-federal entities are prohibited from contracting with 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 specified in 2 CFR section 180.220. All non-procurement transactions entered into by a pass-through entity (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless they are exempt as provided in 2 CFR section 180.215. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the nonfederal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA) and available at SAM.gov Home (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Cause: The Organization did not maintain adequate documentation or controls to ensure compliance with federal procurement requirements of the use of competitive bidding procedures. Effect: Failure to verify vendor eligibility and follow competitive procurement procedures increases the risk of noncompliance with federal regulations, including potential use of federal funds for unallowable costs. This may also expose the Organization to audit findings, questioned costs, or repayment of grant funds. Questioned Costs: $370,461 Recommendation: We recommend the Organization update and follow their documented procurement policies to identify vendors that should go through the procurement process for federal funds at time of award and to document those procedures. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the Corrective Action Plan. Auditor’s Conclusion: Finding remains as stated.