Audit 400830

Criteria: Under 2 CFR 200.318 through 200.320, non-Federal entities must maintain effective oversight and internal controls over the procurement process, use appropriate methods of procurement, provide for full and open competition, perform cost or price analysis when required, and maintain sufficient documentation to support procurement decisions and contract pricing. Condition/Context: The District charged certain expenditures to federal funds; however, because management was not aware, at the time the purchases were made, that the expenditures would be federally funded, the District did not apply the Uniform Guidance procurement standards under 2 CFR 200 to those purchases. As a result, procurement activities were not performed in accordance with applicable federal requirements, and the related procurement files did not consistently contain documentation supporting the procurement method used, full and open competition or justification for limiting competition, required cost or price analysis, and complete procurement history. Therefore, the control activities designed to ensure compliance with federal procurement requirements did not operate effectively. Effect: Major federal programs tested required procurement policies and specific competitive bidding procedures to comply with the use of awarded federal funds to the District. However, the District did use multiple vendors for each project, spreading the cost amongst competing companies, and used vendors that are widely engaged by all irrigation and drainage districts in the State or Arizona. Cause: Management was not aware, at the time the purchases were made, that the related expenditures would be charged to federal funds; therefore, management did not identify the need to apply the Uniform Guidance procurement standards under 2 CFR 200. Consequently, internal controls did not operate effectively to ensure procurements charged to federal awards complied with applicable federal procurement requirements and were supported by complete documentation, including the procurement method used, competition requirements, cost or price analysis, and procurement history. Recommendation: We recommend that management formally adopt amendments to their existing procurement policies to conform with U.S. Code of Federal Regulations, Title 2, Part 200, Uniform Administrative Guidance CFR Section 318(a). Additionally, we recommend management perform competitive procurement on all purchases made with federal funds. Views of Responsible Officials and Planned Corrective Action: Management concurs with the finding, see corrective action plan.

Criteria: Federal requirements related to suspension and debarment require non-Federal entities to ensure that covered transactions are not entered into with parties that are suspended or debarred. Effective internal controls should be in place to verify and document vendor eligibility prior to entering into covered transactions and to evidence review of that determination. Condition/Context: The District did not have an effectively operating control to verify and document that vendors selected for federally funded procurements were not suspended or debarred prior to contracting or payment. Specifically, no documented review of suspension and debarment status was performed for the vendors tested, and there was no evidence of management review to ensure compliance with federal suspension and debarment requirements. Although the vendors tested were not suspended or debarred, the absence of a documented verification and review control indicates the client’s internal controls over compliance for suspension and debarment were not operating effectively. Effect: Without an effectively operating control to verify and document suspension and debarment status, the client is at increased risk of entering into covered transactions with ineligible vendors and being unable to demonstrate compliance with federal requirements. Although no instances of noncompliance were identified in the items tested, the control deficiency increases the risk that material noncompliance could occur and not be prevented or detected in a timely manner. Cause: The District had not established or implemented an effective control requiring personnel to perform, document, and retain evidence of suspension and debarment verification for vendors used in covered transactions involving federal funds. As a result, management did not have a process in place to consistently demonstrate compliance with suspension and debarment requirements. Recommendation: We recommend management implement and document a formal control requiring review of vendor suspension and debarment status before entering into covered transactions funded by federal awards. The control should include: verification through an appropriate source such as SAM.gov, documentation of the date of the review, vendor name, and review result, retention of that documentation in the procurement or vendor file and evidence of supervisory review or other monitoring to ensure the control is consistently performed. Views of Responsible Officials and Planned Corrective Action: Management concurs with the finding, see corrective action plan.