Audit 414046

Criteria - Under 2 CFR § 200.318(a), a recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for the acquisition of property or services. The documented procurement procedures must be consistent with applicable state, local, and tribal laws and regulations and with the procurement standards identified in 2 CFR §§ 200.317 through 200.327. The Uniform Guidance procurement compliance requirement also contemplates that recipients establish and follow written procurement procedures that conform to applicable Federal statutes and the procurement requirements identified in 2 CFR Part 200.9. Condition - During our audit of the Clean Water State Revolving Fund program for the year ended December 31, 2025, we noted that the Authority had informal procurement practices in place for purchases charged to Federal awards; however, the Authority did not maintain formal written procurement procedures applicable to procurement transactions under a Federal award or subaward. Cause - Management indicated that the Authority historically relied on informal procurement practices and institutional knowledge of staff responsible for purchasing activities. The Authority had not developed and formally approved written procurement procedures specifically addressing the Uniform Guidance procurement standards applicable to Federal awards. Effect or Potential Effect - Without documented procurement procedures, there is an increased risk that procurement transactions under a Federal award or subaward may not be performed consistently or in accordance with applicable procurement requirements. The absence of written procedures also increases the risk that personnel responsible for procurement may not consistently apply required procurement methods, obtain appropriate competition, document contractor selection decisions, perform required suspension and debarment checks, or retain sufficient documentation to support compliance. Although no questioned costs were identified as a result of the procedures performed, the lack of documented procedures represents a deficiency in the design of internal control over compliance because informal practices and reliance on external engineer review alone do not provide formal, consistent internal guidance to ensure ongoing compliance with Federal procurement requirements. Questioned Costs - None identified Recommendation - We recommend that management develop, formally approve, and implement written procurement procedures that comply with the Uniform Guidance procurement standards in 2 CFR §§ 200.317 through 200.327. At a minimum, the written procedures should address: • Procurement methods and applicable dollar thresholds; • Requirements for full and open competition; • Required approvals before procurement transactions are initiated or awarded; • Documentation requirements supporting the history of each procurement transaction;• Standards of conduct and conflict-of-interest requirements for employees involved in procurement decisions; • Procedures for verifying suspension and debarment status, when applicable; • Requirements for cost or price analysis, when applicable; • Contractor selection and contract administration procedures; • Record retention requirements; and • Monitoring procedures to ensure the written procurement procedures are consistently followed.