Section III - Findings and Questioned Costs - Major Federal Award Program Audit Finding Reference Number: 2025-001 Title and Assistance Listing Number of Federal Program: Economic Development Initiative, Community_x0004_ Project Funding, and Miscellaneous Grants - 14.251 Type of Finding: Federal Award Finding Finding Resolution Status: In Process Information on Universe Population Size: N/A Sample Size Information: N/A Identification of Repeat Finding and Finding Reference Number: Not a repeat finding Criteria: Under 2 CFR 200.318(a), non-federal entities must establish and maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders. As required under 2 CFR Subpart D (§§200.317–200.327), organizations must follow written procurement procedures that reflect applicable state, local, and tribal laws and regulations, provided that the procurements conform to applicable federal law and the standards in the Uniform Guidance. Statement of Condition: United Playaz, Inc. and Subsidiary (the "Organization") does not have a documented procurement policy that complies with the procurement standards in 2 CFR 200.317–200.327. The Organization has purchasing policies, but no written procedures addressing required elements such as procurement methods, competition, conflicts of interest, domestic preferences, price/cost analysis, or contractor oversight. Cause: The absence of a compliant procurement policy appears to stem from insufficient familiarity with the detailed procurement requirements in the Uniform Guidance, as this was their first award and audit under these standards. Management utilized other local government procurement policies to perform their procurement procedures. Effect or Potential Effect: While no procurement errors were identified during the audit and no questioned costs resulted from this condition, the lack of required written procedures increases the risk of: -Noncompliance with Federal procurement standards -Inadequate competition and pricing documentation -Increased susceptibility to conflict of interest risks -Potential future questioned costs or disallowed expenditures Failure to maintain documented procedures also impairs the organization’s ability to demonstrate compliance to Federal agencies and pass through entities. Auditor Non-Compliance Code: S - Internal control deficiencies Questioned Costs: $- Reportable Views of Responsible Officials: While United Playaz did not have their own policy compliant with federal standards, the organization has historically used procurement guidelines as required by the San Francisco Mayor’s Office of Housing and Community Development (MOHCD) which complies to the Federal standards and guidelines administered and approved by HUD. In addition, the general contractor procurement process was completed prior to the initiation and receipt of the HUD award. _x0004__x0004_Management acknowledges that, while procurement activities were performed using established external guidelines, the Organization did not have a formally adopted written procurement policy that fully complies with the requirements of 2 CFR 200.317–200.327 at the time of the audit. Management has since identified this gap and is in the process of developing a compliant written procurement policy. Context: For procurement processes, the Organization has historically utilized procurement guidelines required by the San Francisco Mayor’s Office of Housing and Community Development and other applicable local government procurement frameworks. In addition, the general contractor procurement process was completed prior to the initiation and receipt of the federal award. Recommendations: 1. Develop and formally adopt a written procurement policy that complies with 2 CFR 200.317–200.327 addressing at minimum: -Procurement methods and applicable dollar thresholds -Full and open competition requirements -Standards of conduct and conflicts of interest -Price or cost analysis (200.324) -Domestic preference (200.322) -Use of small/minority owned businesses (200.321) -Required contract provisions (200.327) 2. Train staff involved in procurement to ensure consistent understanding and implementation. 3. Periodically review and update the policy to remain compliant as Federal requirements evolve Auditors’ Summary of the Auditee’s Comments on the Findings and Recommendations: Response Indicator: Agree Completion Date: 6/30/2026 Response: The Organization is in the process of developing, and will formally adopt and implement, a written procurement policy that complies with the requirements of 2 CFR 200.317–200.327. The policy will address, at a minimum, procurement methods, competition requirements, standards of conduct and conflicts of interest, price or cost analysis, domestic preference requirements, and required contract provisions. In addition, management will provide formal training to personnel involved in procurement to ensure consistent application of the policy and ongoing compliance with Federal procurement standards.