Audit 395436

Criteria: Under 2 CFR 200.320(c), noncompetitive (sole-source) procurement is only permitted when at least one of the following federally allowable circumstances exists: (1) The aggregate amount of the procurement transaction does not exceed the micro-purchase threshold; (2) The procurement transaction can only be fulfilled by a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from providing public notice of a competitive solicitation; (4) The recipient or subrecipient requests in writing to use a noncompetitive procurement method, and the Federal agency or pass-through entity provides written approval; or (5) After soliciting several sources, competition is determined inadequate. Statement of Condition: During testing of two procurement transactions, one transaction totaling $31,848 was procured using a noncompetitive (sole-source) method without documentation supporting any of the allowable criteria under 2 CFR 200.320(c). Cause: The auditee indicated the following reasons for using a noncompetitive (sole-source) procurement method: the selected vendor was already working on the project under a different scope through AD Miller, and management believed bringing in a second scaffolding/shoring subcontractor could create a conflict of interest or increase risk; the vendor had previously been evaluated and priced by the general contractor (GC) partner and was recommended as the best market option available, based on prior use and the GC partner’s experience; because the GC partner had used this vendor before and recommended continuing with them, project staff believed this constituted sufficient justification to proceed without competitive procurement. However, while these operational considerations explain the decision, they do not meet the specific federally allowable justifications for noncompetitive procurement under 2 CFR 200.320(c). This indicates a lack of understanding of federal sole-source rules and insufficient procurement controls to ensure federal criteria are evaluated and documented prior to vendor selection. Effect or Potential Effect: The absence of federally required justification increases the risk of unfair vendor selection, creates the appearance of partiality, and exposes federal funds to risk of disallowance. Questioned Costs: $- Recommendation: Strengthen procurement controls, including documentation requirements and training to ensure all noncompetitive procurements meet 2 CFR 200.320(c) criteria. Management Response: See corrective action plan.

Criteria: 2 CFR 200.303 requires nonFederal entities to “establish and maintain effective internal control over the Federal award” to provide reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of the award. This includes adequate controls over the accuracy, completeness, and reliability of reporting. Statement of Condition: During reporting testing for Program 14.251, it was noted that the organization does not have a documented internal review or approval process governing the preparation and submission of required Federal reports. Although the HUD grant agreement does not explicitly require a presubmission review, the Federal award is still subject to the internal control requirements of 2 CFR 200.303, which require the entity to maintain effective controls over reporting. Cause: The organization has not formally established, documented, or implemented a comprehensive internal control framework over the reporting process, including supervisory review requirements. Effect or Potential Effect: The absence of a documented and consistently applied review process increases the risk that Federal reports may contain errors, omissions, or unsupported information, which could affect compliance with Federal reporting requirements and reduce the reliability of information used for program oversight. Questioned Costs: $- Recommendation: Management should develop, implement, and document a formal, comprehensive internal review and approval process for all required reports submitted under federal awards. The process should: define supervisory review responsibilities; require documented evidence of review (e.g., signoff, checklist, or electronic approval); and be consistently applied across all reports submitted for federal programs. Management Response: See corrective action plan.

Criteria: Per 2 CFR 200.510(b), the auditee must include in the SEFA “the total Federal awards expended for each individual Federal program and the Assistance Listing number”. Statement of Condition: During our audit, we noted that expenditures reported for Assistance Listing 14.251 – Economic Development Initiative, Community Project Funding, and Miscellaneous Grants were understated by approximately $155,000 on the FY 2025 SEFA. This understatement resulted in the SEFA not accurately reflecting the total federal expenditures for this program as required. Cause: The understatement appears to be due to errors in compiling and reconciling federal expenditures during SEFA preparation. Effect or Potential Effect: An understated SEFA can result in: Federal expenditures being misclassified or omitted; Incorrect major program determination; Potential noncompliance with Uniform Guidance reporting requirements; and inaccurate reporting to the Federal Audit Clearinghouse. Questioned Costs: $- Recommendation: We recommend that management: Strengthen its SEFA preparation procedures to ensure all federal expenditures are captured, reconciled, and accurately assigned to the correct Assistance Listing; implement an internal review process verifying completeness of expenditures, including comparison of SEFA totals to the general ledger and grant-level schedules; and review all federal program totals prior to finalizing the SEFA to ensure compliance with 2 CFR 200.510(b). Management Response: See corrective action plan.