FINDING 2024-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): SLFRP1096 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Each entity that accepts federal money must comply with 2 CFR 300.318, which requires each entity to have their own documented procurement procedures. The City provided a procurement policy from Title II of an employee manual that did not fully satisfy the standards of 2 CFR 200.318. The employee manual was adopted in 2004. The COVID-19 - Coronavirus State and Local Fiscal Recovery Funds were used to pay for engineering services in the amount of $301,000. These services were not publicly bid even though the dollar amount of the services exceeds the simplified acquisition threshold. Prior to entering into subawards and covered transactions with the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is done by checking the Excluded Parties List System (EPLS), collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF ANDERSON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The City included suspension and debarment certifications with the agreements with many of the vendors who participated in the activities funded by the SLFRF funds. The City also checked the EPLS for some vendors. Evidence of compliance with the suspension and debarment verification requirements was not provided for two of four vendors selected for suspension and debarment testing. The lack of internal controls and noncompliance was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (c) (1) The non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of the contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. . . . INDIANA STATE BOARD OF ACCOUNTS 17 CITY OF ANDERSON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. . . ." INDIANA STATE BOARD OF ACCOUNTS 18 CITY OF ANDERSON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." Cause The City did not have adequate internal controls over procurement and suspension and debarment. The City had not adopted a formal or informal policy for procurement that meets the requirements of 2 CFR 300.318. The City did not apply its procedures over suspension and debarment uniformly with one vendor not tested for suspension and debarment due to the specific aspects of the City's grant plan that the vendor was assigned to. Effect Without establishing effective internal controls over procurement and suspension and debarment, the City cannot ensure free and open competition or that the vendors paid with federal funds are eligible to participate in federal programs and might allow for payments to suspended or debarred parties that would be unallowable. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could potentially result in the loss of future funding to the City. Recommendation We recommended that management of the City establish a formal policy on procurement that meets the standards of 2 CFR 200.318 and develop effective internal controls and procedures to ensure that all vendors in which expenditures exceed $25,000 are not suspended, debarred, or otherwise excluded prior to entering into contracts or subawards.
Finding 2024-002 – Procurement Federal Agency: U.S. Department of Health and Human Services Federal Program: Rural Health Care Services Outreach, Rural Health Network Development, and Small Health Care Provider Quality Improvement Program AL Number: 93.912 Pass-through: Not applicable Award Number: GA1RH33512 & G26RH49901 Award Year: 2020/2021 & 2023/2024 Type of Finding: Significant Deficiency Criteria: Per 2 CFR 200.318(a) – Documented procurement procedures, “The recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services.” Condition: The Organization did not follow their procurement policy for single-source justification procurement transactions. Two sample items selected for testing within the small purchase threshold were appropriately determined to be single-source items. However, in both instances, no documentation was maintained as to the reasoning for determining this. Cause: The primary underlying cause appears to be a failure to consistently follow established procurement procedures. Both procurements were appropriately determined to be single-source bids by management based on various factors. However, the Organization did not fully adhere to their procurement policy because justification for that determination was not maintained. Effect: Failure to adhere to the Organization’s procurement policies, which are designed in accordance with the Uniform Guidance, could result in the Organization not receiving competitive bids or proposals from multiple vendors, potentially leading to overpayment for contracts or services. Questioned costs: Not applicable. Context: The Organization did not provide documentation for single source justification for two of the samples selected for procurement testing. Recommendation: We recommend the Organization should implement a formal review and approval process for single-source justifications to ensure they are consistently completed, approved by appropriate management, and retained in procurement files. Maintaining complete and accurate documentation will support compliance with federal regulations, facilitate audit reviews, and reduce the risk of overpayment or challenges to procurement decisions. Management’s Response: See Corrective Action Plan.
Finding 2024-002 – Procurement Federal Agency: U.S. Department of Health and Human Services Federal Program: Rural Health Care Services Outreach, Rural Health Network Development, and Small Health Care Provider Quality Improvement Program AL Number: 93.912 Pass-through: Not applicable Award Number: GA1RH33512 & G26RH49901 Award Year: 2020/2021 & 2023/2024 Type of Finding: Significant Deficiency Criteria: Per 2 CFR 200.318(a) – Documented procurement procedures, “The recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services.” Condition: The Organization did not follow their procurement policy for single-source justification procurement transactions. Two sample items selected for testing within the small purchase threshold were appropriately determined to be single-source items. However, in both instances, no documentation was maintained as to the reasoning for determining this. Cause: The primary underlying cause appears to be a failure to consistently follow established procurement procedures. Both procurements were appropriately determined to be single-source bids by management based on various factors. However, the Organization did not fully adhere to their procurement policy because justification for that determination was not maintained. Effect: Failure to adhere to the Organization’s procurement policies, which are designed in accordance with the Uniform Guidance, could result in the Organization not receiving competitive bids or proposals from multiple vendors, potentially leading to overpayment for contracts or services. Questioned costs: Not applicable. Context: The Organization did not provide documentation for single source justification for two of the samples selected for procurement testing. Recommendation: We recommend the Organization should implement a formal review and approval process for single-source justifications to ensure they are consistently completed, approved by appropriate management, and retained in procurement files. Maintaining complete and accurate documentation will support compliance with federal regulations, facilitate audit reviews, and reduce the risk of overpayment or challenges to procurement decisions. Management’s Response: See Corrective Action Plan.
Finding 2024-002 – Procurement Federal Agency: U.S. Department of Health and Human Services Federal Program: Rural Health Care Services Outreach, Rural Health Network Development, and Small Health Care Provider Quality Improvement Program AL Number: 93.912 Pass-through: Not applicable Award Number: GA1RH33512 & G26RH49901 Award Year: 2020/2021 & 2023/2024 Type of Finding: Significant Deficiency Criteria: Per 2 CFR 200.318(a) – Documented procurement procedures, “The recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services.” Condition: The Organization did not follow their procurement policy for single-source justification procurement transactions. Two sample items selected for testing within the small purchase threshold were appropriately determined to be single-source items. However, in both instances, no documentation was maintained as to the reasoning for determining this. Cause: The primary underlying cause appears to be a failure to consistently follow established procurement procedures. Both procurements were appropriately determined to be single-source bids by management based on various factors. However, the Organization did not fully adhere to their procurement policy because justification for that determination was not maintained. Effect: Failure to adhere to the Organization’s procurement policies, which are designed in accordance with the Uniform Guidance, could result in the Organization not receiving competitive bids or proposals from multiple vendors, potentially leading to overpayment for contracts or services. Questioned costs: Not applicable. Context: The Organization did not provide documentation for single source justification for two of the samples selected for procurement testing. Recommendation: We recommend the Organization should implement a formal review and approval process for single-source justifications to ensure they are consistently completed, approved by appropriate management, and retained in procurement files. Maintaining complete and accurate documentation will support compliance with federal regulations, facilitate audit reviews, and reduce the risk of overpayment or challenges to procurement decisions. Management’s Response: See Corrective Action Plan.
2024-003 Procurement, Suspension, and Debarment Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Agriculture Program: 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Award Number and Year: 242MN101S2514; 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 U.S. Code of Federal Regulations § 200.318(i) states that the Health and Human Services must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Additionally, the Health and Human Services must follow further federal guidance over full and open competition as provided in Title 2 U.S. Code of Federal Regulations § 200.319, and perform a cost or price analysis as provided in Title 2 U.S. Code of Federal Regulations § 200.324. Federal requirements prohibit non-federal entities from contracting with or making subawards under covered transactions to parties that are suspended or debarred. Title 2 U.S. Code of Federal Regulations § 180.300 describes a required verification process. Prior to entering into the transaction, one of the following must be performed: (1) checking SAM.gov exclusions, (2) collecting a certification, or (3) adding a clause or condition to the covered transaction. Condition: The following exceptions were noted in the procurements testing: • All five small purchases tested did not have documentation of price or rate quotations obtained from an adequate number of qualified sources detailing the history of procurement or documentation of full and open competition. • For the five micro-purchase procurements tested, Southwest Health and Human Services did not document how purchases are distributed among qualified suppliers, as practical. • For one of the four covered transactions tested, the verification for suspended or debarred vendors was not performed before entering into the procurement. • For the one transaction over the simplified acquisition threshold tested, no documentation was maintained detailing the history of the procurement, demonstrating full and open competition, or that a cost or price analysis was performed. Questioned Costs: None. Context: The threshold used for the procurement testing was based on the Health and Human Services’ policy for simplified acquisition threshold (over $150,000), small purchases ($3,000 to $150,000), and micro-purchases ($3,000 or less). The suspension and debarment covered transaction threshold is $25,000. The population consisted of one procurement over the simplified acquisition threshold, 37 small purchases, 38 micro-purchases, and 18 covered transactions. The sample was one over the simplified acquisition threshold, five small purchases, five micro-purchases, and four covered transactions. The sample size was based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing and Single Audits. Effect: It cannot be determined that the contracting process was open and fair because the Health and Human Services did not document the rationale for the contractor selection. It also cannot be determined that an entity was not suspended, debarred, or otherwise excluded from conducting business with the Health and Human Services. Cause: Southwest Health and Human Services does not have processes in place to ensure federal requirements for procurement are followed. Recommendation: We recommend the Health and Human Services maintain documentation on the history of a procurement, provide for full and open competition, and perform a cost or price analysis to support compliance with Title 2 U.S. Code of Federal Regulations §§ 200.318, 200.319, and 200.324. We further recommend the Health and Human Services maintain documentation to demonstrate that vendors were not debarred, suspended, or otherwise excluded from conducting business with the Health and Human Services; this documentation should be completed prior to entering into a covered transaction. View of Responsible Official: Concur
Assistance Listing Number: 93.193 Name of Federal Program: COVID-19 Urban Indian Health Services Name of Federal Agency: Department of Health and Human Services Award Period: January 1, 2024 – December 31, 2024 Criteria or Specific Requirement: 2 CFR section 200.318(i) requires a non-federal entity to maintain sufficient records to detail the history of procurement including, but not limited to, the: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Condition: The organization did not maintain adequate records to fully detail the history of procurement transactions funded with federal awards. Specifically, documentation was missing or incomplete regarding the rationale for the method of procurement, basis for contractor selection or rejection, price or cost analysis, and contract terms. Cause: The organization did not establish or enforce adequate recordkeeping procedures for procurement transactions. Supporting documentation for procurement files was not retained. Procurement policies and procedures have not been designed and implemented that adhere to Uniform Guidance requirements. Effect or Potential Effect: Without sufficient records, the organization cannot demonstrate compliance with Uniform Guidance procurement requirements. This increases the risk of unallowable or unreasonable costs being charged to federal awards and may result in questioned costs or funding agency disallowances. Questioned Costs: $194,797 Context: All vendors meeting the procurement policy threshold were tested. Repeat Finding: No Recommendation: Management should implement procedures to ensure that complete procurement documentation is maintained in accordance with 2 CFR §200.318(i). This should include standardized procurement checklists, training for staff involved in purchasing, and periodic internal reviews to confirm that procurement files contain all required documentation. Views of Responsible Officials: Management agrees with the finding and will implement procurement procedures.
Assistance Listing Number: 93.193 Name of Federal Program: COVID-19 Urban Indian Health Services Name of Federal Agency: Department of Health and Human Services Award Period: January 1, 2024 – December 31, 2024 Criteria or Specific Requirement: 2 CFR section 200.318(i) requires a non-federal entity to maintain sufficient records to detail the history of procurement including, but not limited to, the: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Condition: The organization did not maintain adequate records to fully detail the history of procurement transactions funded with federal awards. Specifically, documentation was missing or incomplete regarding the rationale for the method of procurement, basis for contractor selection or rejection, price or cost analysis, and contract terms. Cause: The organization did not establish or enforce adequate recordkeeping procedures for procurement transactions. Supporting documentation for procurement files was not retained. Procurement policies and procedures have not been designed and implemented that adhere to Uniform Guidance requirements. Effect or Potential Effect: Without sufficient records, the organization cannot demonstrate compliance with Uniform Guidance procurement requirements. This increases the risk of unallowable or unreasonable costs being charged to federal awards and may result in questioned costs or funding agency disallowances. Questioned Costs: $194,797 Context: All vendors meeting the procurement policy threshold were tested. Repeat Finding: No Recommendation: Management should implement procedures to ensure that complete procurement documentation is maintained in accordance with 2 CFR §200.318(i). This should include standardized procurement checklists, training for staff involved in purchasing, and periodic internal reviews to confirm that procurement files contain all required documentation. Views of Responsible Officials: Management agrees with the finding and will implement procurement procedures.
The District did not have adequate internal controls in place to ensure compliance with federal procurement requirements. Assistance Listing Number and Title: 21.027 – COVID-19 State and Local Fiscal Recovery Funds Federal Grantor Name: Department of Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Yakima County Pass-through Award/Contract Number: 075-2024 Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide government services to the extent COVID-19 caused a reduction in revenues collected, make necessary investments in water, sewer or broadband infrastructure, provide emergency relief from natural disasters or their negative economic impacts, fund projects eligible under certain programs administered by the U.S. Department of Transportation through three pathways and fund projects eligible under the programs established in Title I of the Housing and Community Development Act of 1974. During fiscal year 2024, the District spent $800,000 in program funds for its Collection System Improvement Project – Phase 2 which replaced high-priority aging sewer mains at risk for failure and rerouted sewers away from other vulnerable infrastructure. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive of federal, state or local procurement thresholds and methods when using federal funds. Description of Condition Our audit found the District did not have adequate internal controls for ensuring compliance with federal procurement requirements. Specifically, the District did not have written procurement procedures to ensure compliance with federal requirements. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition The District has not received federal funding in prior years, and this is its first single audit. Since the District did not regularly manage federal funds, staff were unaware of the requirement to have written procedures over procurement until it received the federal award in February 2024. The District adopted a written policy in May 2024, after the procurement action in 2023. Effect of Condition Without written policies and procedures, the District is at a higher risk of not complying with the requirement to follow the most restrictive of federal, state or local procurement methods and standards of conduct requirements when using federal funds to procure contractors. Although the District did not have written policies over procurement in place, it expected the project to be partially federally funded; therefore, it hired an engineering firm familiar with federal procurement requirements and properly procured the contractor for the project we reviewed. Recommendation We recommend the District strengthen its internal controls to ensure required policies and procedures are in place when procuring with federal funds, as required by Uniform Guidance. District’s Response This was the Districts first experience with federal funding. We have practiced appropriate internal controls but neglected to have a written formal policy. Upon realizing that we needed a formal written policy we drafted the steps we utilized to procure our contractor and supplies. That draft was then brought through our commissioner’s approval process. It was accepted formally by our Board of Commissioners on May 2024. Auditor’s Remarks We thank the District for its cooperation and assistande during the audit and acknowledge its commitment to improving the condition described. We will review status of this issue during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 318, General procurement standards, establishes requirements for written procedures. Title 2 CFR Part 200, Uniform Guidance, section 320, Methods of procurement to be followed, establishes requirements for procuring goods and services, including noncompetitive procurement.
Federal Agency: Department of Housing and Urban Development Federal Program Name: Continuum of Care Assistance Listing Number: 14.267 Federal Award Identification Number and Year: SC-110351 - 2024 SC-111132 - 2024 SC-110353 - 2024 SC-111134 - 2024 SC-110355 - 2024 SC-110349 - 2024 SC-111130 - 2024 Pass-Through Agency: Pierce County Pass-Through Number(s): LP9XHDGASCJ3 Award Period: SC-110351: 7/1/23-6/30/24 SC-111132: 7/1/24-6/30/25 SC-110353: 12/1/23-11/30/24 SC-111134: 12/1/24-11/30/25 SC-110355: 6/1/23-8/31/24 SC-110349: 5/1/23-4/30/24 SC-111130: 5/1/24-4/30/25 Type of finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.303(a), recipients of federal funds must "establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award." Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred (2 CFR sections 200.212 and 200.318(h); 2 CFR section 1800.30; 48 CFR section 52.209-6). Additionally, an entity is required to have policies and procedures in place for verifying the above requirements. Condition: During our suspension and debarment testing, CLA noted no suspension and debarment policy in place and no suspension and debarment check was performed over a covered transaction. Questioned costs: $7,442 of known questioned costs. Context: There was only one covered transaction subject to suspension and debarment check that had a contract amount exceeding $25,000 but only $7,442 was paid with federal program. However, no suspension and debarment check was performed. CLA elected to perform a SAM.gov check and noted that vendor (Locke System) is not debarred as of the date of the audit procedure. Cause: Share & Care House and Subsidiary lacks sufficient understanding of the compliance requirements surrounding covered transactions and suspension and debarment check requirements. Effect: Contracts could be entered into with suspended or debarred vendors leading to noncompliance. Improper understanding caused Share & Care House and Subsidiary to be noncompliant with program requirements over suspension and debarment. Repeat finding: No. Recommendation: CLA recommends Share & Care House and Subsidiary to develop and implement a suspension and debarment policy that meets the requirements outlined in Uniform Guidance. CLA also recommends increased training for those individuals involved in procurement and contract approval process to ensure suspension and debarment checks are performed on all covered transactions. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Federal Agency: Department of Housing and Urban Development Federal Program Name: Continuum of Care Assistance Listing Number: 14.267 Federal Award Identification Number and Year: SC-110351 - 2024 SC-111132 - 2024 SC-110353 - 2024 SC-111134 - 2024 SC-110355 - 2024 SC-110349 - 2024 SC-111130 - 2024 Pass-Through Agency: Pierce County Pass-Through Number(s): LP9XHDGASCJ3 Award Period: SC-110351: 7/1/23-6/30/24 SC-111132: 7/1/24-6/30/25 SC-110353: 12/1/23-11/30/24 SC-111134: 12/1/24-11/30/25 SC-110355: 6/1/23-8/31/24 SC-110349: 5/1/23-4/30/24 SC-111130: 5/1/24-4/30/25 Type of finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.303(a), recipients of federal funds must "establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award." Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred (2 CFR sections 200.212 and 200.318(h); 2 CFR section 1800.30; 48 CFR section 52.209-6). Additionally, an entity is required to have policies and procedures in place for verifying the above requirements. Condition: During our suspension and debarment testing, CLA noted no suspension and debarment policy in place and no suspension and debarment check was performed over a covered transaction. Questioned costs: $7,442 of known questioned costs. Context: There was only one covered transaction subject to suspension and debarment check that had a contract amount exceeding $25,000 but only $7,442 was paid with federal program. However, no suspension and debarment check was performed. CLA elected to perform a SAM.gov check and noted that vendor (Locke System) is not debarred as of the date of the audit procedure. Cause: Share & Care House and Subsidiary lacks sufficient understanding of the compliance requirements surrounding covered transactions and suspension and debarment check requirements. Effect: Contracts could be entered into with suspended or debarred vendors leading to noncompliance. Improper understanding caused Share & Care House and Subsidiary to be noncompliant with program requirements over suspension and debarment. Repeat finding: No. Recommendation: CLA recommends Share & Care House and Subsidiary to develop and implement a suspension and debarment policy that meets the requirements outlined in Uniform Guidance. CLA also recommends increased training for those individuals involved in procurement and contract approval process to ensure suspension and debarment checks are performed on all covered transactions. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Federal Agency: Department of Housing and Urban Development Federal Program Name: Continuum of Care Assistance Listing Number: 14.267 Federal Award Identification Number and Year: SC-110351 - 2024 SC-111132 - 2024 SC-110353 - 2024 SC-111134 - 2024 SC-110355 - 2024 SC-110349 - 2024 SC-111130 - 2024 Pass-Through Agency: Pierce County Pass-Through Number(s): LP9XHDGASCJ3 Award Period: SC-110351: 7/1/23-6/30/24 SC-111132: 7/1/24-6/30/25 SC-110353: 12/1/23-11/30/24 SC-111134: 12/1/24-11/30/25 SC-110355: 6/1/23-8/31/24 SC-110349: 5/1/23-4/30/24 SC-111130: 5/1/24-4/30/25 Type of finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.303(a), recipients of federal funds must "establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award." Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred (2 CFR sections 200.212 and 200.318(h); 2 CFR section 1800.30; 48 CFR section 52.209-6). Additionally, an entity is required to have policies and procedures in place for verifying the above requirements. Condition: During our suspension and debarment testing, CLA noted no suspension and debarment policy in place and no suspension and debarment check was performed over a covered transaction. Questioned costs: $7,442 of known questioned costs. Context: There was only one covered transaction subject to suspension and debarment check that had a contract amount exceeding $25,000 but only $7,442 was paid with federal program. However, no suspension and debarment check was performed. CLA elected to perform a SAM.gov check and noted that vendor (Locke System) is not debarred as of the date of the audit procedure. Cause: Share & Care House and Subsidiary lacks sufficient understanding of the compliance requirements surrounding covered transactions and suspension and debarment check requirements. Effect: Contracts could be entered into with suspended or debarred vendors leading to noncompliance. Improper understanding caused Share & Care House and Subsidiary to be noncompliant with program requirements over suspension and debarment. Repeat finding: No. Recommendation: CLA recommends Share & Care House and Subsidiary to develop and implement a suspension and debarment policy that meets the requirements outlined in Uniform Guidance. CLA also recommends increased training for those individuals involved in procurement and contract approval process to ensure suspension and debarment checks are performed on all covered transactions. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Federal Agency: Department of Housing and Urban Development Federal Program Name: Continuum of Care Assistance Listing Number: 14.267 Federal Award Identification Number and Year: SC-110351 - 2024 SC-111132 - 2024 SC-110353 - 2024 SC-111134 - 2024 SC-110355 - 2024 SC-110349 - 2024 SC-111130 - 2024 Pass-Through Agency: Pierce County Pass-Through Number(s): LP9XHDGASCJ3 Award Period: SC-110351: 7/1/23-6/30/24 SC-111132: 7/1/24-6/30/25 SC-110353: 12/1/23-11/30/24 SC-111134: 12/1/24-11/30/25 SC-110355: 6/1/23-8/31/24 SC-110349: 5/1/23-4/30/24 SC-111130: 5/1/24-4/30/25 Type of finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.303(a), recipients of federal funds must "establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award." Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred (2 CFR sections 200.212 and 200.318(h); 2 CFR section 1800.30; 48 CFR section 52.209-6). Additionally, an entity is required to have policies and procedures in place for verifying the above requirements. Condition: During our suspension and debarment testing, CLA noted no suspension and debarment policy in place and no suspension and debarment check was performed over a covered transaction. Questioned costs: $7,442 of known questioned costs. Context: There was only one covered transaction subject to suspension and debarment check that had a contract amount exceeding $25,000 but only $7,442 was paid with federal program. However, no suspension and debarment check was performed. CLA elected to perform a SAM.gov check and noted that vendor (Locke System) is not debarred as of the date of the audit procedure. Cause: Share & Care House and Subsidiary lacks sufficient understanding of the compliance requirements surrounding covered transactions and suspension and debarment check requirements. Effect: Contracts could be entered into with suspended or debarred vendors leading to noncompliance. Improper understanding caused Share & Care House and Subsidiary to be noncompliant with program requirements over suspension and debarment. Repeat finding: No. Recommendation: CLA recommends Share & Care House and Subsidiary to develop and implement a suspension and debarment policy that meets the requirements outlined in Uniform Guidance. CLA also recommends increased training for those individuals involved in procurement and contract approval process to ensure suspension and debarment checks are performed on all covered transactions. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Federal Agency: Department of Housing and Urban Development Federal Program Name: Continuum of Care Assistance Listing Number: 14.267 Federal Award Identification Number and Year: SC-110351 - 2024 SC-111132 - 2024 SC-110353 - 2024 SC-111134 - 2024 SC-110355 - 2024 SC-110349 - 2024 SC-111130 - 2024 Pass-Through Agency: Pierce County Pass-Through Number(s): LP9XHDGASCJ3 Award Period: SC-110351: 7/1/23-6/30/24 SC-111132: 7/1/24-6/30/25 SC-110353: 12/1/23-11/30/24 SC-111134: 12/1/24-11/30/25 SC-110355: 6/1/23-8/31/24 SC-110349: 5/1/23-4/30/24 SC-111130: 5/1/24-4/30/25 Type of finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.303(a), recipients of federal funds must "establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award." Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred (2 CFR sections 200.212 and 200.318(h); 2 CFR section 1800.30; 48 CFR section 52.209-6). Additionally, an entity is required to have policies and procedures in place for verifying the above requirements. Condition: During our suspension and debarment testing, CLA noted no suspension and debarment policy in place and no suspension and debarment check was performed over a covered transaction. Questioned costs: $7,442 of known questioned costs. Context: There was only one covered transaction subject to suspension and debarment check that had a contract amount exceeding $25,000 but only $7,442 was paid with federal program. However, no suspension and debarment check was performed. CLA elected to perform a SAM.gov check and noted that vendor (Locke System) is not debarred as of the date of the audit procedure. Cause: Share & Care House and Subsidiary lacks sufficient understanding of the compliance requirements surrounding covered transactions and suspension and debarment check requirements. Effect: Contracts could be entered into with suspended or debarred vendors leading to noncompliance. Improper understanding caused Share & Care House and Subsidiary to be noncompliant with program requirements over suspension and debarment. Repeat finding: No. Recommendation: CLA recommends Share & Care House and Subsidiary to develop and implement a suspension and debarment policy that meets the requirements outlined in Uniform Guidance. CLA also recommends increased training for those individuals involved in procurement and contract approval process to ensure suspension and debarment checks are performed on all covered transactions. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Federal Agency: Department of Housing and Urban Development Federal Program Name: Continuum of Care Assistance Listing Number: 14.267 Federal Award Identification Number and Year: SC-110351 - 2024 SC-111132 - 2024 SC-110353 - 2024 SC-111134 - 2024 SC-110355 - 2024 SC-110349 - 2024 SC-111130 - 2024 Pass-Through Agency: Pierce County Pass-Through Number(s): LP9XHDGASCJ3 Award Period: SC-110351: 7/1/23-6/30/24 SC-111132: 7/1/24-6/30/25 SC-110353: 12/1/23-11/30/24 SC-111134: 12/1/24-11/30/25 SC-110355: 6/1/23-8/31/24 SC-110349: 5/1/23-4/30/24 SC-111130: 5/1/24-4/30/25 Type of finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.303(a), recipients of federal funds must "establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award." Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred (2 CFR sections 200.212 and 200.318(h); 2 CFR section 1800.30; 48 CFR section 52.209-6). Additionally, an entity is required to have policies and procedures in place for verifying the above requirements. Condition: During our suspension and debarment testing, CLA noted no suspension and debarment policy in place and no suspension and debarment check was performed over a covered transaction. Questioned costs: $7,442 of known questioned costs. Context: There was only one covered transaction subject to suspension and debarment check that had a contract amount exceeding $25,000 but only $7,442 was paid with federal program. However, no suspension and debarment check was performed. CLA elected to perform a SAM.gov check and noted that vendor (Locke System) is not debarred as of the date of the audit procedure. Cause: Share & Care House and Subsidiary lacks sufficient understanding of the compliance requirements surrounding covered transactions and suspension and debarment check requirements. Effect: Contracts could be entered into with suspended or debarred vendors leading to noncompliance. Improper understanding caused Share & Care House and Subsidiary to be noncompliant with program requirements over suspension and debarment. Repeat finding: No. Recommendation: CLA recommends Share & Care House and Subsidiary to develop and implement a suspension and debarment policy that meets the requirements outlined in Uniform Guidance. CLA also recommends increased training for those individuals involved in procurement and contract approval process to ensure suspension and debarment checks are performed on all covered transactions. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
Federal Agency: Department of Housing and Urban Development Federal Program Name: Continuum of Care Assistance Listing Number: 14.267 Federal Award Identification Number and Year: SC-110351 - 2024 SC-111132 - 2024 SC-110353 - 2024 SC-111134 - 2024 SC-110355 - 2024 SC-110349 - 2024 SC-111130 - 2024 Pass-Through Agency: Pierce County Pass-Through Number(s): LP9XHDGASCJ3 Award Period: SC-110351: 7/1/23-6/30/24 SC-111132: 7/1/24-6/30/25 SC-110353: 12/1/23-11/30/24 SC-111134: 12/1/24-11/30/25 SC-110355: 6/1/23-8/31/24 SC-110349: 5/1/23-4/30/24 SC-111130: 5/1/24-4/30/25 Type of finding: Material Weakness in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.303(a), recipients of federal funds must "establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award." Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred (2 CFR sections 200.212 and 200.318(h); 2 CFR section 1800.30; 48 CFR section 52.209-6). Additionally, an entity is required to have policies and procedures in place for verifying the above requirements. Condition: During our suspension and debarment testing, CLA noted no suspension and debarment policy in place and no suspension and debarment check was performed over a covered transaction. Questioned costs: $7,442 of known questioned costs. Context: There was only one covered transaction subject to suspension and debarment check that had a contract amount exceeding $25,000 but only $7,442 was paid with federal program. However, no suspension and debarment check was performed. CLA elected to perform a SAM.gov check and noted that vendor (Locke System) is not debarred as of the date of the audit procedure. Cause: Share & Care House and Subsidiary lacks sufficient understanding of the compliance requirements surrounding covered transactions and suspension and debarment check requirements. Effect: Contracts could be entered into with suspended or debarred vendors leading to noncompliance. Improper understanding caused Share & Care House and Subsidiary to be noncompliant with program requirements over suspension and debarment. Repeat finding: No. Recommendation: CLA recommends Share & Care House and Subsidiary to develop and implement a suspension and debarment policy that meets the requirements outlined in Uniform Guidance. CLA also recommends increased training for those individuals involved in procurement and contract approval process to ensure suspension and debarment checks are performed on all covered transactions. Views of responsible officials: Management agrees with the finding and has provided its corrective action plan.
FINDING 2024-004 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): SWIF224568 Pass-Through Entity: Indiana Finance Authority Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context As part of sound management of the federal award, the Town was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The Town had not properly designed or implemented such a system, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. INDIANA STATE BOARD OF ACCOUNTS 19 TOWN OF RIDGEVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds: micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. One vendor was identified that fell within the small purchase threshold. Purchases from the vendor totaled $38,225. As such, price or rate quotations from an adequate number of qualified sources should have been obtained. However, the Town did not obtain price or rate quotations for the purchases, nor was full and open competition provided for the vendor. Additionally, there was no documentation available to support the rationale to limit competition. Suspension and Debarment Prior to entering into subawards and covered transactions with the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. The Town did not have policies or procedures in place for verifying that an entity with which it planned to enter into a covered transaction was not suspended, debarred, or otherwise excluded. Two of the three vendors selected for testing, with covered transactions, were not verified to ensure that the vendor was not suspended, debarred, or otherwise excluded. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 TOWN OF RIDGEVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." Cause The Town did not have policies or procedures in place to document the process performed to ensure each vendor related to the SLFRF program was not suspended or debarred from participation in federal awards. The Town was not aware of the requirements for specific federal procurement policies or the need to verify covered transactions for suspension and debarment. Effect Without the proper implementation of an effectively designed system of internal controls and procedures, the Town could not ensure the vendors paid with federal funds were eligible to participate in federal programs. Any program funds the Town used to pay vendors that have been suspended or debarred would be unallowable and the funding agency could potentially recover the funds. Questioned Costs No questioned costs noted. INDIANA STATE BOARD OF ACCOUNTS 21 TOWN OF RIDGEVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended the Town implement procurement policies to ensure compliance with state and federal laws and regulations for procuring goods and services paid with federal funds. We also recommended that management of the Town adopt internal controls to ensure that all contractors that are expected to be paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before entering into covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: Highway Planning and Construction - Procurement Federal Agency: Department of Transportation Federal Program: Highway Planning and Construction Assistance Listings Number: 20.205 Federal Award Number and Year (or Other Identifying Number): DES 2300096 Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The County had not properly designed or implemented a system of internal controls that would be effective in preventing, or detecting and correcting, noncompliance to ensure that the Local Public Agency (LPA) followed all federal requirements related to engineering and design services. In addition, the County did not have documented procurement procedures or policies used to procure engineering and design services. For consultant contracting (engineering and design related services), the LPA was to create and send a Request for Proposal (RFP) to the Indiana Department of Transportation (INDOT), who would review and advertise them. Consultants could then respond to those RFPs by completing and submitting a Letter of Interest (LOI). After all LOIs were received and ranked, the County was to report the number of LOIs received on the LPA Selection Review Checklist. The County did not maintain the LOIs as reported to the INDOT on the LPA Selection Review Checklist. As a result, the number of LOIs documented on the checklist provided to the INDOT could not be verified or audited. In addition, we were unable to ensure the minimum number of LOIs were received to meet the procurement competition standards. The lack of internal controls and noncompliance was isolated to DES 2300096. The lack of written procedures or policies was a systemic issue throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 18 CRAWFORD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320(b) states in part: "Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance awards exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: . . . (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; INDIANA STATE BOARD OF ACCOUNTS 19 CRAWFORD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. Cause Management did not develop effective internal controls to maintain records sufficient to detail the history of a procurement as required by retaining the LOIs. The County was unaware that it needed to maintain documented procurement procedures or policies. Effect The failure to establish and maintain an effective internal control system for procurement placed the County at risk of noncompliance with the federal requirements. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the County. Due to the lack of retention of the LOIs, compliance with the procurement process could not be determined. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County establish and implement written policies and procedures for the procurement of engineering and design services. We further recommended that the County ensure it retains all LOIs and other procurement documentation to ensure compliance with federal regulations. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Federal Program 594 Environmental Infrastructure Assistance Program (AL #12.U01) Drinking Water State Revolving Fund (AL #66.468) Procurement, Suspension, and Debarment Criteria Per Uniform Guidance, “Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR section 200.318 through 200.326. They must use their own documented procurement procedures, which reflect appliable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. Furthermore, “Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. Condition During testing, we noted that the City does not have a procurement policy in place that follows Uniform Guidance. Also, we noted that the City entered into two covered transactions with vendors who were not reviewed for suspension and debarment before entering into these transactions. Questioned Costs None. Context The City does not have a procurement policy that follows Uniform Guidance. Also, we tested two vendors who were not reviewed for suspension and debarment from a population of two. Cause Management oversight. Effect The City is not in compliance with Uniform Guidance. Also, there is an increased risk of the City entering into a covered transaction with an entity that is suspended or debarred from receiving federal funds. Repeat Finding Yes. Prior audit finding 2023-005. Recommendation The City should implement a written procurement policy that follows Uniform Guidance. Furthermore, vendors should be reviewed for suspension and debarment before entering into a covered transaction. View of Responsible Officials The City agrees with the recommendation.
Federal Program 594 Environmental Infrastructure Assistance Program (AL #12.U01) Drinking Water State Revolving Fund (AL #66.468) Procurement, Suspension, and Debarment Criteria Per Uniform Guidance, “Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR section 200.318 through 200.326. They must use their own documented procurement procedures, which reflect appliable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. Furthermore, “Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. Condition During testing, we noted that the City does not have a procurement policy in place that follows Uniform Guidance. Also, we noted that the City entered into two covered transactions with vendors who were not reviewed for suspension and debarment before entering into these transactions. Questioned Costs None. Context The City does not have a procurement policy that follows Uniform Guidance. Also, we tested two vendors who were not reviewed for suspension and debarment from a population of two. Cause Management oversight. Effect The City is not in compliance with Uniform Guidance. Also, there is an increased risk of the City entering into a covered transaction with an entity that is suspended or debarred from receiving federal funds. Repeat Finding Yes. Prior audit finding 2023-005. Recommendation The City should implement a written procurement policy that follows Uniform Guidance. Furthermore, vendors should be reviewed for suspension and debarment before entering into a covered transaction. View of Responsible Officials The City agrees with the recommendation.
Item: 2024-001 Assistance Listing Number: 21.027 Program: COVID-19 – Coronavirus State and Local Fiscal Federal Recovery Funds Federal Agency: U.S. Department of the Treasury Pass-Through Agencies: State of Arizona, Office of the Governor Pass-Through Grantor Identifying Number: Unknown Award Year: March 1, 2022 to September 30, 2024 Compliance Requirement: Procurement, suspension and debarment Criteria or Specific Requirement: In accordance with 2 CFR § 200.318 – Procurement Standards, the Association is required to maintain records to sufficiently detail the history of each procurement transaction, including the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. Condition: The Association did not retain documentation regarding the procurement procedures over one of the vendors tested. Questioned Costs: N/A Context: In a population of 172 program costs, we conducted a non-statistical sample of 18 transactions. In our sample of 18 transactions, one procurement was above the micro-purchase but below the small purchase threshold for which there was no documentation retained regarding quotes or rates obtained from other vendors. Per review of all program costs, the untested costs either fell below the micro-purchase threshold or were explicitly named in the approved budget. Additionally, the Association has a written procurement policy that aligns with the requirements of 2 CFR § 200.318. As such this is deemed to be a significant deficiency in internal controls over compliance. Cause: The Association did not follow its procurement policy when purchasing goods and services under the federal award. Effect: Undocumented procurement decisions could violate the requirements of 2 CFR § 200.318. Repeat Finding: Repeat finding – prior year 2023-003 Recommendation: We recommend implementing stronger controls to ensure adherence to the policies that conform to 2 CFR § 200.318. Views of Responsible Officials and Planned Corrective Actions: Management of the Association concurs with the finding. See Corrective Action Plan.
Finding: 2024-001 ALN 10.559, USDA Summer Food Service Program (SFSP) Known/Likely Questioned Costs: $151,099.42 Criteria: Federal regulations require that costs charged to the program be necessary, reasonable, and properly documented (2 CFR 200.403–200.404). In addition, procurement must follow open and competitive bidding procedures (2 CFR 200.318), and contracts must be executed and approved before charging costs to the program. Deviation/Condition: The Organization paid $151,099.42 of SFSP program funds to UTA of Boro Park for outsourced payroll services without following federal procurement requirements and without an executed, approved contract. Cause: Inadequate internal controls over procurement and contract approval. Effect: Use of program funds for unallowable costs, resulting in questioned costs of $151,099.42. Perspective: The issue represents a material exception, as the entire amount of outsourced payroll services ($151,099.42) charged to the SFSP was deemed unallowable due to noncompliance with procurement and contract approval requirements. Reporting Period: 1/1/2024-12/31/2024 Repeat Finding: No Recommendation: The Organization should reimburse the SFSP program fund in the amount of $151,099.42 from its non-federal operating funds. In addition, the Organization should establish procedures to ensure all future service contracts are competitively procured, executed in writing, and approved by the State agency before being charged to the program. Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding, has reimbursed $151,099.42 to the SFSP account, and will strengthen procurement controls through competitive bidding and contract approvals to ensure compliance.
2024-005 Finding – Federal Award Type: Procurement – Material Non-Compliance and Material Weakness in Internal Control over Compliance. (Repeat of finding 2023-005) Identification of Federal Program: AL Number: 81.086 Conservation Research and Development Program Criteria / Requirement: Per 2 CFR sections 200.318 through 200.326 an entity receiving federal funds must follow their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. Condition / Context: During the audit it was noted that Forth Mobility Fund has an established Procurement Policy which incorporates procurement requirements identified in 2 CFF Part 200. However, of the 3 items selected for testing, all 3 did not follow the Procurement Policy. Either a sufficient number of quotes were not obtained or proper documentation was not maintained. Cause: While the Procurement Policy is documented, the procedures and policies were not being followed. Effect: Failure to maintain sufficient internal controls and proper procedures may result in wrongful use of federal funds and non-compliance with federal awards. Questioned Costs: None. Recommendation: The Organization should follow the establish written policies and procedures regarding procurement and properly document the process for each procurement made. Management’s Response: We agree with the auditor's comments and have taken steps to strengthen compliance with procurement policies. We have established additional documentation requirements for all procurements and will update our policies to incorporate explicit internal controls and approval processes. Staff involved in procurement will also receive guidance on these updated requirements.
Item: 2024-001 Assistance Listing Number: 21.027 Programs: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of the Treasury Pass-Through Agencies: Arizona State Office of the Governor Pass-Through Grantor Identifying Number: Unknown Award Year: January 1, 2022 to December 31, 2024 Compliance Requirement: Procurement, suspension and debarment Criteria: In accordance with 2 CFR § 200.318 - General procurement standards - the entity must use its own documented procurement procedures which reflect applicable. State and local laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in 2 CFR § 200.318. Condition: The Organization’s procurement policy and related procedures do address the provisions of 2 CFR § 200.318; however, the Organization has not retained documentation to support that the policy is being adhered to. Questioned Costs: n/a Context: In a population of over 250 procurements for program costs, we conducted a non-statistical sample of 60 transactions. In our sample of 60 transactions, it was noted that 57 procurements were below the micro-purchase threshold, and 3 procurements were above the micro-purchase threshold but below the small purchase threshold, which was 100% of the population in this threshold. We noted there was a lack of documentation retained by the Organization to support two of these three procurement transactions above the micro-purchase threshold but below the small purchase threshold. As such, this is deemed to be a material weakness in internal control over compliance. Effect: Undocumented procurement decisions could violate the requirements of 2 CFR § 200.318 Cause: Special Olympics Arizona, Inc. did not implement controls to ensure documentation was retained to support adherence to its own procurement policy. Identification as a Repeat Finding: Partial repeat finding of 2023-04 Recommendation: The entity should implement controls to ensure that documentation is retained to support adherence to its own procurement policy. Views of Responsible Officials: Management of the Organization concurs with the finding. See Corrective Action Plan.
Federal Agency: U.S. Department of State Federal Program Name: Professional and Cultural Exchange Programs - Citizen Exchanges Assistance Listing Number: 19.415 Award Period: July 26, 2022- September 30, 2025; September 14, 2022- September 30, 2026 Type of Finding: • Material Weakness in Internal Control over Compliance • Material Noncompliance (Modified Opinion) Criteria or Specific Requirement: The Foundation must comply with procurement standards set out at 2 CFR sections 200.318 through 200.326 within Uniform Guidance. Condition: The procurement policy of the Foundation does not include the essential elements as outlined in 2 CFR sections 200.318 through 200.326. Questioned costs: None Context: We reviewed the procurement policy of the Foundation and noted that the policy does not include the essential compliance elements as outlined in 2 CFR sections 200.318 through 200.326. Cause: Management was unaware of the restrictive requirements of the new procurement standards. Effect: With the absence of a compliant policy, the Foundation is at risk for noncompliance as it relates to federal procurement. Repeat Finding: No Recommendation: We recommend that the Foundation review its procurement policy and make necessary changes to comply with the criteria as set out in 2 CFR sections 200.318 and 200.326. Views of Responsible Officials: Management is not in agreement with the finding. See separate corrective action plan.
Federal Agency: U.S. Department of State Federal Program Name: Professional and Cultural Exchange Programs - Citizen Exchanges Assistance Listing Number: 19.415 Award Period: July 26, 2022- September 30, 2025; September 14, 2022- September 30, 2026 Type of Finding: • Material Weakness in Internal Control over Compliance • Material Noncompliance (Modified Opinion) Criteria or Specific Requirement: The Foundation must comply with procurement standards set out at 2 CFR sections 200.318 through 200.326 within Uniform Guidance. Condition: The procurement policy of the Foundation does not include the essential elements as outlined in 2 CFR sections 200.318 through 200.326. Questioned costs: None Context: We reviewed the procurement policy of the Foundation and noted that the policy does not include the essential compliance elements as outlined in 2 CFR sections 200.318 through 200.326. Cause: Management was unaware of the restrictive requirements of the new procurement standards. Effect: With the absence of a compliant policy, the Foundation is at risk for noncompliance as it relates to federal procurement. Repeat Finding: No Recommendation: We recommend that the Foundation review its procurement policy and make necessary changes to comply with the criteria as set out in 2 CFR sections 200.318 and 200.326. Views of Responsible Officials: Management is not in agreement with the finding. See separate corrective action plan.
FINDING 2024-002 Subject: Drinking Water State Revolving Fund - Procurement and Suspension and Debarment Federal Agency: Environmental Protection Agency Federal Program: Drinking Water State Revolving Fund Assistance Listings Number: 66.468 Federal Award Number and Year (or Other Identifying Number): DW 23 512703 Pass-Through Entity: Indiana Finance Authority Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the City in order to ensure compliance with requirements related to the grant agreement and the following compliance requirement: Procurement and Suspension and Debarment. Procurement - Policy The City did not have an approved procurement policy that reflected applicable state laws and regulations including procedures to avoid acquisition of unnecessary or duplicative items and procedures to ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. The City is required to have and use documented procurement procedures, which are consistent with state, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a federal award or subaward. Suspension and Debarment Prior to entering into subawards and covered transactions with the Drinking Water State Revolving Fund, recipients are required to verify that such contracts and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under procurement and nonprocurement transactions (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking SAM exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF JONESBORO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon the inquiry of the City to determine its policies and procedures related to suspension and debarment requirements, the City stated that a suspension and debarment clause is included in contracts or bid packets. Contracts and bid packets are reviewed by the Mayor and the Common Council. One covered transaction, totaling $718,000, was identified and tested. The City could not provide documentation that procedures were performed to verify that the vendor paid from the Drinking Water State Revolving Fund with contracts over $25,000 were not excluded or disqualified from participation in federal programs. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed by the management of the City. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. The City failed to adopt a procurement policy as required for federal grants. Additionally, the City contracted with outside engineers and a CPA firm to manage the compliance requirement, and there was no documentation that showed a suspension or debarment clause was included in the contract or that was in the bid packet. INDIANA STATE BOARD OF ACCOUNTS 17 CITY OF JONESBORO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, there was no procurement policy, and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Any program funds the City used to pay vendors that have been suspended or debarred could be unallowable, and the funding agency could potentially recover them. Additionally, noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Questioned Costs There were no questioned costs identified. Recommendation We recommended the City establish documented procurement procedures consistent with state and local laws for the acquisition of property or services required under a federal award or subaward as outlined in the code of federal regulations. In addition, we recommended that the City strengthen its system of internal controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before entering into any covered transactions. We also recommended that the City gain a thorough understanding of the grant requirements to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
United States Department of Agriculture Federal Assistance Listing #10.855 Distance Learning and Telemedicine Grants United States Department of Treasury Federal Assistance Listing #21.029 COVID-19 Coronavirus Capital Projects Fund Procurement, Suspension, and Debarment Material Weakness in Internal Control Over Compliance Criteria - Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non-federal entities other than states must follow when operating federal programs and the procurement procedures required. Condition - In our testing of procurement, suspension, and debarment it was identified that the Cooperative’s written policy did not address the requirements of 2 CFR sections 200.318 through 200.326. Cause - Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect - A lack of compliant policies increases the overall risk of non-compliance. Questioned Costs - None reported. Context – Sampling was not used. Repeat Finding from Prior Years - No Recommendation - We recommend that management establish a written policy that is in compliance with all of the procurement requirements for federal programs as identified in 2 CFR sections 200.318 through 200.326 and maintain adequate supporting documentation and records to document history and methods of procurement and the procedures performed to comply with these CFR sections. Views of Responsible Officials - There is no disagreement with the audit finding.
United States Department of Agriculture Federal Assistance Listing #10.855 Distance Learning and Telemedicine Grants United States Department of Treasury Federal Assistance Listing #21.029 COVID-19 Coronavirus Capital Projects Fund Procurement, Suspension, and Debarment Material Weakness in Internal Control Over Compliance Criteria - Uniform Guidance and 2 CFR sections 200.318 through 200.326 set forth the procurement standards non-federal entities other than states must follow when operating federal programs and the procurement procedures required. Condition - In our testing of procurement, suspension, and debarment it was identified that the Cooperative’s written policy did not address the requirements of 2 CFR sections 200.318 through 200.326. Cause - Lack of oversight, awareness, or understanding of all of the specific requirements under the Uniform Guidance and applicable CFR sections, and controls were not adequately designed to ensure compliance with all of these requirements. Effect - A lack of compliant policies increases the overall risk of non-compliance. Questioned Costs - None reported. Context – Sampling was not used. Repeat Finding from Prior Years - No Recommendation - We recommend that management establish a written policy that is in compliance with all of the procurement requirements for federal programs as identified in 2 CFR sections 200.318 through 200.326 and maintain adequate supporting documentation and records to document history and methods of procurement and the procedures performed to comply with these CFR sections. Views of Responsible Officials - There is no disagreement with the audit finding.
Criteria: Non-Federal entities other than States, including those operating Federal programs as subrecipients of States, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200. Condition: The Organization did not provide a procurement policy. Cause: The Organization does not have internal controls in place surrounding procurement policies and procedures. Effect: The lack of internal controls surrounding the procurement policies and procedures could lead to potential funding issues in the future. Questioned Costs: None. Recommendation: We recommend that management establish a formal written procurement policy. Organization’s Response: Management agrees with this finding.
Criteria: Non-Federal entities other than States, including those operating Federal programs as subrecipients of States, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200. Condition: The Organization did not provide a procurement policy. Cause: The Organization does not have internal controls in place surrounding procurement policies and procedures. Effect: The lack of internal controls surrounding the procurement policies and procedures could lead to potential funding issues in the future. Questioned Costs: None. Recommendation: We recommend that management establish a formal written procurement policy. Organization’s Response: Management agrees with this finding.
Criteria: Non-Federal entities other than States, including those operating Federal programs as subrecipients of States, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200. Condition: The Organization did not provide a procurement policy. Cause: The Organization does not have internal controls in place surrounding procurement policies and procedures. Effect: The lack of internal controls surrounding the procurement policies and procedures could lead to potential funding issues in the future. Questioned Costs: None. Recommendation: We recommend that management establish a formal written procurement policy. Organization’s Response: Management agrees with this finding.
Criteria: Non-Federal entities other than States, including those operating Federal programs as subrecipients of States, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR part 200. Condition: The Organization was not able to provide a procurement policy for the year ended December 31, 2024. Cause: The Organization does not have internal controls in place surrounding procurement policies and procedures. Effect: The lack of internal controls surrounding the procurement policies and procedures could lead to potential funding issues in the future. Questioned Costs: None. Recommendation: We recommend that management prepare a procurement policy that aligns with the Uniform Guidance and continue to implement additional control processes in order to ensure proper controls are in place and followed. Organization Response: Management agrees with this finding.
2024 001 Reporting and Procurement U.S. Department of the Treasury: Passed-through State of New Jersey Department of Community Affairs: COVID 19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Contract Number and Years: G2022 09 (03/02/2021 – 12/31/2026) Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample Repeat Finding: Yes (2023-001) Finding Type: Material Weakness, Material Noncompliance Criteria Reporting Per 2 CFR 200.502, the determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs. Generally, the activity pertains to events that require the non Federal statutes, regulations and the terms and conditions of Federal awards, such as: expenditures/expense transactions associated with awards including grants. Further, the Uniform Guidance compliance supplement notes, each recipient must report program outlays and program income on a cash or accrual basis, as prescribed by the Federal awarding agency. In accordance with the grant agreement and the reporting requirements for the State of New Jersey Department of Community Affairs, direct grants and pass through funds are fulfilled utilizing an advanced payment method and tracking reports. The grantee shall submit quarterly financial reports, in a format to be provided by the Department, and including the number of government full time employees responding to COVID 19 as supported by this funding. The reports are prepared and submitted to allow for relevant and reliable information to be provided to the Federal government or State of New Jersey for tracking purposes. The reports are the source documents for the grantee to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the grantee’s financial statements in accordance with 2 CFR 200.502, Basis for determining Federal awards expended, for the SEFA. Procurement Non Federal entities other than states, including those operating Federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements identified in 2 CFR Part 200. A non Federal entity must: 1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements. 2. Conduct all procurement transactions in a manner providing full and open competition, in accordance with 2 CFR section 200.319. 3. Use the micro purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) (1) and (2). Under the micro purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in the case of acquisition for construction subject to the Wage Rate Requirements (Davis Bacon Act)). Small purchase procedures are used for purchases that exceed the micro purchase amount but do not exceed the simplified acquisition threshold ($250,000). Micro purchases may be awarded without soliciting competitive quotations if the non Federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)). In accordance with the grant agreement and the reporting requirements for the State of New Jersey Department of Community Affairs, recipients may use award funds to enter into contracts to procure goods and services necessary to implement one or more of the eligible purposes outlined in sections 602(c) and 603(c) of the Act and Treasury’s Interim Final Rule and Final Rule. As such, recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance. Under the program, St. Joseph’s Health, Inc. must follow the procurement standards in 2 CFR sections 200.318 through 200.327, including ensuring that the procurement method used for the contracts are appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. Internal Control Additionally, in accordance with Federal requirements, a non Federal entity shall maintain internal controls over Federal programs designed to provide reasonable assurance that transactions are executed in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program. Condition and Context Reporting On a quarterly basis, St. Joseph’s Health, Inc. (the System) prepares and reports to New Jersey Department of Community Affairs (the Department) the program expenditures for Federal funding amounts on the tracking report of expenditures, which are then used to prepare the annual SEFA in conjunction with the general ledger detail at the end of the fiscal year. While expenditures per the SEFA as prepared by the System were accurate and the quarterly reporting was accepted by the State, the System’s expenditures per the report of expenditures continue to be based upon purchase order amounts, which include expenditures that were incurred subsequent to year end. Procurement Further, the System engaged multiple vendors for several projects under the G2022 09 grant that were above the $10K micro purchase threshold, but below the simplified acquisition threshold. However, the System did not obtain multiple quotes from different vendors to encourage fair competition in the market. The System’s policies and procedures to ensure compliance with the above compliance requirements did not include certain internal controls that were designed properly and operating effectively to ensure that the System properly reported costs on the report of expenditures or obtained the necessary quotes from potential bidders for procurements over the micro purchase threshold. Cause Management’s review of the submitted quarterly report of expenditures continuing not to be identified the need for a reconciliation of incurred expenditures and purchase order balances reported to the Department and as such, as there is a variance between the amounts reported on the SEFA and the amounts reported to the Department on the quarterly reports of approximately $2.1 million. We noted, however, that this variance did not represent any unallowable costs. Additionally, Management did not retain or obtain the required documentation indicating quotes from multiple vendors were obtained for the ongoing construction projects under the grant. Effect The System had a material variance in the amount of expenditures reported to the Department as compared to the SEFA and did not obtain multiple quotations from vendors when making selections for various projects ongoing under the Federal program. Questioned Costs None Recommendation Reporting We recommend that the System strengthen its processes and internal controls to ensure the tracking of each report of expenditures provided to the Department has a reconciliation of the amount of expenditures incurred in the period based upon the general ledger and accounting records, used to prepare the annual SEFA, as compared to the purchase order balances. Procurement We recommend that the System strengthen its processes and internal controls to ensure that all procurement related transactions are supported by the appropriate bidding documentation as required by the Uniform Guidance for each respective bidding threshold. View of Responsible Official Management agrees with the auditor’s recommendations and will strengthen its processes and internal controls to ensure the report of expenditures provided to the Department has a reconciliation of the amount of expenditures incurred in the period compared to the purchase order balances and all procurement transactions contain the required bidding documentation for each bidding threshold in accordance with the Uniform Guidance.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (a) the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in 200.317 through 200.327; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award: (a) (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (a) the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in 200.317 through 200.327; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award: (a) (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (a) the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in 200.317 through 200.327; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award: (a) (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (a) the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in 200.317 through 200.327; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award: (a) (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (a) the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in 200.317 through 200.327; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award: (a) (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (a) the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in 200.317 through 200.327; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award: (a) (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Procurement Policy Federal Agency: U.S. Department of Treasury Federal Program Title: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Numbers: SLFRP0135-2024 Pass-Through Agency: Wisconsin Department of Workforce Development Pass-Through Number: 7471 Award Period: January 1, 2024 – December 31, 2024 Compliance Requirement: Procurement Type of Finding: Material Weakness in Internal Control over Compliance, Other Matter Criteria or specific requirement: The Organization should have formal procurement policy to guide the Organization when entering into covered transactions. The policy needs to include all components identified in 2 CFR 200.318. The Organization had 3 out of 5 procurements that adequate documentation was not retained to support reaching out to adequate sources. Condition: The Organization had expenses applied to the grant in excess of the $10k required micro-purchase threshold. The Organization also did not have a formal procurement policy in place that follows UG and did not retain supporting documentation to support 3 out of 5 procurement transactions. Questioned Costs: Unknown Context: The Organization entered into transactions in excess of the $10k required micro purchase threshold for which an adequate number of price or rate quotes were not documented. Cause: Management Oversight Repeat Finding: No Effect: The effect of not having a procurement policy with all the required components would be noncompliance with 2 CFR 200.318. Recommendation: It is recommended that the Organization review Uniform Guidance procurement requirements and create a procurement policy to ensure compliance with Uniform Guidance. The Organization should retain supporting documentation for any vendors in excess of the micro purchase level. Views of responsible officials: There is no disagreement with the audit finding. Refer to the Organization’s Corrective Action Plan for more information.
Assistance Listing, Federal Agency, and Program Name 21.027, U.S. Department of Treasury, COVID 19 Coronavirus State and Local Recovery Funds Federal Award Identification Number and Year 2021 16100 5WAYMANPALNEI, 2024 Pass through Entity City of Toledo Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria 2 CFR 200.318(i) requires the recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. Condition The entity did not retain required support; rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. Questioned Costs $165,357 If Questioned Costs are Not Determinable, Description of Why Known Questioned Costs were Undetermined or Otherwise Could Not be Reported N/A Identification of How Questioned Costs Were Computed Questioned costs represent the total known expenditures incurred under the contract for which the exception was identified. Context Of the two procurements selected for testing using the formal procurement method, one procurement did not contain evidence of records maintained to support the rationale for the contract type selection and the contractor selection or rejection. Cause and Effect A control was lacking to ensure appropriate procurement records were maintained which could result in material noncompliance with federal procurement standards. Recommendation We recommend that controls be put in place to ensure that all procurements adhere to the requirements of 2 CFR 200.318 and your internal procurement policy. Views of Responsible Officials and Corrective Action Plan Although YMCA performed the proper procedures, the passage of time resulted in a mis placing of the supporting documentation. YMCA relied upon legal counsel to retain the documentation. This was a unique and one time award. In the future, YMCA will take responsibility for the retention of the supporting documentation.
Assistance Listing, Federal Agency, and Program Name 21.027, U.S. Department of Treasury, COVID 19 Coronavirus State and Local Recovery Funds Federal Award Identification Number and Year 2021 16100 5WAYMANPALNEI, 2024 Pass through Entity City of Toledo Finding Type Material weakness and material noncompliance with laws and regulations Repeat Finding No Criteria 2 CFR Section 200.318(h) requires the entity to award contracts only to responsible contractors that possess the ability to perform successfully under the terms and conditions of a proposed contract. The recipient or subrecipient must consider contractor integrity, public policy compliance, proper classification of employees (see the Fair Labor Standards Act, 29 U.S.C. 201, chapter 8), past performance record, and financial and technical resources when conducting a procurement transaction. Condition YMCA did not retain evidence to support procedures were performed to ensure a vendor was not suspended or debarred before entering into a covered transaction. Questioned Costs None If Questioned Costs are Not Determinable, Description of Why Known Questioned Costs were Undetermined or Otherwise Could Not be Reported N/A Identification of How Questioned Costs Were Computed Not applicable Context Of the two procurements selected for testing, one procurement did not contain evidence of either (1) a search performed on SAM.gov to determine if the vendor was suspended, debarred, or otherwise excluded; (2) a certification from the contractor attesting that they are not suspended, debarred, or otherwise excluded; or (3) adding a clause or condition to the covered transaction with that vendor. Subsequently YMCA did perform the search and noted that the vendor was not suspended or debarred, thereby creating no questioned costs. Cause and Effect A control was lacking to ensure the YMCA performed procedures to verify that the vendor was not suspended, debarred, or otherwise excluded prior to entering into contracts which could result in material noncompliance with federal suspension and debarment standards. Recommendation We recommend that internal controls be put in place to ensure that the required verification is performed, documented, and reviewed prior to entering into contracts with vendors. Views of Responsible Officials and Planned Corrective Actions YMCA relied on outside legal counsel for guidance in the procurement process. In the future, YMCA will perform this procedure or ensure that legal counsel performs this procedure.
Finding 2024-003 AL No.: 66.468 Program Title: Drinking Water State Revolving Fund Federal Agency: U.S. Environmental Protection Agency Pass-Through Agency: Wisconsin Department of Natural Resources Award Number/Year: Unknown / 2024 Criteria: The Uniform Guidance requires in 2 CFR section 200.318(h) that entities receiving federal awards verify the suspension and debarment status of vendors before procurement takes place. Condition and Context: During testing, it was noted that the City did not document its review of suspension and debarment for both of the vendors tested for the federal program. Our sample was not statistically valid. Cause: The City did not complete and document the review of suspended and debarred vendors as required for expenditures of federal awards in accordance with the Uniform Guidance. Effect: If transactions occur with a suspended or debarred vendor, the funding agency may disallow the costs associated with the transaction. Questioned Costs: None noted. Recommendation: We recommend that the City complete and document the review for suspended and debarred vendors as required for expenditures of federal awards in accordance with Uniform Guidance before contracting with a vendor. Management's Response: The City did not perform a review for suspended and debarred vendors. Neither we, nor our engineering firm, had prior knowledge of this requirement and were not informed by the State of Wisconsin to conduct such a review. Moving forward, the Utilities Department will work with our engineering firm to conduct a review for suspended and debarred vendors prior to contracting with a specific vendor. We will implement this protocol as of September 15, 2025.
Finding 2024-003 Subject: Water and Waste Disposal Systems for Rural Communities - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal Systems for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other Identifying Number): 15-048-349178652 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. Condition and Context An effective internal control system was not in place at the Town in order to ensure compliance with requirements related to the grant agreement and the following compliance requirement: Procurement and Suspension and Debarment Procurement - Policy The Town did not have an approved procurement policy that reflected applicable state laws and regulations including procedures to avoid acquisition of unnecessary or duplicative items and procedures to ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. The Town is required to have and use documented procurement procedures, which are consistent with state, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a federal award or subaward. Suspension and Debarment Prior to entering into subawards and covered transactions with the Water and Waste Disposal Systems for Rural Communities award funds, recipients are required to verify that such contracts and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under procurement and nonprocurement transactions (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking SAM exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Upon the inquiry of the Town to determine its policies and procedures related to suspension and debarment requirements, the Town stated that a suspension and debarment clause is included in contracts. Contracts are reviewed by the President of the Town Council. Three covered transactions, totaling $4,902,201, were identified and tested. The Town could not provide documentation that procedures were performed to verify that one of the three vendors paid from the Water and Waste Disposal Systems for Rural Communities award funds with contracts over $25,000 were not excluded or disqualified from participation in federal programs. Additionally, the Town had two agreements subject to the Buy America Build America (BABA) provisions. The Town could not provide documentation for one of the two vendors that procedures were performed to ensure the Buy America domestic preference provisions were included in either agreement or a BABA waiver was obtained. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." 2 CFR 184.4 states in part: "(a) Applicability of Buy America Preference to infrastructure projects. The Buy America Preference applies to Federal awards where funds are appropriated or otherwise made available for infrastructure projects in the United States, regardless of whether infrastructure is the primary purpose of the Federal award. (b) Including the Buy America Preference in Federal awards. All Federal awards with infrastructure projects must include the Buy America Preference in the terms and conditions. The Buy America Preference must be included in all subawards, contracts, and purchase orders for the work performed, or products supplied under the Federal award. . . ." Cause A proper system of internal controls was not designed by the management of the Town. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. The Town had a newly elected official as of January 1, 2024, who was not familiar with the requirements. The Town contracted with outside engineers to manage the compliance requirement, and there was no documentation that BABA provisions or a waiver were obtained for the contracts nor that they included a suspension or debarment clause. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, there was no procurement policy and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. In addition, the BABA provisions were not appropriately included in infrastructure projects. Any program funds the Town used to pay vendors that have been suspended or debarred could be unallowable, and the funding agency could potentially recover them. Additionally, noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the Town. Questioned Costs There were no questioned costs identified. Recommendation We recommended the Town establish documented procurement procedures consistent with state and local laws for the acquisition of property or services required under a federal award or subaward as outlined in the code of federal regulations. In addition, we recommended that the Town strengthen its system of internal controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before entering into any covered transactions. We recommended that the Town ensure all applicable contracts contain the required BABA provisions. We also recommended that the current official gain a thorough understanding of the grant requirement to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding: Item 2024-001 – General Procurement Standards Material Weakness Federal Program – Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number – 21.027 Federal Award Number – PJ1350-ARP35-CMF 20220466 and 2159FR0357 Federal Agency – U.S. Department of the Treasury Pass-Through Entities – Board of County Commissioners of Tulsa County and City of Tulsa Criteria: Per 2 CFR §200.318(a), non-Federal entities must use documented procurement procedures consistent with applicable laws and regulations, and the standards set forth in the Uniform Guidance. Condition/context: The Organization did not have written procurement policies in place during the audit period. The Organization has an informal procurement process. We tested the two vendors for which expenditures exceeded the micro-purchases limit, as defined by 2 CFR §200.320(a)(1). For one of the vendors, expenditures totaled $52,477, and there was no documentation that price or rate quotations were obtained from an adequate number of qualified sources. Cause: The Organization had not developed or adopted written procurement policies. Effect: Without written procurement policies, there is an increased risk of noncompliance with Federal procurement standards, inconsistent procurement practices, and potential misuse of federal funds. Questioned cost: $52,477 Repeat finding: This is not a repeat finding. Recommendation: We recommend the Organization develop and implement written procurement policies that comply with 2 CFR §200.318, 2 CFR §200.318(c) and other applicable procurement standards. These policies should be communicated to relevant staff and incorporated into procurement practices. View of responsible officials: Management's response is reported in "Corrective Action Plan" at the end of this report.
Finding Number: 2024-001 Repeat Finding: No Type of Finding: Significant Deficiency Description: Procurement and Suspension and Debarment Questioned cost: No Criteria: Under 2 CFR sections 180.220 and 200.318 through 200.326, 45 CFR 75.327 through 75.334 and 45 CFR 75 Part E, the Organization is required to implement certain written Procurement and Suspension and Debarment policies and procedures that adhere to the minimum Federal Procurement standards. The Organization must use its own documented procurement procedures, which reflect applicable State and local laws and regulations, provided that the procurements conform to applicable Federal statutes and the procurement requirements outlined in Uniform Guidance and maintain sufficient records to detail the history of procurements. Condition: The Organization's policy did not meet all of the minimum federal requirements under Uniform Guidance. Cause: Historically the Organization has received few federal grants subject to the Uniform Guidance, and while the Organization maintained a written procurement policy, it did not meet certain requirements of the Guidance. Effect: The Organization was not in compliance with federal regulations. Recommendation: The Organization should update their procurement policy to meet the minimum federal requirements and ensure procurement policies are being followed for all procurement levels with written documentation. View of Responsible Officials: Management has developed a policy in 2025.
#2024-005 – Major Federal Award Finding – Reporting; Procurement and Suspension and Debarment Nature of Finding: Reporting and Procurement, Maintenance of Documentation/Records – Compliance Finding and Significant Deficiency in Internal Control over Compliance Criteria/Condition: Documentation was not maintained to support financial data provided in reports submitted to the funding source. Documentation was also not maintained to support certain procurement procedures. Per 2 CFR 200.334, financial records and supporting documentation must be maintained for three years from the date of the final financial report. Per 2 CFR 200.318(i), recipients must maintain records sufficient to detail the history of each procurement transaction, including (among other items) rationale for contractor selection or rejection. Cause/Context: The following activities did not have supporting documentation: • Expenditure balances reported to the State of Michigan in quarterly reports were not amended or reconciled to the final accounting records for each reporting period. The accounting periods were impacted by various transactions between the dates of the grant expenditure reports and the close of the respective period financial statement. • Performance of contractor/vendor suspension and debarment search on SAM.gov. Effect: Evidence to support a reconciliation between reports submitted to a funding source and the general ledger is not readily available. Evidence to support that the appropriate contractor/vendor vetting process was conducted is not available. Recommendation: The Organization should produce and maintain supporting documentation for all reports submitted to funding sources, including information to reconcile reports to the final financial statements for the respective period and resolution of any reporting differences with the funding agency. We also recommend that the Organization maintain all documentation to support the decision process associated with procurement. Views of Responsible Officials and Planned Corrective Actions: All procurement following the adoption of the procurement policy have been done in alignment with the policy. We also introduced procurement “kickoff meetings’ for new grants to review each budget line, determine the correct procurement method and plan documentation. All vendors now have debarment searches in their QuickBooks vendor information tab.
2024-003 Corporation for National and Community Service Federal Financial Assistance Listing #94.012, 22BIICA001 10/1/2022 – 9/30/2025, 23BIACA001 10/1/2023 – 9/30/2026, 23BIFNY001 10/1/2023 – 9/30/2026 Americorps September 11th National Day of Service and Remembrance Grants Procurement, Suspension and Debarment Material Weakness in Internal Controls over Compliance and Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in 2 CFR 200.318 through 200.327 which also requires documentation to be retained to detail the history of procurements. Condition: The organization’s procurement policy is missing required provisions in accordance with 2 CFR 200.318. For each of the 4 vendors selected for testing there was no documentation retained to support the rationale for the method of procurement. Additionally, the Organization did not retain supporting documentation to substantiate whether consideration was taken whether the vendor was suspended or debarred from doing business with the federal government prior to entering the covered transaction for each of the 4 vendors selected for testing. Cause: There was a lapse in oversight of the internal control process ensuring documentation was retained supporting the organization’s procurement, suspension and debarment process. Additionally, the organization did not cross reference procurement policy with 2 CFR 200.318 through 200.327 ensuring minimum required provisions were included within. Effect: Without retaining documentation to support procurement, suspension and debarment rationale, demonstrating that the program complies with laws, regulations, and other compliance requirements is difficult. Questioned Costs: None reported based on assessment of comparative pricing readily available. Context/Sampling: A nonstatistical sample of 4 vendors out of 8 vendors were selected for testing. Repeat Finding from Prior Year: Yes, prior year finding 2023-004. Recommendation: We recommend management to review internal control procedures ensuring support is retained to substantiate procurement, suspension and debarment was considered prior to entering the transaction. We recommend management review 2 CFR 200.318 through 200.327 and revise the organization’s procurement policy to include all minimum required provisions. Views of Responsible Officials: Management is in agreement.
The City did not have adequate internal controls for ensuring compliance with federal subrecipient monitoring, procurement, suspension and debarment requirements, and it did not comply with federal subrecipient monitoring, suspension and debarment requirements. Background. The Justice Assistance Grant (JAG) program provides states, tribes and local governments with critical funding necessary to support personnel, equipment, supplies, contractual support, training, technical assistance and information systems for criminal justice or civil proceedings for a variety of programs. In 2024, the City spent $650,928 for its JAG program. Federal regulations require recipients to establish, document and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Subrecipient Monitoring. When the City passes on federal funds to subrecipients, federal regulations require it to ensure every subaward agreement clearly identifies that it is a federal award and includes the applicable federal requirements. Further, the City is required to evaluate every subrecipient’s risk of noncompliance with federal requirements to determine the appropriate level of subrecipient monitoring. Subrecipient monitoring requirements include ensuring compliance with program requirements, ensuring the subrecipient receives a federal single audit when required, following up and ensuring the subrecipient takes timely and appropriate action on all audit findings, and issuing a management decision as required. Procurement. Federal regulations require recipients to follow their own documented procurement procedures, which must conform to the Uniform Guidance procurement standards found in 2 CFR 200.318-327. The procedures must reflect the most restrictive of federal, state or local procurement thresholds and methods. When using federal funds to purchase goods or services, governments must follow their own documented procurement procedures that reflect the most restrictive of federal, state or local requirements, and apply them by obtaining quotes or following a competitive procurement process, depending on the estimated cost of the procurement activity. A local government may use noncompetitive procurement procedures when certain circumstances apply, such as if an item is only available from a single source, a public emergency or when the awarding agency expressly authorizes a noncompetitive procurement in response to a written request. In those circumstances, the local government must evaluate each procurement action individually and document its rationale for waiving competition. Suspension and Debarment. Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the City enters into contracts or purchases goods and services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors are not suspended, debarred or otherwise excluded from participating in federal programs. The City may verify this by obtaining a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration’s System for Award Management at SAM.gov. The City must verify this before entering into the contract, and must maintain documentation demonstrating compliance with this federal requirement. Description of Condition. Subrecipient Monitoring. The City did not have effective internal controls for ensuring compliance with subrecipient monitoring requirements. Specifically, the City provided funds to one subrecipient to administer crime prevention and control, community-based violence interventions and advancing racial equity to underserved communities and did not include all required elements in the subaward agreement. Further, it did not perform a risk assessment and did not sufficiently monitor the subrecipient as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Procurement. The City’s procurement policy did not conform to federal regulations in that they did not include procedures to competitively procure services when using federal funds as required by federal regulations. Our audit found the City did not competitively procure one service contract. We consider this deficiency in internal controls to be a significant deficiency. Suspension and Debarment. Although the City has a process to verify the suspension and debarment status for contractors it pays more than $25,000, our audit found the City did not follow this process and did not verify one of three contractors we tested was not suspended or debarred before purchasing from them. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition. Subrecipient Monitoring. Although the City has a process to include all requirements in a subrecipient contract and perform risk assessments and subrecipient monitoring, City employees said they were not aware that the entity was a subrecipient because they operated under a memorandum of understanding each year instead of a subrecipient agreement. Because staff did not consider the entity a subrecipient, they did not follow their normal processes for subrecipient monitoring. Procurement. City staff were not aware they should perform a competitive process when awarding service contracts. The City has a procurement policy, however, it did not include all the necessary requirements to comply with federal regulations. As a result, staff relied on the City’s policy that allowed them to perform a noncompetitive process for services, which does not comply with federal regulations. Suspension and Debarment. City staff were aware of the federal suspension and debarment verification requirements and normally verify this during the procurement process using a contract template that includes a suspension and debarment clause that the contractor signs. However, when the City entered into the contract, it used the contractor’s contract that did not include the clause, and staff did not verify the contractor’s status through another method. Effect of Condition and Questioned Costs. Subrecipient Monitoring. By not clearly identifying the required information in subawards, the City cannot ensure that subrecipients are adequately informed of program requirements for each federal award. By not conducting risk assessments, the City risks inadequately monitoring its subrecipient to ensure it complies with program requirements and uses federal funds appropriately. Procurement. Because the City's policy does not conform to Uniform Guidance, it is at a higher risk of not complying with the most restrictive of federal, state or local procurement requirements when using federal funds for purchases. The City paid one contractor $40,350 in federal program funds without competitively procuring. Without effective internal controls, the City cannot demonstrate it complied with federal procurement requirements, allowed for full and open competition, and received the best price. Suspension and Debarment. The City did not obtain a written certification from the contractor, insert a clause into the contract or check for exclusion records at SAM.gov to verify the contractor it paid $43,776 using federal funds was not suspended or debarred before contracting. Without adequate internal controls, the City increases its risk of awarding federal funds to contractors that are excluded from participating in federal programs. Any payments the City made to an ineligible party would be unallowable, and the awarding agency could potentially recover them. The City subsequently verified the contractor was not suspended or debarred. Therefore, we are not questioning costs. Recommendation. Subrecipient Monitoring. We recommend the City correctly identify its subrecipients and include all required elements in federally funded subaward agreements, perform risk assessments for its subrecipients and monitor them accordingly to verify they are in compliance with the terms and conditions of the award. Procurement. We recommend the City update its procurement policy to conform with federal procurement requirements and strengthen internal controls to ensure it procures goods and services in accordance with federal procurement requirements and its own procurement policies and procedures. Suspension and Debarment. We recommend the City strengthen its internal controls to verify all contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs and maintain documentation demonstrating compliance with this requirement.
Finding 2024-002 – Procurement and Suspension and Debarment Identification of the federal program: U.S. Department of Health and Human Services U.S. Department of Defense Research and Development Cluster Assistance Listing Numbers: 12.910 – Research and Technology Development 93.279 – Drug Use and Addiction Research Programs 93.351 – Research Infrastructure Programs 93.855 – Allergy and Infectious Diseases Research Federal Award Numbers Award Period Pass-Through Entity, if Applicable HR00112420365 7/23/2024-1/22/2026 Texas A&M Engineering Experiment Station (M2404608) U19AI135972-07 1/1/2024-12/31/2024 Icahn School of Medicine at Mount Sinai P51OD011133-26 5/1/2024-4/30/2025 N/A R01DA052845-04 7/1/2023-6/30/2024 N/A Criteria or specific requirement (including statutory, regulatory, or other citation) 2 CFR 200.303(a) requires that a non-federal entity must “(a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 200.318 General procurement standards. (i) Procurement records. The recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. 200.319 Competition. (a) All procurement transactions under the Federal award must be conducted in a manner that provides full and open competition and is consistent with the standards of this section and § 200.320. 200.320 Procurement Methods There are three types of procurement methods described in this section: informal procurement methods (for micro-purchases and simplified acquisitions); formal procurement methods (through sealed bids or proposals); and noncompetitive procurement methods. For any of these methods, the recipient or subrecipient must maintain and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319. (a) Informal procurement methods for small purchases. These procurement methods expedite the completion of transactions, minimize administrative burdens, and reduce costs. Informal procurement methods may be used when the value of the procurement transaction under the Federal award does not exceed the simplified acquisition threshold as defined in § 200.1. Recipients and subrecipients may also establish a lower threshold. Informal procurement methods include: (1) Micro-purchases — (i) Distribution. The aggregate amount of the procurement transaction does not exceed the micro-purchase threshold defined in § 200.1. To the extent practicable, the recipient or subrecipient should distribute micro-purchases equitably among qualified suppliers. (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the recipient or subrecipient considers the price reasonable based on research, experience, purchase history, or other information; and maintains documents to support its conclusion. Purchase cards may be used as a method of payment for micro-purchases. (iii) Micro-purchase thresholds. The recipient or subrecipient is responsible for determining and documenting an appropriate micro-purchase threshold based on internal controls, an evaluation of risk, and its documented procurement procedures. The micro-purchase threshold used by the recipient or subrecipient must be authorized or not prohibited under State, local, or tribal laws or regulations. (2) Simplified acquisitions — (i) Simplified acquisition procedures. The aggregate dollar amount of the procurement transaction is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If simplified acquisition procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. Unless specified by the Federal agency, the recipient or subrecipient may exercise judgment in determining what number is adequate. (ii) Simplified acquisition thresholds. The recipient or subrecipient is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk, and its documented procurement procedures, which may be lower than, but must not exceed, the threshold established in the FAR. (b) Formal procurement methods. Formal procurement methods are required when the value of the procurement transaction under a Federal award exceeds the simplified acquisition threshold of the recipient or subrecipient. Formal procurement methods are competitive and require public notice. The following formal methods of procurement are used for procurement transactions above the simplified acquisition threshold determined by the recipient or subrecipient in accordance with paragraph (a)(2)(ii) of this section: (1) Sealed bids. This is a procurement method in which bids are publicly solicited through an invitation and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid conforms with all the material terms and conditions of the invitation and is the lowest in price. The sealed bids procurement method is preferred for procuring construction services. (i) For sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders have been identified as willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm-fixed-price contract, and the selection of the successful bidder can be made principally based on price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them with sufficient response time prior to the date set for opening the bids. Unless specified by the Federal agency, the recipient or subrecipient may exercise judgment in determining what number is adequate. For local governments, the invitation for bids must be publicly advertised. (B) The invitation for bids must define the items or services with specific information, including any required specifications, for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids. For local governments, the bids must be opened publicly. (D) A firm-fixed-price contract is awarded in writing to the lowest responsive bid and responsible bidder. When specified in the invitation for bids, factors such as discounts, transportation cost, and life-cycle costs must be considered in determining which bid is the lowest. Payment discounts must only be used to determine the low bid when the recipient or subrecipient determines they are a valid factor based on prior experience. (E) The recipient or subrecipient must document and provide a justification for all bids it rejects. (2) Proposals. This is a procurement method used when conditions are not appropriate for using sealed bids. This procurement method may result in either a fixed-price or cost-reimbursement contract. They are awarded in accordance with the following requirements: (i) Requests for proposals require public notice, and all evaluation factors and their relative importance must be identified. Proposals must be solicited from multiple qualified entities. To the maximum extent practicable, any proposals submitted in response to the public notice must be considered. (ii) The recipient or subrecipient must have written procedures for conducting technical evaluations and making selections. (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the recipient or subrecipient considering price and other factors; and (iv) The recipient or subrecipient may use competitive proposal procedures for qualifications-based procurement of architectural/engineering (A/E) professional services whereby the offeror’s qualifications are evaluated, and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where the price is not used as a selection factor, can only be used to procure architectural/engineering (A/E) professional services. The method may not be used to purchase other services provided by A/E firms that are a potential source to perform the proposed effort. (c) Noncompetitive procurement. There are specific circumstances in which the recipient or subrecipient may use a noncompetitive procurement method. The noncompetitive procurement method may only be used if one of the following circumstances applies: (1) The aggregate amount of the procurement transaction does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); (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 of single-use plastic products. See Executive Order 14057, section 101, Policy. 200.324 Contract cost and price. (a) The recipient or subrecipient must perform a cost or price analysis for every procurement transaction, including contract modifications, in excess of the simplified acquisition threshold. The method and degree of analysis conducted depend on the facts surrounding the particular procurement transaction. For example, the recipient or subrecipient should consider potential workforce impacts in their analysis if the procurement transaction will displace public sector employees. However, as a starting point, the recipient or subrecipient must make independent estimates before receiving bids or proposals. (b) Costs or prices based on estimated costs for contracts under the Federal award are allowable only to the extent that the costs incurred or cost estimates included in negotiated prices would be allowable for the recipient or subrecipient under subpart E of this part. The recipient or subrecipient may reference its own cost principles as long as they comply with subpart E of this part. (c) The recipient or subrecipient must not use the “cost plus a percentage of cost” and “percentage of construction costs” methods of contracting. Condition Texas Biomed did not comply with procurement requirements per the Uniform Guidance. Specifically, Texas Biomed did not comply with informal procurement methods for small purchases and noncompetitive procurement requirements. Texas Biomed also did not comply with its own procurement policy in relation to procurements of small purchases and noncompetitive procurements. Additionally, Texas Biomed did not maintain records for certain procurements sufficient to detail the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, the basis for the contract price, and the performance of a cost or price analysis, when required. Cause Texas Biomed did not have effective internal controls and procedures in place to ensure Texas Biomed complied with federal procurement requirements and Texas Biomed’s procurement policy and also maintained records for procurements sufficient to detail the history of procurement, including the rationale for the method of procurement and other required elements, including a cost or price analysis, when required. Effect or potential effect Texas Biomed did not comply with the general procurement standards, methods of procurement, and cost or price analysis requirements, according to the Uniform Guidance. Questioned costs $270,923 in total as follows: $29,438 – Assistance Listing Number 12.910, Award Identification Number – HR00112420365 $149,500 – Assistance Listing Number 93.351, Award Identification Number – P51OD011133-26 $11,295 – Assistance Listing Number 93.855, Award Identification Number – U19AI135972-07 $80,690 – Assistance Listing Number 93.279, Award Identification Number – R01DA052845-04 Questioned costs were computed by using the total procurements over $10,000 that did not adhere to procurement methods per the Uniform Guidance or were not supported by adequate documentation regarding the history of the procurement, including the rationale of the procurement and the performance of a cost or price analysis, when required. Per 2 CFR 200.1, questioned cost means an amount, expended or received from a Federal award, that in the auditor’s judgment: (1) Is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award; (2) At the time of the audit, lacked adequate documentation to support compliance; or (3) Appeared unreasonable and did not reflect the actions a prudent person would take in the circumstances. Context EY issued a material weakness for Texas Biomed related to internal control over procurement in the prior year. Based upon the implementation date for the corrective action provided by management, the finding related to this internal control had not been remediated for the full period under audit. As such, we did not test the operating effectiveness of this control and are issuing a material weakness consistent with the prior year finding. EY tested 12 procurements over the micro-purchase threshold of $10,000, with expenditures totaling $2,148,830 from a population of 48 procurements over $10,000 with expenditures totaling $3,629,769 during the year ended December 31, 2024. For 1 procurement with expenditures in the amount of $29,438 for supplies, Texas Biomed obtained only 2 quotes rather than 3 quotes, as required by Texas Biomed’s procurement policy in effect at the time of the procurement. Documentation of the history of the procurement did not include a reason for obtaining 2 quotes instead of 3 quotes. For 1 procurement with expenditures in the amount of $149,500, related to a total purchase order of $980,500, for animal food, Texas Biomed did not contemporaneously document sole source justification at the time of the procurement. Additionally, since the total purchase order for this procurement exceeded $250,000, the simplified acquisition threshold, a cost or price analysis was required but was not performed. For 2 procurements with expenditures in the amounts of $11,295 for supplies and $80,690 for animal purchases, Texas Biomed did not obtain quotes or document sole source justification or the history of the procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. We consider the expenditures related to these procurements to be questioned costs due to Texas Biomed not adhering to federal procurement requirements per the Uniform Guidance and also Texas Biomed’s procurement policy. Identification as a repeat finding, if applicable This is a repeat finding – Finding 2023-002. Recommendation Texas Biomed should comply with federal procurement requirements, as well as Texas Biomed’s procurement policy with regards to obtaining quotes for small purchases and documentation of sole source justification at the time of the procurement, as applicable. Texas Biomed should retain written documentation for procurements, documenting the history of the procurement prior to the procurement of goods or services including, but not limited to, the rationale for the method of procurement, selection of contract type, contractor selection or rejection, the basis for the contract price, and the performance of a cost or price analysis, when required. Views of responsible officials Management agrees with the finding and will implement corrective action to ensure controls are in place to retain the required written documentation for procurements.