Audit 409699

Finding 2025-001: Procurement, Suspension and Debarment – Noncompliance and Significant Deficiency in Internal Control over Compliance Agency: Department of Defense Assistance Listing Numbers (ALN): 12.600 Program Name: Community Investment Pass-Through Agency: Alaska Energy Authority Pass-Through Entity Identifying Number: 7910077 Award Year: 2022 Criteria: The Uniform Guidance requires that recipients of federal awards have adequate procedures and controls in place related to procurement and that they ensure that procedures are properly documented. Procedures should provide for full and open competition supported by a cost or price analysis. They should provide for retention of files and other supporting documentation which provides evidence of compliance with specified requirements. Condition: We reviewed 2 out of a total of 3 procurement files and noted an exception with 1 of the 2 procurements sampled. The Association did not follow its established procurement policy when procuring services through a sole-source contract exceeding the Federal micro-purchase threshold. Specifically, the required approvals for a sole-source procurement were not obtained, and supporting documentation was not retained to demonstrate that the procurement was conducted in a manner that ensured full and open competition. Cause: The Association did not adhere to its established procurement policy. Effect or Potential Effect: An ineffective control system related to the procurement process can lead to noncompliance with laws and regulations. The Association could award contracts to vendors whose contract prices are unreasonable and federal funds may have been expended that were not demonstrated to be cost-effective. Contracts awarded to invalid vendors may result in disallowed expenditures. Questioned Costs: None. Context: We selected a sample of 2 procurement transactions totaling $11,891,236. Of the two procurements selected for testing, one was for engineering consulting services totaling $50,000. The Association did not obtain price or rate quotations from qualified sources and did not obtain the approvals required under its procurement policy for sole-source procurement. Identification as a repeat finding: Not a repeat finding. Recommendation: We recommend that management review current and future procurement transactions to ensure compliance with both Association and Federal procurement requirements. Management should ensure that required approvals are obtained and that sufficient documentation is retained to support procurement decisions and demonstrate that purchases were conducted with full and open competition, or that an appropriate exception was properly approved and documented. Views of responsible officials: Management plans to communicate with authorized contract approvers to reinforce compliance with the Association’s established procurement policy and ensure procurement transactions receive the required review and approvals.