Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Procurement and Suspension and Debarment Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: 84.371C – Comprehensive Literacy Development Federal Award Number: S371C190016-19A (Years: 2017-21) Questioned Costs: $12,921.61 Repeat of Prior Year Findings: FA 2022-002, FA 2023-001 Description: A review of expenditures and journal entries charged to the Comprehensive Literacy Development program revealed that the School District’s internal control procedures were not operating to ensure that appropriate reviews and approvals occurred and the School District’s procurement procedures were followed. Background Information: The Comprehensive Literacy Development Program (CLD) was authorized under Sections 2222-2225 of the Elementary and Secondary Education Act of 1965 to create a comprehensive literacy program to advance literacy skills, including pre-literacy skills, reading, and writing, for children from birth to grade 12, with an emphasis on disadvantaged children, including children living in poverty, English learners, and children with disabilities. CLD funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the expenditure of funds by LEAs. CLD funds totaling $454,278.20 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to 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 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented, (h) Cost must be incurred during the approved budget period…” Lastly, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations and… (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.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Condition: Auditors performed a review of various expenditure activity associated with the CLD program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were identified: • A sample of 60 expenditures was randomly selected for testing using a non-statistical sampling approach. Evidence of review and approval was not reflected for 17 expenditures, and adequate evidence of receipt was not maintained for 20 expenditures. • A sample of two journal entries was randomly selected for testing using a non-statistical sampling approach. Evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for either journal entry tested. • A sample of 45 procurement transactions was randomly selected for testing using a non-statistical sampling approach. Four procurement transactions did not reflect evidence of supervisory review and approval, and the School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources for 13 small purchase procurements reviewed. Questioned Costs: Upon testing a sample of $45,625.42 in procurement transactions, known questioned costs of $12,921.61 were identified for expenditures that did not follow the School District’s procurement procedures. Using the total population of $327,567.83 in procurement transactions, we project the likely questioned costs to be approximately $92,770.73. Cause: The School District did not maintain evidence of review and approval of expenditures, journal entries, and procurement transactions as a result of oversight. Small purchase procurement transactions did not follow the School District’s procurement policy because the Federal Programs Director was unaware that it was necessary to follow these procedures for the purchase of instructional materials. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review expenditures for allowability and journal entries for allowability and period of performance compliance exposes the School District to unnecessary risk of error and misuse of federal funds. In addition, failure to appropriately follow applicable procurement procedures exposes the School District to unnecessary risk of error and misuse of federal funds. Lastly, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the CLD program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures, journal entries, and procurement transactions reflect evidence of review for associated compliance requirements. In addition, expenditure voucher packages should contain all required components. Furthermore, the School District should evaluate and improve internal control procedures to ensure that required procurement methods are properly identified and followed and required procurement documentation is properly identified, safeguarded, and retained. Management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: The finding states evidence of review and approval was not reflected for 17 expenditures. While 3 invoices were not approved, 14 were approved by multiple levels including the building level Principal, Central Office Director, including the Director in charge of the grant, and/or the Superintendent. Additionally, all expenditures charged to the grant were submitted to the Georgia Department of Education for review and approval for reimbursement of expenditures. All expenditures were approved and reimbursed. The finding states adequate evidence of receipt was not maintained for 20 expenditures; however, 10 of the expenditures were not for tangible items. Instead, the expenditures were for dues and fees and travel. Dues and fees and travel expenditures do not have packing slips due to the nature of the activity. Of the remaining 10, all but 1 were approved by multiple levels including the building level Principal, Central Office Director, including the Director in charge of the grant, and/or the Superintendent. Approval for payment isn’t granted unless items are received. The finding states evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for 2 journal entries. Both of the journal entries were usual in nature and occurred in the normal course of business including a journal entry to reverse accounts receivable from the prior year and a journal entry to record accounts receivable in the current year. Both journal entries are annual, standard journal entries that are required under Generally Accepted Accounting Principles. While not approved by the Director in charge of the grant, the journal entry was appropriate, allowable, and necessary to ensure revenues were accurately recorded in the proper accounting period. The finding states 4 procurement transactions did not reflect evidence of supervisory review and approval. While 4 transactions included invoices that were not approved by the Director in charge of the grant, 2 invoices were approved by the building level Principal and the Superintendent, and 1 was approved by the Superintendent. Three of the transactions included purchase orders that were properly approved by the Director in charge of the grant. Auditor’s Concluding Remarks: Under the Uniform Guidance, auditees are required to implement internal controls over federal awards. Upon completing procedures over internal controls associated with the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, and Procurement and Suspension and Debarment compliance requirements, auditors obtained an understanding of internal controls put in place and subsequently tested those controls. Auditors noted that the internal controls described by the School District were not in place for the transactions identified. Based on this information, we reaffirm our finding and will review the status of the finding during our next audit.
U.S. Department of Environmental Protection Agency Passed through State Department of Natural Resources and Conservation FFAL# 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Procurement, Suspension and Debarment Material Non-compliance Material Weakness in Internal Control Criteria: • 2 CFR §200.303 requires non-federal entities to establish and maintain effective internal control over federal awards. • 2 CFR §200.318 requires non-federal entities to have and follow written procurement procedures that conform to applicable federal laws and standards. • 2 CFR §200.320 outlines requirements for procurement to be followed depending on the purchase threshold. • 2 CFR §200.213 requires non-federal entities to ensure that entities with which they contract are not suspended or debarred from federal programs. Condition: The District does not have documented internal controls over procurement activities. Additionally, the District did not follow procurement methods including obtaining quotes or bids as necessary or perform any of the required suspension and debarment procedures for vendors, such as verifying that vendors were not excluded from federal programs. Further, the District does not have a written procurement policy as required by Uniform Guidance. Cause: The District has not implemented documented internal controls or written procurement policies and did not perform suspension and debarment checks. Effect: Failure to implement these requirements increases the risk of noncompliance with Uniform Guidance and may result in unallowable costs or questioned costs. Questioned Costs: $1,124,156 Context/Sampling: A nonstatistical sample of three vendors were selected for testing. Repeat Finding from Prior Years: No. Recommendation: We recommend the District: • Develop and adopt a written procurement policy that complies with Uniform Guidance requirements. • Implement documented internal controls over procurement activities, including procedures for suspension and debarment checks. • Train staff responsible for procurement to ensure compliance with federal requirements. Views of Responsible Officials: Agree.
Finding Reference: 2024-006 – I. Procurement, Suspension and Debarment Federal Program Information Federal Agencies: Department of Treasury Awards: Assistance Listing 21.027 – COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award Periods: July 1, 2023 – December 31, 2026 Description: Incomplete Federal Requirements within Procurement Policies Criteria In accordance with Title 2 U.S. Code of Federal Regulations, Part 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).” Part 200.320 Methods of procurement to be followed states the following: “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” regarding the methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. Condition As part of our testing over the operating effectiveness of internal controls over the Procurement, Suspension and Debarment assertion for our major programs, we noted that the Corporation did not have a procurement policy that conforms to all applicable standards contained in the Uniform Guidance, when purchasing goods or services with the federal funds. Cause The Corporation did not comply and maintain a procurement policy that conforms to the provisions required by the Uniform Guidance upon receiving such federal funds related to their federal programs. Effect or potential effect Purchasing of goods and/or servicing with the major federal programs may not be in compliance with the Uniform Guidance. Questioned costs None. Identification of a repeat finding This is a repeat finding of Finding 2023-001. Context Management has not established a procurement policy in line with the applicable standards contained in the Uniform Guidance based on review of the existing policy and discussions with management, however, no other instances of noncompliance with procurement standards identified in 2 CFR part 200 were noted as the amount of purchases exceeding the micro-purchase threshold was not direct and material to this program and therefore no further testing over procurement was performed. Recommendation The Corporation should update its procurement policy to include the provisions required by the Uniform Guidance for purchasing goods and/or services with federal funds. View of responsible officials There is no disagreement with the audit finding.
Finding 2024-003: Documentation of Procurement and Competitive Bidding Procedures Condition During testing of procurement transactions, we noted that a vendor was selected for services without documented evidence that competitive bidding or price quotations were obtained, and the procurement file did not include documentation describing the basis for vendor selection. While Home Start, Inc.’s fiscal policies allow for the use of oral quotes and permit vendor selection based on responsiveness and advantage to the Organization considering factors such as price, quality, and other relevant considerations, the procurement documentation maintained by the Organization did not include evidence that quotes were obtained or documentation supporting the basis for vendor selection. Criteria Under 2 CFR §200.318(a), non-federal entities must establish and maintain effective internal controls over the procurement process to ensure compliance with federal statutes, regulations, and the terms and conditions of federal awards. Additionally, 2 CFR §200.318(i) requires non-federal entities to maintain records sufficient to detail the history of procurement, including documentation of the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Further, 2 CFR §§200.319–200.320 require that procurements be conducted in a manner providing full and open competition, and that appropriate price or rate quotations be obtained depending on the procurement method. Cause The Organization did not consistently maintain documentation supporting the procurement process, including evidence of quotes obtained or documentation explaining the basis for vendor selection when competitive quotes were not documented. Effect The absence of procurement documentation reduces the Organization’s ability to demonstrate compliance with Uniform Guidance procurement requirements and increases the risk that procurements funded with federal awards may not meet federal competition standards. Recommendation We recommend that management strengthen procurement documentation procedures to ensure that procurement files include sufficient documentation of the competitive bidding or quotation process, including: • Evidence of quotes or bids obtained, including oral quotes where permitted by policy. • Documentation supporting the evaluation and selection of vendors. • Written justification when competitive bids or quotes are not obtained, consistent with both Uniform Guidance requirements (2 CFR §200.318(i)) and the Organization’s fiscal policies. Implementing these procedures will help ensure that procurement activities funded by federal awards are adequately documented and compliant with Uniform Guidance procurement standards.
Material Weakness Finding No. 2024-003: Procurement Policies U.S. Department of Health and Human Services Substance Abuse and Mental Health Services Federal Assistance Listing Number 93.243. U.S. Department of Health and Human Services Health Care for Native Hawaiians Federal Assistance Listing Number 93.932. Criteria The Uniform Guidance 2 CFR §200.320 sets forth the methods of procurement to be followed in the acquisition of property or services required under a Federal award or subaward, which includes formal purchase methods such as proposal or bids when the value of the property or services under a Federal financial assistance award exceeds a certain threshold, as defined. Furthermore, 2 CFR §200.320(c) provides specific circumstances in which noncompetitive procurement can be used. Condition During our audit, we noted that the Organization entered into contracts with entities which were subject to a formal purchase method, for which competitive processes for selection were not performed, nor was documentation of the specific criteria of 2 CFR §200.320(c) met to support noncompetitive procurements maintained. Cause Management had not updated its policies and procedures to incorporate certain pertinent sections of the procurement standards of the Uniform Guidance. Effect The lack of procurement standards in accordance with the Uniform Guidance may result in allowable cost issues. Identification of a Repeat Finding This finding was reported as a federal award finding in the immediately previous audit as Finding No. 2023-003. Recommendation We recommend that the Organization incorporate and adhere to the procurement standards of the Uniform Guidance to its policies and procedures manual to ensure compliance with Federal standards, including 2 CFR §200.318(h) which stipulates that sufficient detail of the history of the procurement must be maintained, including the selection of the contractor.
Condition: Upon inquiry of county personnel and a test of nineteen (19) disbursements, the following weaknesses were noted: • The County did not advertise bids for at least three weeks. • The County does not have written standards of conduct that cover conflicts of interest and govern the performance of its employees engaged in the selection, award, and administration of contract. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: The Board acknowledges the need to incorporate specific federal clause language and procurement documentation standards into the County’s written procurement policy. • The County procurement policy will be updated to include required federal purchase and Uniform Guidance provisions. • Standardized procurement documentation procedures will be implemented for purchases involving federal funds. • Training will be provided to relevant personnel regarding federal purchasing requirements. • A compliance checklist will be adopted for federal expenditures to ensure documentation consistency. • Federal procurement requirements will be reviewed with personnel prior to project initiation, and documentation will be evaluated at project close out to confirm compliance. No questioned costs were identified in connection with these findings. County Clerk: The County will gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Criteria: 2 CFR § 200.317 through 200.327 General Procurement Standards reads as follows: When procuring property and services under a Federal award, a State must follow the same policies and procedures it uses for procurements from its non-Federal funds. The State will comply with §§ 200.321, 200.322, and 200.323 and ensure that every purchase order or other contract includes any clauses required by § 200.327. All other non-Federal entities, including subrecipients of a State, must follow the procurement standards in §§ 200.318 through 200.327. 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 purchases orders. 2 CFR § 200.320 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 CFR § 3474.1 gives regulatory effect to the Department of Education for 2 CFR Part 200. Effective on December 26, 2014, 2 CFR §200.320 outlined the methods of procurement to be followed by state subrecipients non-Federal entities when expending certain types of Federal funds, including those received through Grant Agreements. However, 2 CFR §200.110(a), created a "grace period" for compliance with 2 CFR §200.320, by permitting non-Federal entities to comply with previously issued Office of Management and Budget procurement guidance for all fiscal years beginning prior to December 26, 2017. Ohio Rev. Code §§ 3313.843 and 3313.845 allow traditional schools to contract with Educational Service Centers (ESCs) to provide services as outlined in the agreement between the two parties. Ohio Rev. Code §3313.843(C) requires these agreements to be filed with the Ohio Department of Education and Workforce (DEW) by the first day of July of the school year for which the agreement is in effect. During fiscal year 2024, the District contracted with Wood County Educational Service Center (ESC) to provide purchased services. These services included expenditures of $175,808, which were paid for out of the Special Education Cluster Grants and subject to the Federal procurement laws. Under 2 CFR §200.320 the District should have competitively bid the services needed or obtained price quotes from qualified sources. Due to a lack of controls over the procurement process related to Federal contracts, these services were not competitively bid and price quotes were not obtained. In January 2020, DEW published a form that allows schools to request DEW authorize a noncompetitive proposal for their ESC Services. This form is available on DEW's website and should be completed and maintained by schools moving forward. The District should develop and implement control and procedures to verify that established procurement procedures are followed when entering into contracts using Federal monies. The DEW form that allows schools to request DEW authorize a noncompetitive proposal for their ESC Services should be utilized for any ESC contract in the future. Failure to follow proper procurement procedures could result in contracts awarded to entities which do not meet all the needs of the District or have a cost significantly higher than their competitors, as well as a loss in future federal funding and possible questioned costs in future audits.
FINDING 2024-005 Subject: Child Nutrition Cluster - Procurement and Suspension and Debarment Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 22-23, FY 23-24 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of the entity will be achieved. For federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards to provide reasonable assurance that the entity will comply with applicable federal statutes, regulations, and the terms and conditions of its awards. Internal control is not one event or circumstance, but a dynamic and continual process. The process is based on fundamental principles that operate as whole. The fundamental principles are related to five components of internal controls which are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in all five of the components. INDIANA STATE BOARD OF ACCOUNTS 35 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Control Environment The School Corporation had not established a strong foundation for an effective internal control system. There was no demonstrated emphasis on the importance of internal controls or on compliance with federal program requirements. Risk Assessment The School Corporation had not defined objectives necessary to identify risks or determine risk tolerances. Management did not identify, analyze, or respond to risks that could affect the achievement of objectives, including risks arising from significant changes to operations or the potential for fraud. Control Activities - 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 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. The School Corporation did not have internal controls in place to ensure the purchasing method used complied with federal and state requirements. We identified three vendors in fiscal year 2022-2023 and three vendors in 2023-2024 that fell within the small purchase threshold. All vendors were selected for testing. The School Corporation did not obtain price or rate quotes for any of the vendors tested that were less than the simplified acquisition threshold of $150,000 but exceeded the $10,000 micro-purchase threshold. Additionally, the School Corporation did not enter into a contract for two of the six vendors as required by Indiana Code for purchases between $50,000 and $150,000. Finally, documentation detailing the history of the procurement, which must include the reason for the procurement method used, was not available for audit. We identified 125 micro-purchases for the audit period. Of the 125 micro-purchases, 25 were selected for testing. Documentation detailing the history of the procurement, which must include the reason for the procurement method used, was not available for audit for all 25 micro-purchases tested. Control Activities - Suspension and Debarment Prior to entering into subawards and covered transactions with federal 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 SAMs exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. INDIANA STATE BOARD OF ACCOUNTS 36 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiry of the School Corporation in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the School Corporation disclosed procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transaction. We identified two vendors in 2022-2023 and two vendors in 2023-2024 for which suspension and debarment procedures should have been performed. All vendors were selected for testing. For all vendors, the School Corporation did not perform procedures to ensure the vendors paid with federal grant funds were not suspended or debarred prior to entering into the covered transaction. Information and Communication The School Corporation had not established adequate communication methods or practices to ensure that reliable information was identified, captured, and communicated to the appropriate internal and external parties. Monitoring The School Corporation did not perform ongoing or periodic evaluations to determine whether internal controls were operating effectively or to identify needed improvement. In addition, the School Corporation did not have a process in place to track or to follow-up on corrective actions written in response to audit findings. The lack of internal controls and noncompliance were systemic issues 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. . . . INDIANA STATE BOARD OF ACCOUNTS 37 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 states in part: "The non-Federal Entity must have and use documented procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement . . . (1) Micro-purchases– . . . (ii) Micro-purchase awards. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. . . . (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 form an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." Indiana Code 5-22-8-3(d) states in part: ". . . the purchasing agent shall award a contract to the lowest responsible and responsive offeror . . ." 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 The School Corporation had not implemented an effective system of internal controls. Changes in key financial personnel, along with insufficient employee training, contributed to processes and procedures not being properly developed or consistently followed. Policies and procedures were not properly implemented to ensure that appropriate procurement methods were used, histories of procurements were documented, and price or rate quotes for small purchases were obtained. Additionally, vendors' suspension and debarment statuses were not being verified. INDIANA STATE BOARD OF ACCOUNTS 38 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Because the five components of internal control were not properly designed or implemented, the School Corporation's internal control system could not be effective. As a result, general and fraud-related risks, as well as risks arising from significant operational changes, could negatively impact the School Corporation. Existing internal control deficiencies may continue undetected, and additional weaknesses may exist without being identified. Furthermore, by not properly completing the procurement process the School Corporation could have overpaid for goods or services. Additionally, the School Corporation could have made payments to a vendor that was suspended or debarred. Payments to a suspended or debarred vendor are unallowable. Questioned Costs There were no questioned costs identified. Recommendation We recommended the School Corporation design and implement a system of internal controls, which would include policies and procedures related to the five components of internal control. Management should define clear objectives, identify and assess risks, and develop policies and procedures to address those risks. Regular monitoring should be conducted to ensure internal controls are operating effectively and deficiencies are addressed promptly. Additionally, we recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards use the appropriate procurement method. Finally, we recommended that the School Corporation's management verify applicable vendors are not suspended or debarred prior to making payment. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Coronavirus State and Local Fiscal Recovery Funds – Assistance Listing No. 21.027 U.S. Department of Treasury Missouri Primary Care Association Criteria or specific requirement – Procurement (2 CFR 200.319 and 2 CFR 200.320) Condition – The Organization’s internal controls over compliance were not sufficient to ensure the appropriate procurement method was utilized based on the value of the procurement transaction or to ensure procurement transactions were conducted in a manner that provided full and open competition. Cause – The Organization did not follow its policy when procuring services during the pre-construction phase of a project later funded by federal grants. Effect or potential effect – A contract for services was entered into during 2022 with estimated fees in excess of the threshold requiring a formal procurement method. The request for proposal did not allow for full and open competition as the Organization did not publicly request proposals or bids and only one proposal was obtained. Services purchased in 2024 under this contract may not have been obtained in the most effective manner. Questioned costs – Unknown Context – A sample of one procurement totaling $336,274 was tested out of a population of three procurements. The sample was not, and is not intended to be, statistically valid. The Organization’s procurement records were insufficient in accordance with the Organization’s procurement policy and Uniform Guidance. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should educate employees on its procurement policy, which is compliant with Uniform Guidance. The Organization should also implement additional internal controls, such as the creation of a standard form or template for purchase orders, contracts, requests for proposals/bids, cost/price analyses, bid evaluation, etc., to ensure compliance with its procurement policy and that procurement records sufficient to detail the history of each procurement transaction are maintained. Views of responsible officials and planned corrective actions – This error occurred during fiscal year 2022, when the architect for an upcoming project was chosen. We are in a very rural area, where architects are not easy to come by. For this project, we had decided to utilize a local firm we had a good track record with. We presented it to our board for approval, and it was approved by them at that time so we originally had thought we could justify with having them as a sole source vendor. At the time, the total amount of the project was unknown, and has even changed significantly since that date. However, come to find out, due to the size of the project it should have been bid out. We have revised our procurement policy since this date and have educated all staff on proper procurement procedures.
Coronavirus State and Local Fiscal Recovery Funds – Assistance Listing No. 21.027 U.S. Department of Treasury Missouri Primary Care Association Criteria or specific requirement – Procurement (2 CFR 200.319 and 2 CFR 200.320) Condition – The Organization’s internal controls over compliance were not sufficient to ensure the appropriate procurement method was utilized based on the value of the procurement transaction or to ensure procurement transactions were conducted in a manner that provided full and open competition. Cause – The Organization did not follow its policy when procuring services during the pre-construction phase of a project later funded by federal grants. Effect or potential effect – A contract for services was entered into during 2022 with estimated fees in excess of the threshold requiring a formal procurement method. The request for proposal did not allow for full and open competition as the Organization did not publicly request proposals or bids and only one proposal was obtained. Services purchased in 2024 under this contract may not have been obtained in the most effective manner. Questioned costs – Unknown Context – A sample of one procurement totaling $336,274 was tested out of a population of three procurements. The sample was not, and is not intended to be, statistically valid. The Organization’s procurement records were insufficient in accordance with the Organization’s procurement policy and Uniform Guidance. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should educate employees on its procurement policy, which is compliant with Uniform Guidance. The Organization should also implement additional internal controls, such as the creation of a standard form or template for purchase orders, contracts, requests for proposals/bids, cost/price analyses, bid evaluation, etc., to ensure compliance with its procurement policy and that procurement records sufficient to detail the history of each procurement transaction are maintained. Views of responsible officials and planned corrective actions – This error occurred during fiscal year 2022, when the architect for an upcoming project was chosen. We are in a very rural area, where architects are not easy to come by. For this project, we had decided to utilize a local firm we had a good track record with. We presented it to our board for approval, and it was approved by them at that time so we originally had thought we could justify with having them as a sole source vendor. At the time, the total amount of the project was unknown, and has even changed significantly since that date. However, come to find out, due to the size of the project it should have been bid out. We have revised our procurement policy since this date and have educated all staff on proper procurement procedures.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds; Health Center Program Cluster Assistance Listing Number: 21.027; 93.224/93.527 Pass-Through Entity: Cook County Department of Public Health, N/A Pass-Through Number: None; N/A Award Periods: May 1, 2023-November 30, 2026; July 1, 2021 – June 30, 2023. Type of Finding: Material weakness in internal control over compliance Criteria: 2 CFR section 200.320 outlines the acceptable methods of procurement. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used in certain circumstances however the non-Federal entity is to maintain appropriate documentation justifying the use of sole source procurement consistent with 2 CFR 200.320(c). Condition: Legacy did not maintain appropriate documentation to support the procurement method utilized for procurements selected for testing. Questioned Costs: Unknown. Context: One (1) of two (2) transactions selected for testing within 21.027 and three (3) of three (3) transactions selected for testing within 93.224/93.527. Cause: Legacy did not maintain appropriate documentation based on the method of procurement utilized. Effect: Legacy may inadvertently select vendors without regard to fair competition and cost analysis. Repeat Finding: Yes. Prior Year Finding: 2023-005. Recommendation: We recommend Legacy consistently follow its established policies and procedures related to maintaining necessary documentation to support the method of procurement utilized. Legacy may also consider qualifying multiple vendors for particular goods/service and then utilizing an approved vendors list. Views of Responsible Officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds; Health Center Program Cluster Assistance Listing Number: 21.027; 93.224/93.527 Pass-Through Entity: Cook County Department of Public Health, N/A Pass-Through Number: None; N/A Award Periods: May 1, 2023-November 30, 2026; July 1, 2021 – June 30, 2023. Type of Finding: Material weakness in internal control over compliance Criteria: 2 CFR section 200.320 outlines the acceptable methods of procurement. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used in certain circumstances however the non-Federal entity is to maintain appropriate documentation justifying the use of sole source procurement consistent with 2 CFR 200.320(c). Condition: Legacy did not maintain appropriate documentation to support the procurement method utilized for procurements selected for testing. Questioned Costs: Unknown. Context: One (1) of two (2) transactions selected for testing within 21.027 and three (3) of three (3) transactions selected for testing within 93.224/93.527. Cause: Legacy did not maintain appropriate documentation based on the method of procurement utilized. Effect: Legacy may inadvertently select vendors without regard to fair competition and cost analysis. Repeat Finding: Yes. Prior Year Finding: 2023-005. Recommendation: We recommend Legacy consistently follow its established policies and procedures related to maintaining necessary documentation to support the method of procurement utilized. Legacy may also consider qualifying multiple vendors for particular goods/service and then utilizing an approved vendors list. Views of Responsible Officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds; Health Center Program Cluster Assistance Listing Number: 21.027; 93.224/93.527 Pass-Through Entity: Cook County Department of Public Health, N/A Pass-Through Number: None; N/A Award Periods: May 1, 2023-November 30, 2026; July 1, 2021 – June 30, 2023. Type of Finding: Material weakness in internal control over compliance Criteria: 2 CFR section 200.320 outlines the acceptable methods of procurement. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used in certain circumstances however the non-Federal entity is to maintain appropriate documentation justifying the use of sole source procurement consistent with 2 CFR 200.320(c). Condition: Legacy did not maintain appropriate documentation to support the procurement method utilized for procurements selected for testing. Questioned Costs: Unknown. Context: One (1) of two (2) transactions selected for testing within 21.027 and three (3) of three (3) transactions selected for testing within 93.224/93.527. Cause: Legacy did not maintain appropriate documentation based on the method of procurement utilized. Effect: Legacy may inadvertently select vendors without regard to fair competition and cost analysis. Repeat Finding: Yes. Prior Year Finding: 2023-005. Recommendation: We recommend Legacy consistently follow its established policies and procedures related to maintaining necessary documentation to support the method of procurement utilized. Legacy may also consider qualifying multiple vendors for particular goods/service and then utilizing an approved vendors list. Views of Responsible Officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds; Health Center Program Cluster Assistance Listing Number: 21.027; 93.224/93.527 Pass-Through Entity: Cook County Department of Public Health, N/A Pass-Through Number: None; N/A Award Periods: May 1, 2023-November 30, 2026; July 1, 2021 – June 30, 2023. Type of Finding: Material weakness in internal control over compliance Criteria: 2 CFR section 200.320 outlines the acceptable methods of procurement. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used in certain circumstances however the non-Federal entity is to maintain appropriate documentation justifying the use of sole source procurement consistent with 2 CFR 200.320(c). Condition: Legacy did not maintain appropriate documentation to support the procurement method utilized for procurements selected for testing. Questioned Costs: Unknown. Context: One (1) of two (2) transactions selected for testing within 21.027 and three (3) of three (3) transactions selected for testing within 93.224/93.527. Cause: Legacy did not maintain appropriate documentation based on the method of procurement utilized. Effect: Legacy may inadvertently select vendors without regard to fair competition and cost analysis. Repeat Finding: Yes. Prior Year Finding: 2023-005. Recommendation: We recommend Legacy consistently follow its established policies and procedures related to maintaining necessary documentation to support the method of procurement utilized. Legacy may also consider qualifying multiple vendors for particular goods/service and then utilizing an approved vendors list. Views of Responsible Officials: There is no disagreement with the audit finding.
2024-006 Procurement Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Entities receiving federal awards must have and use their documented procurement policies. Title 2 CFR 200.320 outlines the acceptable methods of procurement and establishes the maximum thresholds allowed. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used only in certain circumstances as allowed for in 2 CFR 200.320(c). Condition The Organization’s procurement policy allows the Board to authorize noncompetitive procurement for certain types expenditures which are outside the circumstances allowing for noncompetitive bids under 2 CFR 200.320(c). In addition, the Organization did not follow its documented procurement policy. Cause The Organization’s procurement policy was not compared with the federal regulations when it was developed. Management did not follow its established procurement policy and documentation was not maintained evidencing its compliance with the policy. Effect The Organization may overpay for goods and services due to selecting vendors without appropriate consideration of the competitive bids and cost analysis. Questioned Costs $514,086 (of which $318,272 was previously reported in findings 2024-004 and 2024-005 above) Context In a sample of sixty invoices, we noted fourteen with issues related to the procurement process. Four of these related to the Organization’s procurement policy being non-compliant with the federal requirements. Two of these were due to the Organization not following their established procurement policy and eight were due to the lack of appropriate documentation of the competitive bids. Recommendation We recommend the Organization maintain documentation supporting reports filed with awarding agencies. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-006 Procurement Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Entities receiving federal awards must have and use their documented procurement policies. Title 2 CFR 200.320 outlines the acceptable methods of procurement and establishes the maximum thresholds allowed. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used only in certain circumstances as allowed for in 2 CFR 200.320(c). Condition The Organization’s procurement policy allows the Board to authorize noncompetitive procurement for certain types expenditures which are outside the circumstances allowing for noncompetitive bids under 2 CFR 200.320(c). In addition, the Organization did not follow its documented procurement policy. Cause The Organization’s procurement policy was not compared with the federal regulations when it was developed. Management did not follow its established procurement policy and documentation was not maintained evidencing its compliance with the policy. Effect The Organization may overpay for goods and services due to selecting vendors without appropriate consideration of the competitive bids and cost analysis. Questioned Costs $514,086 (of which $318,272 was previously reported in findings 2024-004 and 2024-005 above) Context In a sample of sixty invoices, we noted fourteen with issues related to the procurement process. Four of these related to the Organization’s procurement policy being non-compliant with the federal requirements. Two of these were due to the Organization not following their established procurement policy and eight were due to the lack of appropriate documentation of the competitive bids. Recommendation We recommend the Organization maintain documentation supporting reports filed with awarding agencies. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-006 Procurement Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Entities receiving federal awards must have and use their documented procurement policies. Title 2 CFR 200.320 outlines the acceptable methods of procurement and establishes the maximum thresholds allowed. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used only in certain circumstances as allowed for in 2 CFR 200.320(c). Condition The Organization’s procurement policy allows the Board to authorize noncompetitive procurement for certain types expenditures which are outside the circumstances allowing for noncompetitive bids under 2 CFR 200.320(c). In addition, the Organization did not follow its documented procurement policy. Cause The Organization’s procurement policy was not compared with the federal regulations when it was developed. Management did not follow its established procurement policy and documentation was not maintained evidencing its compliance with the policy. Effect The Organization may overpay for goods and services due to selecting vendors without appropriate consideration of the competitive bids and cost analysis. Questioned Costs $514,086 (of which $318,272 was previously reported in findings 2024-004 and 2024-005 above) Context In a sample of sixty invoices, we noted fourteen with issues related to the procurement process. Four of these related to the Organization’s procurement policy being non-compliant with the federal requirements. Two of these were due to the Organization not following their established procurement policy and eight were due to the lack of appropriate documentation of the competitive bids. Recommendation We recommend the Organization maintain documentation supporting reports filed with awarding agencies. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-006 Procurement Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Entities receiving federal awards must have and use their documented procurement policies. Title 2 CFR 200.320 outlines the acceptable methods of procurement and establishes the maximum thresholds allowed. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used only in certain circumstances as allowed for in 2 CFR 200.320(c). Condition The Organization’s procurement policy allows the Board to authorize noncompetitive procurement for certain types expenditures which are outside the circumstances allowing for noncompetitive bids under 2 CFR 200.320(c). In addition, the Organization did not follow its documented procurement policy. Cause The Organization’s procurement policy was not compared with the federal regulations when it was developed. Management did not follow its established procurement policy and documentation was not maintained evidencing its compliance with the policy. Effect The Organization may overpay for goods and services due to selecting vendors without appropriate consideration of the competitive bids and cost analysis. Questioned Costs $514,086 (of which $318,272 was previously reported in findings 2024-004 and 2024-005 above) Context In a sample of sixty invoices, we noted fourteen with issues related to the procurement process. Four of these related to the Organization’s procurement policy being non-compliant with the federal requirements. Two of these were due to the Organization not following their established procurement policy and eight were due to the lack of appropriate documentation of the competitive bids. Recommendation We recommend the Organization maintain documentation supporting reports filed with awarding agencies. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-006 Procurement Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Entities receiving federal awards must have and use their documented procurement policies. Title 2 CFR 200.320 outlines the acceptable methods of procurement and establishes the maximum thresholds allowed. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used only in certain circumstances as allowed for in 2 CFR 200.320(c). Condition The Organization’s procurement policy allows the Board to authorize noncompetitive procurement for certain types expenditures which are outside the circumstances allowing for noncompetitive bids under 2 CFR 200.320(c). In addition, the Organization did not follow its documented procurement policy. Cause The Organization’s procurement policy was not compared with the federal regulations when it was developed. Management did not follow its established procurement policy and documentation was not maintained evidencing its compliance with the policy. Effect The Organization may overpay for goods and services due to selecting vendors without appropriate consideration of the competitive bids and cost analysis. Questioned Costs $514,086 (of which $318,272 was previously reported in findings 2024-004 and 2024-005 above) Context In a sample of sixty invoices, we noted fourteen with issues related to the procurement process. Four of these related to the Organization’s procurement policy being non-compliant with the federal requirements. Two of these were due to the Organization not following their established procurement policy and eight were due to the lack of appropriate documentation of the competitive bids. Recommendation We recommend the Organization maintain documentation supporting reports filed with awarding agencies. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-006 Procurement Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Entities receiving federal awards must have and use their documented procurement policies. Title 2 CFR 200.320 outlines the acceptable methods of procurement and establishes the maximum thresholds allowed. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used only in certain circumstances as allowed for in 2 CFR 200.320(c). Condition The Organization’s procurement policy allows the Board to authorize noncompetitive procurement for certain types expenditures which are outside the circumstances allowing for noncompetitive bids under 2 CFR 200.320(c). In addition, the Organization did not follow its documented procurement policy. Cause The Organization’s procurement policy was not compared with the federal regulations when it was developed. Management did not follow its established procurement policy and documentation was not maintained evidencing its compliance with the policy. Effect The Organization may overpay for goods and services due to selecting vendors without appropriate consideration of the competitive bids and cost analysis. Questioned Costs $514,086 (of which $318,272 was previously reported in findings 2024-004 and 2024-005 above) Context In a sample of sixty invoices, we noted fourteen with issues related to the procurement process. Four of these related to the Organization’s procurement policy being non-compliant with the federal requirements. Two of these were due to the Organization not following their established procurement policy and eight were due to the lack of appropriate documentation of the competitive bids. Recommendation We recommend the Organization maintain documentation supporting reports filed with awarding agencies. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-006 Procurement Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Entities receiving federal awards must have and use their documented procurement policies. Title 2 CFR 200.320 outlines the acceptable methods of procurement and establishes the maximum thresholds allowed. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used only in certain circumstances as allowed for in 2 CFR 200.320(c). Condition The Organization’s procurement policy allows the Board to authorize noncompetitive procurement for certain types expenditures which are outside the circumstances allowing for noncompetitive bids under 2 CFR 200.320(c). In addition, the Organization did not follow its documented procurement policy. Cause The Organization’s procurement policy was not compared with the federal regulations when it was developed. Management did not follow its established procurement policy and documentation was not maintained evidencing its compliance with the policy. Effect The Organization may overpay for goods and services due to selecting vendors without appropriate consideration of the competitive bids and cost analysis. Questioned Costs $514,086 (of which $318,272 was previously reported in findings 2024-004 and 2024-005 above) Context In a sample of sixty invoices, we noted fourteen with issues related to the procurement process. Four of these related to the Organization’s procurement policy being non-compliant with the federal requirements. Two of these were due to the Organization not following their established procurement policy and eight were due to the lack of appropriate documentation of the competitive bids. Recommendation We recommend the Organization maintain documentation supporting reports filed with awarding agencies. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-006 Procurement Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Entities receiving federal awards must have and use their documented procurement policies. Title 2 CFR 200.320 outlines the acceptable methods of procurement and establishes the maximum thresholds allowed. Purchases below the simplified acquisition threshold, but above the micro-purchase threshold, require price or rate quotations to be obtained from an adequate number of qualified sources. Noncompetitive procurement can be used only in certain circumstances as allowed for in 2 CFR 200.320(c). Condition The Organization’s procurement policy allows the Board to authorize noncompetitive procurement for certain types expenditures which are outside the circumstances allowing for noncompetitive bids under 2 CFR 200.320(c). In addition, the Organization did not follow its documented procurement policy. Cause The Organization’s procurement policy was not compared with the federal regulations when it was developed. Management did not follow its established procurement policy and documentation was not maintained evidencing its compliance with the policy. Effect The Organization may overpay for goods and services due to selecting vendors without appropriate consideration of the competitive bids and cost analysis. Questioned Costs $514,086 (of which $318,272 was previously reported in findings 2024-004 and 2024-005 above) Context In a sample of sixty invoices, we noted fourteen with issues related to the procurement process. Four of these related to the Organization’s procurement policy being non-compliant with the federal requirements. Two of these were due to the Organization not following their established procurement policy and eight were due to the lack of appropriate documentation of the competitive bids. Recommendation We recommend the Organization maintain documentation supporting reports filed with awarding agencies. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
Finding 2023-001 Noncompliance and material weakness in internal control over compliance with procurement requirements Federal Agency: Department of Housing and Urban Development Assistance Listing Number: 14.251 Assistance Listing Name: Community Project Funding Award Number: B-23-CP-WA-1530 Criteria Nonfederal entities must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. For acquisitions exceeding the simplified acquisition threshold, the nonfederal entity must use one of the following procurement methods: the sealed bid method if the acquisition meets the criteria in 2 CFR section 200.320(b)(i); the competitive proposals method under the conditions specified in 2 CFR section 200.320(b)(2); or the noncompetitive proposals method (i.e., solicit a proposal from only one source) but only when one or more of four circumstances are met, in accordance with 2 CFR section 200.320(c)). Condition and Effect During our testing of the procurement compliance requirement, we noted that the Aquarium had not performed the required procurement procedures for one of the vendors in our sample. For this one vendor the acquisition exceeded the simplified acquisition threshold. The Aquarium used a noncompetitive method to select the vendor; however, the acquisition did not meet one of the four qualifying circumstances for a noncompetitive procurement. Cause The Aquarium’s system of internal control did not operate effectively to prevent the Aquarium from incorrectly using a noncompetitive procurement process, when instead a proscribed competitive procurement process should have been followed. Context During the year under audit there was a total population of nine vendors to which the procurement compliance requirement applied. For our testing of the procurement compliance requirement, we tested a sample of two vendors from the total population of nine. As noted in the condition section above, our testing found that the Aquarium did not comply with the procurement compliance requirements for one of the vendors tested. We also noted that the procurement activity for this vendor occurred in 2017 and prior to the Aquarium seeking federal funding for the Ocean Pavilion project. Questioned Costs Payments to that one vendor during 2023 that were charged to the major federal program totaled $118,845. Repeat Finding This is not a repeat finding. Recommendation We recommend management provide training for those involved with procurement activities for acquisitions that will be charged to federal awards to ensure the Aquarium’s procurement policies and procedures are consistently applied. We also recommend management update the Aquarium’s procurement policies and procedures to ensure they incorporate the required procedures and controls to ensure compliance with the procurement requirements in 2 CFR 200 (the Uniform Guidance) for acquisitions that will be charged to federal awards. Views of Responsible Officials and Corrective Action Plan Management agrees with the finding and has provided the accompanying corrective action plan.
Finding 2023-003: Significant Deficiency - Internal Control Over Procurement, Suspension and Debarment Program Water and Waste Disposal Systems for Rural Communities Federal Agency U.S. Department of Agriculture Assistance Listing Number 10.760 Criteria: For federal awards after January 1, 2018, guidance provided in 2 CFR part 200.318 requires nonfederal entities to establish and follow their own documented procurement procedures that conform to applicable federal law and standards. 2 CFR part 200.320 includes different allowable methods of procurement. There are also requirements to verify the vendors are not suspended or debarred. Condition/Context: During our testing for this program, we noted that the City did not have a written procurement policy to conform with Uniform Guidance requirements. The City contracted with a thirdparty administrator who provided the services related to procurement for this grant program. Cause: The City was not aware that a written policy was required to be in place outside of the terms and condition in the grant agreement. Effect: Without an adequate policy in place, procurement procedures may not adhere to requirements of federal awards. Questioned Costs: None noted. Recommendation: Program personnel should become familiar with the procurement, suspension and debarment rules for Federal programs and implement a formal written policy to conform with Uniform Guidance requirements. Views of Responsible Officials: Management agrees with the finding and will make efforts to implement a formal procurement policy.
Assistance Listing, Federal Agency, and Program Name - ALN 47.074, National Science Foundation, Biological Sciences - Collaborative Research: Phenobase: Community, Infrastructure, and Data for Global Scale Analyses of Plant Phenology; ALN 47.074, National Science Foundation, Biological Sciences - REU Site: Plant Biology and Conservation Research Experiences for Undergraduates Federal Award Identification Number and Year - DBI-2223510, DBI2149888 Pass through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - 2 CFR 180.300 - 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 of 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 200.318(i) - The entity must maintain records sufficient to detail the history of procurement. These records will include, but are not 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 200.319(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. 2 CFR 200.320(a)(2)(i) - 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. Condition - The Society did not have documentation to support that two covered transactions were checked for potential suspension or debarment before entering into the transaction. There was one covered transaction where the Society did not have documentation to support the procurement process followed or that more than one vendor was reviewed for pricing before selecting the vendor chosen. Questioned Costs - The Society charged a total of $31,000 to grant DBI-2223510 during 2023 for a covered transaction in which there was not supporting documentation that the service was procured under the requirements above. Identification of How Questioned Costs Were Computed - The amount of the covered transaction that was submitted for reimbursement during 2023. Context - Two covered transactions with total expenditures charged to the grants of $85,735 were reviewed. The population subject to testing included a total of three covered transactions. Cause and Effect - The Society experienced significant personnel turnover during the year within its accounting and grants departments, which resulted in issues with documentation retention and records retrieval. Recommendation - The Society should implement an internal review process of its record retention to ensure that all procurement documentation is appropriately retained in accordance with its formal policies. Views of Responsible Officials and Planned Corrective Actions - Staff turnover in early 2023 resulted in limited capacity for dedicated staff to check for potential suspension or debarment before adding vendors to the system. We have dedicated staff who will be managing this process going forward. The Society has written procurement policies and procedures. Key leadership stakeholders have been apprised of our policies and procedures. The Society will be implementing a training series for government funded procurement stakeholders within the Society to ensure compliance.
Assistance Listing, Federal Agency, and Program Name - ALN 47.074, National Science Foundation, Biological Sciences - Collaborative Research: Phenobase: Community, Infrastructure, and Data for Global Scale Analyses of Plant Phenology; ALN 47.074, National Science Foundation, Biological Sciences - REU Site: Plant Biology and Conservation Research Experiences for Undergraduates Federal Award Identification Number and Year - DBI-2223510, DBI2149888 Pass through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - 2 CFR 180.300 - 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 of 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 200.318(i) - The entity must maintain records sufficient to detail the history of procurement. These records will include, but are not 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 200.319(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. 2 CFR 200.320(a)(2)(i) - 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. Condition - The Society did not have documentation to support that two covered transactions were checked for potential suspension or debarment before entering into the transaction. There was one covered transaction where the Society did not have documentation to support the procurement process followed or that more than one vendor was reviewed for pricing before selecting the vendor chosen. Questioned Costs - The Society charged a total of $31,000 to grant DBI-2223510 during 2023 for a covered transaction in which there was not supporting documentation that the service was procured under the requirements above. Identification of How Questioned Costs Were Computed - The amount of the covered transaction that was submitted for reimbursement during 2023. Context - Two covered transactions with total expenditures charged to the grants of $85,735 were reviewed. The population subject to testing included a total of three covered transactions. Cause and Effect - The Society experienced significant personnel turnover during the year within its accounting and grants departments, which resulted in issues with documentation retention and records retrieval. Recommendation - The Society should implement an internal review process of its record retention to ensure that all procurement documentation is appropriately retained in accordance with its formal policies. Views of Responsible Officials and Planned Corrective Actions - Staff turnover in early 2023 resulted in limited capacity for dedicated staff to check for potential suspension or debarment before adding vendors to the system. We have dedicated staff who will be managing this process going forward. The Society has written procurement policies and procedures. Key leadership stakeholders have been apprised of our policies and procedures. The Society will be implementing a training series for government funded procurement stakeholders within the Society to ensure compliance.
Federal Agency: U.S. Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: SLFRP0135 – 2021 Pass-Through Agency: Wisconsin Department of Administration Pass-Through Number(s): ARPA-NIF-072 Award Period: March 3, 2021 through December 31, 2024 Type of Finding: • Significant Deficiency in Internal Control over Compliance and Other Matter Criteria or specific requirement: 2 CFR 200.320 Methods of Procurement state that if the small purchases method is used, price or rate quotations must be obtained from an adequate number of qualified sources. The City should have internal controls designed to ensure compliance with those provisions. Condition: The City did not follow controls related to ensuring procurement policies were followed. Questioned Costs: None Context: There were 55 transactions that exceeded procurement thresholds during the granting period. The sample size selected tested was 19. During our testing, it was noted on 6 of the 19 items tested that the City was not following the requirements under the adopted procurement policies. Cause: The City did not follow the requirements under the adopted procurement policies. Effect: The County is not in compliance with procurement requirements. Contracts for construction, non- construction related procurements, and those over the simplified acquisition threshold may not be in compliance with the Uniform Guidance. Repeat Finding: The finding is not a repeat of a finding in the immediately prior year. Recommendation: We recommend the City design controls to ensure an adequate review process is in place to review potential contractors to determine they are not suspended or debarred. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: SLFRP0135 – 2021 Pass-Through Agency: Wisconsin Department of Administration Pass-Through Number(s): ARPA-NIF-072 Award Period: March 3, 2021 through December 31, 2024 Type of Finding: • Significant Deficiency in Internal Control over Compliance and Other Matter Criteria or specific requirement: 2 CFR 200.320 Methods of Procurement state that if the small purchases method is used, price or rate quotations must be obtained from an adequate number of qualified sources. The City should have internal controls designed to ensure compliance with those provisions. Condition: The City did not follow controls related to ensuring procurement policies were followed. Questioned Costs: None Context: There were 55 transactions that exceeded procurement thresholds during the granting period. The sample size selected tested was 19. During our testing, it was noted on 6 of the 19 items tested that the City was not following the requirements under the adopted procurement policies. Cause: The City did not follow the requirements under the adopted procurement policies. Effect: The County is not in compliance with procurement requirements. Contracts for construction, non- construction related procurements, and those over the simplified acquisition threshold may not be in compliance with the Uniform Guidance. Repeat Finding: The finding is not a repeat of a finding in the immediately prior year. Recommendation: We recommend the City design controls to ensure an adequate review process is in place to review potential contractors to determine they are not suspended or debarred. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: SLFRP0135 – 2021 Pass-Through Agency: Wisconsin Department of Administration Pass-Through Number(s): ARPA-NIF-072 Award Period: March 3, 2021 through December 31, 2024 Type of Finding: • Significant Deficiency in Internal Control over Compliance and Other Matter Criteria or specific requirement: 2 CFR 200.320 Methods of Procurement state that if the small purchases method is used, price or rate quotations must be obtained from an adequate number of qualified sources. The City should have internal controls designed to ensure compliance with those provisions. Condition: The City did not follow controls related to ensuring procurement policies were followed. Questioned Costs: None Context: There were 55 transactions that exceeded procurement thresholds during the granting period. The sample size selected tested was 19. During our testing, it was noted on 6 of the 19 items tested that the City was not following the requirements under the adopted procurement policies. Cause: The City did not follow the requirements under the adopted procurement policies. Effect: The County is not in compliance with procurement requirements. Contracts for construction, non- construction related procurements, and those over the simplified acquisition threshold may not be in compliance with the Uniform Guidance. Repeat Finding: The finding is not a repeat of a finding in the immediately prior year. Recommendation: We recommend the City design controls to ensure an adequate review process is in place to review potential contractors to determine they are not suspended or debarred. Views of responsible officials: There is no disagreement with the audit finding.
Finding 2023-001: Procurement Policy Information on the Federal Program: All Criteria: According to 2 CFR §200.303, 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). Additionally, according to 2 CFR §200.318 Procurement standards, 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 Procurement Standards. 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. The non-Federal entity must have written procedures for procurement transactions." Additionally, according to 2 CFR §200.318 Procurement standards, 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 Procurement Standards. 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. The non-Federal entity must have written procedures for procurement transactions. Condition: During our testing performed over procurement and through inquiries with management, we noted the Organization does not have a formally documented procurement policy in place that is consistent with 2 CFR §200.318(a). Cause: Management has not formalized and implemented an official organizational procurement policy. Effect or Potential Effect: An official procurement policy will outline specified thresholds for which procurement is required, required documentation needed for each threshold, and individuals responsible for ensuring procurement is performed in all required circumstances. When no policy is in place, there is a risk that procurement would not be performed, or adequate documentation would not be obtained, when required. Questioned Costs: None noted. Context: We noted that the Organization does not have a documented procurement policy in effect.Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that management formalize and implement an official procurement policy. This policy should include thresholds for which various levels of procurement are required. The policy should also include what documentation is required for each level of procurement. Additionally, the policy should specify individuals responsible for conducting procurement, and approving the final selection.
Federal Agency: U.S. Department of Health and Human Services Program Title: Consolidated Health Centers Assistance Listing Number: 93.224 and 93.527 Award Period: January 1, 2023 to December 31, 2023 Type of Finding: Compliance and Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: § 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 approved procurement methods used for the acquisition of property or services required under a Federal award or sub-award. Condition: The Organization did not have documentation of multiple quotes for certain capital purchases as stated under their procurement policy. Questioned costs: None Cause: In certain circumstances the Organization utilizes a supply chain vendor for equipment and supply acquisitions, however the documentation around multiple quotes was not received and maintained. Effect: The Organization may inadvertently select vendors without regard to fair competition and cost analysis. Recommendation: Management should adhere to or revise the Organization’s existing procurement policy and implement a system of processes and internal controls to ensure that the appropriate level of documentation is maintained based on the procurement methodology selected for a transaction of contract. Views of responsible officials and planned corrective actions: There is no disagreement with the audit finding. Management identified that subsequent to the conclusion of the 2022 audit in May of 2023 procedures were implemented to the procurement process to assure adherence with the Organization’s policy on a go forward basis. The expenditures in question tested for 2023 were spent in the first quarter of 2023 prior to the procedure improvements and therefore caused the repeat finding.
Federal Agency: U.S. Department of Health and Human Services Program Title: Consolidated Health Centers Assistance Listing Number: 93.224 and 93.527 Award Period: January 1, 2023 to December 31, 2023 Type of Finding: Compliance and Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: § 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 approved procurement methods used for the acquisition of property or services required under a Federal award or sub-award. Condition: The Organization did not have documentation of multiple quotes for certain capital purchases as stated under their procurement policy. Questioned costs: None Cause: In certain circumstances the Organization utilizes a supply chain vendor for equipment and supply acquisitions, however the documentation around multiple quotes was not received and maintained. Effect: The Organization may inadvertently select vendors without regard to fair competition and cost analysis. Recommendation: Management should adhere to or revise the Organization’s existing procurement policy and implement a system of processes and internal controls to ensure that the appropriate level of documentation is maintained based on the procurement methodology selected for a transaction of contract. Views of responsible officials and planned corrective actions: There is no disagreement with the audit finding. Management identified that subsequent to the conclusion of the 2022 audit in May of 2023 procedures were implemented to the procurement process to assure adherence with the Organization’s policy on a go forward basis. The expenditures in question tested for 2023 were spent in the first quarter of 2023 prior to the procedure improvements and therefore caused the repeat finding.
Criteria: Under the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires certain elements to be part of the District's procurement standards. The general procurement standards require the District to have and use documented procurement procedures that conform to the procurement standards identified in §§ 200.317 through 200.327 of the Uniform Guidance. The details of these requirements can be found in Title 2, Part 200, CFR Section 318(a). The procurement standard also requires written documentation including criteria for when sole source solicitation may be used. The District's written sole source policy does not state that sole source may be used in a public emergency; when a pass-through entity expressly authorizes; or after solicitation of more than one, competition is determined inadequate. The details of these requirements can be found in 2 CFR Section 320(c)(2). Please refer to URL https://www.ecfr.gov/current/title-2/subtitle-A/chapter-II/part- 200#200.320. Condition/Context: The District has not formally updated their procurement policies to include the thresholds and policies required by the federal government uniform guidance Title 2, Part 200, 2 CFR Section 320 on competitive bidding. Additionally, procurement procedures, specifically required by the federal government for use in sole source solicitations, were not performed for expenses using federal awards. Effect: Major federal programs tested required procurement policies and specific competitive bidding procedures to comply with the use of awarded federal funds to the District. As of the date of this report, the District is not in compliance with those requirements. Cause: The District had not formally amended their procurement policies to conform to the federal procurement policies before spending federal funds. Additionally, the District uses a third-party grant manager (Electrical District #3, Pinal County Arizona) to perform competitive procurement on the District's behalf, in which all federal funds reimburse Electrical District #3 who had paid the vendor awarded the work through competitive means. The third-party grant manager was not awarded in conformity with sole source requirements. Recommendation: We recommend that management formally adopt amendments to their existing procurement policies to conform with U.S. Code of Federal Regulations, Title 2, Part 200, Uniform Administrative Guidance CFR Section 318(a). Additionally, we recommend management perform competitive procurement on all purchases made with federal funds and pay all vendors awarded directly from the District and not through a third-party conduit grant manager. Views of Responsible Officials and Planned Corrective Action: Management concurs with the finding, see corrective action plan.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Identification of the federal program: Federal Agency: United States Department of Health and Human Services, Health Resources and Services Administration (HRSA) Pass-Through Entities: North Dakota Department of Health, South Dakota Department of Health and Minnesota Department of Health Assistance Listing: 93.155; COVID-19 Rural Health Research Centers Award Numbers: Various Award Year: FY 2021 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).” The Uniform Guidance 2 CFR Section 200.213 states, “Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal assistance programs or activities”. In addition, Uniform Guidance 2 CFR Section 200.320 (c) states: “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.” Further, Uniform Guidance 2 CFR Section 200.320(a)(2) states: Small purchases – “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.” Condition: We noted the following matters during our testing of Procurement and Suspension and Debarment compliance requirements: • A third-party vendor performed the suspension and debarment validation process for Sanford. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For a portion of the year, Sanford relied on the suspension and debarment checks performed by the third-party vendor for results concluding no match without completing a validation control to ensure the results provided by the third-party vendor were accurate. • We noted instances where the vendor screening for suspension and debarment was not performed prior to setting up the vendor in the System and procuring the goods/services. Section III—Federal Award Findings and Questioned Costs (continued) • For certain procurement transactions tested, we noted Sanford did not adhere to the compliance requirements and did not follow its procurement policy by maintaining documentation related to cost/price analysis or sole-source procurement and completing the sole-source justification forms timely. Cause: Sanford utilizes a third-party vendor to perform suspension and debarment checks on its vendors, both during the vendor setup process as well as ongoing monitoring of active vendors. Sanford did not add an additional validation control until August 2023 to ensure that the suspension and debarment checks performed by the third-party vendor aligned with the governmental suspension and debarment database when the search resulted in no match. In addition, Sanford did not follow its procurement policy and perform the vendor screening for suspension and debarment prior to setting up the vendor in the system and transacting with the vendors. Furthermore, Sanford, prior to entering into the procurement transaction, did not complete the sole-source justification forms, or maintain documentation to support the sole-sourced procurements for those procurement transactions that exceeded the small purchase threshold. Effect or potential effect: Sanford’s screening for suspension and debarment through the third-party vendor results may not be accurate for the period January 1, 2023 through July 31, 2023. Further, by not performing the vendor screening for suspension and debarment prior to transacting with the vendor, Sanford could have potentially entered into a business transaction with suspended or debarred parties. Sanford did not comply with the federal procurement requirements and its procurement policy by not maintaining adequate documentation to support the cost/price analysis or sole sourced vendor selections in addition to not timely completing the sole source justification forms. Section III—Federal Award Findings and Questioned Costs (continued) Questioned costs: $307,249 determined as the amount of the procurement expenditures included in the Schedule of Expenditures of Federal Awards for two procurement transactions that had inadequate documentation to justify sole source selection. Context: To ensure compliance with 2 CFR Section 200.213, Sanford conducts both preventive and detective controls in its vendor setup and monitoring process to ensure new vendors and active vendors are not suspended or debarred. A consistent vendor setup process is followed for each new vendor that Sanford transacts with, regardless of whether the vendor transactions are funded through federal grant funding or through other sources. To prevent a suspended or debarred vendor from being added as a new vendor, the vendor is checked against the suspension and debarment database electronically before completion of the vendor setup. Subsequent to vendor setup, Sanford also monitors the status of its vendors to ensure the vendor’s status has not changed. We selected 25 new vendors to verify that the suspension and debarment screening was performed and performed timely. We noted for 3 of the 25 vendors, the suspension and debarment screening was not performed prior to setting up the vendor in the system and for 1 of these vendors, Sanford had entered into a transaction prior to performing the suspension and debarment screening. We selected 8 procurement transactions that exceeded the small purchase threshold. Of the 8 transactions, 4 transactions did not follow the federal procurement standards and Sanford’s procurement policy which requires sole source documentation be completed prior to procuring the items. Additionally, for 2 of these 4 transactions, Sanford did not have sufficient documentation maintained to support the cost/price analysis performed or justification to support the sole source selection of the vendors. Total federal expenditures subject to suspension and debarment is $2,870,421, and federal expenditures exceeding the micro purchase threshold is $2,298,733. Total federal expenditures under the program, as reported on the SEFA, is $2,870,421. Identification as a repeat finding, if applicable: This finding is a repeat of Finding 2022-001 in the prior year. Recommendation: Management should ensure that the suspension and debarment screening is performed prior to entering into the transaction with the vendor and also ensure that it follows the procurement policy to verify suspension and debarment of the vendor prior to setting up the vendor in the system. In addition, Management should ensure that any sole sourced purchases or when quotes are obtained, that those be documented prior to entering into the procurement transaction. Views of responsible officials: Sanford continues to document periodic validation of the suspension and debarment search results performed by the third-party vendor for vendor searches that yield no suspension and debarment match. Additionally, as part of the periodic validation, Sanford will include a validation to ensure a suspension and debarment search is completed prior to setting the vendor up in the system. Sanford will re-educate appropriate staff regarding the process to verify a suspension and debarment search is completed prior to setting up the vendor in the system. Sanford’s preventative and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being paid to vendors that are suspended or debarred. Sanford’s preventive and detective controls and operating procedures provide reasonable assurance over the effectiveness of the controls necessary to prevent the risk of federal funds being utilized for items that do not adhere to the procurement standards. Sanford will re-educate applicable parties and enhance its procedural documentation regarding procurement. Sanford will implement a monthly review process of federal funds utilized for procurement.
Criteria or specific requirement: The Code of Federal Regulations, 2 CFR 200.320, requires that nonfederal entities must have and use documented procurement procedures. Such procurement procedures must reflect the standards identified in 2 CFR 200.320. These standards require various elements, such as cover conflict of interests, avoiding acquisition of unnecessary or duplicative items, maintaining records sufficient to detail the history of procurement, and conducting procurement in a manner providing full and open competition and adhering to the required methods of procurement for the acquisition of property and services. The required methods of procurement: • Micro purchases: These purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. • Small purchases: For purchases of which the dollar amount 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. • Procurement by 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. • Procurement by competitive 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. • Noncompetitive procurement: This procurement method is when a proposal form only one source is used. This form of procurement can only be used when an item is only available from a single source, for a public emergency, the awarding agency expressly authorizes the proposal, or, after solicitation of a number of sources, competition is determined inadequate. Condition: The Company's written procurement policy did not address the federally required elements of written procurement policies listed above. Context: Based on our review of the Company's procurement policy, we noted that the policy did not include documented procurement procedures for the required elements above. Cause: Management was unaware of the requirements that such elements should be included in their written procurement policy. Effect: The Company is not in compliance with procurement policy requirements as outlined by 2 CFR 200.320. Recommendation: We recommend the Company update its written procurement policy so that it incorporates all required procurement elements as outlined by 2 CFR 200.320. Views of responsible officials: There is no disagreement with the audit finding.