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.
Procurement, Suspension and Debarment Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services and U.S. Department of Defense Federal Cluster: Research and Development (R&D) Pass-Through Entity: The University of Texas Health (93.853, NS119834) Assistance Listing Nos.: 12.420, 93.310, 93.353, 93.393, and 93.853 Award Numbers: W81XWH-15-1-0292 (12.420), OD23121 (93.310), CA246568 (93.353), CA259201 (93.393), NS119834 (93.853), NS122096 (93.853) Award Periods: Various Criteria or specific requirement (including statutory, regulatory or other citation): 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).” Section 200.320(a)(2)(i) of the Uniform Guidance states the following regarding 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.” Section 200.320(b) of the Uniform Guidance states the following regarding formal procurement methods to be followed: “When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section.” Section 200.214 of the Uniform Guidance states “Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 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.” The Clinic procurement justification form for procurements more than $25,000 requires completion of the rationale for the procurement and a search of the federal government’s exclusion list to be performed and documented at the time of the procurement. On a monthly basis, Supply Chain Management performs a review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures. Condition: Internal Control For five (56%) of nine procurement transactions tested for operating effectiveness of internal controls, the procurement justification form used by the Clinic to document the history of the procurement and compliance with Uniform Guidance CFR 200.303, was not completed until after the purchase order was created and/or invoice received from the vendor. In addition, for these same five procurement transactions, the Clinic did not timely document its suspension and debarment check at the time of procurement as required by its procurement justification form. In addition, for four (44%) of nine procurement transactions tested for operating effectiveness of internal controls (two of which relate to the five cited above), the procurement justification form used by the Clinic to document the procurement transaction’s compliance with policies, procedures and the Uniform Guidance was outdated. Furthermore, the monthly review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures was not operating effectively. Compliance For one (9%) of 11 procurement transactions tested for compliance, the procurement was an add-on purchase related to a larger procurement of the same product under a prior purchase order. The prior procurement was above the simplified acquisition threshold and the Clinic’s competitive bid threshold. The Clinic did not complete a procurement justification form for the add-on purchase (which was a small purchase), and the original procurement did not have adequate support to evidence that it had been competitively bid. As such, adequate documentation did not exist for the procurement in accordance with Uniform Guidance Section 230.320(a)(2)(i) and(b). In addition, for five procurement transactions, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Cause: While management has internal controls in place to review procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures and Uniform Guidance CFR 200.320, the review of the procurement justification form is not robust enough to identify errors and there is not a process in place to ensure the form is completed prior to the purchase. Effect or potential effect: The Clinic’s internal controls over procurement were not properly followed during the fiscal year. In addition, the Clinic did not follow the Uniform Guidance requirements related to small purchases and noncompetitive procurements. Questioned costs: $53,482, determined as the amount of the procurement expenditures included in the schedule of expenditures of federal awards for the year ended December 31, 2023, for the one procurement transaction that had inadequate support for compliance with CFR 200.320 at the time of procurement, as follows: • Assistance Listing No. 93.310, OD023121 – $53,482 Context: Internal Control We sampled nine federal procurements over $25,000 to test operating effectiveness of internal controls, totaling $962,393, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For seven of the 11 federal procurements tested totaling $770,093, procurement controls were not operating effectively. • For five of 11 procurement transactions tested totaling $529,273, the independent suspension and debarment check to be performed at the time of procurement was not performed until approximately two to eight months later. Compliance We sampled 11 federal procurements over $25,000 to test compliance, totaling $1,736,844, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For one of 11 federal procurements tested totaling $53,482, documentation retained was not adequate to support that the procurement transaction was executed in accordance with the Uniform Guidance Sections 200.320(a)(2)(i) and (b). • For five of 11 procurement transactions tested totaling $529,273, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Procurement-related expenditures are approximately 9% of total Federal expenditures for the R&D Cluster of $445,961,340 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat of the finding of the prior year. Recommendation: The Clinic should ensure that all R&D awards that require procurement of goods and services follow established policies, procedures, and internal controls to comply with the Uniform Guidance procurement standards and that the procurement justification form is reviewed prior to entering into the purchase transaction. The Clinic should ensure that independent checks for suspension and debarment should be timely completed at the time of procurement in accordance with the Clinic documented policies, procedures, and internal controls. Views of responsible officials: Management will reinforce education and training to the research community and procurement teams regarding the procurement requirements, Justification of Source Selection Checklist/Form, and timely completion of the required documentation. The Clinic utilizes a third party, Visual Compliance, to execute daily supplier sanction and debarment checks for all Mayo Clinic vendors. All third party suspension and debarment match alerts are reviewed and adjudicated as needed. Going forward, the Clinic will supplement this daily review by periodically validating a sample of vendors who are not flagged with an alert by Visual Compliance.
Procurement, Suspension and Debarment Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services and U.S. Department of Defense Federal Cluster: Research and Development (R&D) Pass-Through Entity: The University of Texas Health (93.853, NS119834) Assistance Listing Nos.: 12.420, 93.310, 93.353, 93.393, and 93.853 Award Numbers: W81XWH-15-1-0292 (12.420), OD23121 (93.310), CA246568 (93.353), CA259201 (93.393), NS119834 (93.853), NS122096 (93.853) Award Periods: Various Criteria or specific requirement (including statutory, regulatory or other citation): 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).” Section 200.320(a)(2)(i) of the Uniform Guidance states the following regarding 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.” Section 200.320(b) of the Uniform Guidance states the following regarding formal procurement methods to be followed: “When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section.” Section 200.214 of the Uniform Guidance states “Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 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.” The Clinic procurement justification form for procurements more than $25,000 requires completion of the rationale for the procurement and a search of the federal government’s exclusion list to be performed and documented at the time of the procurement. On a monthly basis, Supply Chain Management performs a review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures. Condition: Internal Control For five (56%) of nine procurement transactions tested for operating effectiveness of internal controls, the procurement justification form used by the Clinic to document the history of the procurement and compliance with Uniform Guidance CFR 200.303, was not completed until after the purchase order was created and/or invoice received from the vendor. In addition, for these same five procurement transactions, the Clinic did not timely document its suspension and debarment check at the time of procurement as required by its procurement justification form. In addition, for four (44%) of nine procurement transactions tested for operating effectiveness of internal controls (two of which relate to the five cited above), the procurement justification form used by the Clinic to document the procurement transaction’s compliance with policies, procedures and the Uniform Guidance was outdated. Furthermore, the monthly review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures was not operating effectively. Compliance For one (9%) of 11 procurement transactions tested for compliance, the procurement was an add-on purchase related to a larger procurement of the same product under a prior purchase order. The prior procurement was above the simplified acquisition threshold and the Clinic’s competitive bid threshold. The Clinic did not complete a procurement justification form for the add-on purchase (which was a small purchase), and the original procurement did not have adequate support to evidence that it had been competitively bid. As such, adequate documentation did not exist for the procurement in accordance with Uniform Guidance Section 230.320(a)(2)(i) and(b). In addition, for five procurement transactions, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Cause: While management has internal controls in place to review procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures and Uniform Guidance CFR 200.320, the review of the procurement justification form is not robust enough to identify errors and there is not a process in place to ensure the form is completed prior to the purchase. Effect or potential effect: The Clinic’s internal controls over procurement were not properly followed during the fiscal year. In addition, the Clinic did not follow the Uniform Guidance requirements related to small purchases and noncompetitive procurements. Questioned costs: $53,482, determined as the amount of the procurement expenditures included in the schedule of expenditures of federal awards for the year ended December 31, 2023, for the one procurement transaction that had inadequate support for compliance with CFR 200.320 at the time of procurement, as follows: • Assistance Listing No. 93.310, OD023121 – $53,482 Context: Internal Control We sampled nine federal procurements over $25,000 to test operating effectiveness of internal controls, totaling $962,393, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For seven of the 11 federal procurements tested totaling $770,093, procurement controls were not operating effectively. • For five of 11 procurement transactions tested totaling $529,273, the independent suspension and debarment check to be performed at the time of procurement was not performed until approximately two to eight months later. Compliance We sampled 11 federal procurements over $25,000 to test compliance, totaling $1,736,844, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For one of 11 federal procurements tested totaling $53,482, documentation retained was not adequate to support that the procurement transaction was executed in accordance with the Uniform Guidance Sections 200.320(a)(2)(i) and (b). • For five of 11 procurement transactions tested totaling $529,273, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Procurement-related expenditures are approximately 9% of total Federal expenditures for the R&D Cluster of $445,961,340 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat of the finding of the prior year. Recommendation: The Clinic should ensure that all R&D awards that require procurement of goods and services follow established policies, procedures, and internal controls to comply with the Uniform Guidance procurement standards and that the procurement justification form is reviewed prior to entering into the purchase transaction. The Clinic should ensure that independent checks for suspension and debarment should be timely completed at the time of procurement in accordance with the Clinic documented policies, procedures, and internal controls. Views of responsible officials: Management will reinforce education and training to the research community and procurement teams regarding the procurement requirements, Justification of Source Selection Checklist/Form, and timely completion of the required documentation. The Clinic utilizes a third party, Visual Compliance, to execute daily supplier sanction and debarment checks for all Mayo Clinic vendors. All third party suspension and debarment match alerts are reviewed and adjudicated as needed. Going forward, the Clinic will supplement this daily review by periodically validating a sample of vendors who are not flagged with an alert by Visual Compliance.
Procurement, Suspension and Debarment Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services and U.S. Department of Defense Federal Cluster: Research and Development (R&D) Pass-Through Entity: The University of Texas Health (93.853, NS119834) Assistance Listing Nos.: 12.420, 93.310, 93.353, 93.393, and 93.853 Award Numbers: W81XWH-15-1-0292 (12.420), OD23121 (93.310), CA246568 (93.353), CA259201 (93.393), NS119834 (93.853), NS122096 (93.853) Award Periods: Various Criteria or specific requirement (including statutory, regulatory or other citation): 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).” Section 200.320(a)(2)(i) of the Uniform Guidance states the following regarding 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.” Section 200.320(b) of the Uniform Guidance states the following regarding formal procurement methods to be followed: “When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section.” Section 200.214 of the Uniform Guidance states “Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 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.” The Clinic procurement justification form for procurements more than $25,000 requires completion of the rationale for the procurement and a search of the federal government’s exclusion list to be performed and documented at the time of the procurement. On a monthly basis, Supply Chain Management performs a review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures. Condition: Internal Control For five (56%) of nine procurement transactions tested for operating effectiveness of internal controls, the procurement justification form used by the Clinic to document the history of the procurement and compliance with Uniform Guidance CFR 200.303, was not completed until after the purchase order was created and/or invoice received from the vendor. In addition, for these same five procurement transactions, the Clinic did not timely document its suspension and debarment check at the time of procurement as required by its procurement justification form. In addition, for four (44%) of nine procurement transactions tested for operating effectiveness of internal controls (two of which relate to the five cited above), the procurement justification form used by the Clinic to document the procurement transaction’s compliance with policies, procedures and the Uniform Guidance was outdated. Furthermore, the monthly review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures was not operating effectively. Compliance For one (9%) of 11 procurement transactions tested for compliance, the procurement was an add-on purchase related to a larger procurement of the same product under a prior purchase order. The prior procurement was above the simplified acquisition threshold and the Clinic’s competitive bid threshold. The Clinic did not complete a procurement justification form for the add-on purchase (which was a small purchase), and the original procurement did not have adequate support to evidence that it had been competitively bid. As such, adequate documentation did not exist for the procurement in accordance with Uniform Guidance Section 230.320(a)(2)(i) and(b). In addition, for five procurement transactions, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Cause: While management has internal controls in place to review procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures and Uniform Guidance CFR 200.320, the review of the procurement justification form is not robust enough to identify errors and there is not a process in place to ensure the form is completed prior to the purchase. Effect or potential effect: The Clinic’s internal controls over procurement were not properly followed during the fiscal year. In addition, the Clinic did not follow the Uniform Guidance requirements related to small purchases and noncompetitive procurements. Questioned costs: $53,482, determined as the amount of the procurement expenditures included in the schedule of expenditures of federal awards for the year ended December 31, 2023, for the one procurement transaction that had inadequate support for compliance with CFR 200.320 at the time of procurement, as follows: • Assistance Listing No. 93.310, OD023121 – $53,482 Context: Internal Control We sampled nine federal procurements over $25,000 to test operating effectiveness of internal controls, totaling $962,393, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For seven of the 11 federal procurements tested totaling $770,093, procurement controls were not operating effectively. • For five of 11 procurement transactions tested totaling $529,273, the independent suspension and debarment check to be performed at the time of procurement was not performed until approximately two to eight months later. Compliance We sampled 11 federal procurements over $25,000 to test compliance, totaling $1,736,844, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For one of 11 federal procurements tested totaling $53,482, documentation retained was not adequate to support that the procurement transaction was executed in accordance with the Uniform Guidance Sections 200.320(a)(2)(i) and (b). • For five of 11 procurement transactions tested totaling $529,273, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Procurement-related expenditures are approximately 9% of total Federal expenditures for the R&D Cluster of $445,961,340 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat of the finding of the prior year. Recommendation: The Clinic should ensure that all R&D awards that require procurement of goods and services follow established policies, procedures, and internal controls to comply with the Uniform Guidance procurement standards and that the procurement justification form is reviewed prior to entering into the purchase transaction. The Clinic should ensure that independent checks for suspension and debarment should be timely completed at the time of procurement in accordance with the Clinic documented policies, procedures, and internal controls. Views of responsible officials: Management will reinforce education and training to the research community and procurement teams regarding the procurement requirements, Justification of Source Selection Checklist/Form, and timely completion of the required documentation. The Clinic utilizes a third party, Visual Compliance, to execute daily supplier sanction and debarment checks for all Mayo Clinic vendors. All third party suspension and debarment match alerts are reviewed and adjudicated as needed. Going forward, the Clinic will supplement this daily review by periodically validating a sample of vendors who are not flagged with an alert by Visual Compliance.
Procurement, Suspension and Debarment Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services and U.S. Department of Defense Federal Cluster: Research and Development (R&D) Pass-Through Entity: The University of Texas Health (93.853, NS119834) Assistance Listing Nos.: 12.420, 93.310, 93.353, 93.393, and 93.853 Award Numbers: W81XWH-15-1-0292 (12.420), OD23121 (93.310), CA246568 (93.353), CA259201 (93.393), NS119834 (93.853), NS122096 (93.853) Award Periods: Various Criteria or specific requirement (including statutory, regulatory or other citation): 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).” Section 200.320(a)(2)(i) of the Uniform Guidance states the following regarding 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.” Section 200.320(b) of the Uniform Guidance states the following regarding formal procurement methods to be followed: “When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section.” Section 200.214 of the Uniform Guidance states “Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 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.” The Clinic procurement justification form for procurements more than $25,000 requires completion of the rationale for the procurement and a search of the federal government’s exclusion list to be performed and documented at the time of the procurement. On a monthly basis, Supply Chain Management performs a review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures. Condition: Internal Control For five (56%) of nine procurement transactions tested for operating effectiveness of internal controls, the procurement justification form used by the Clinic to document the history of the procurement and compliance with Uniform Guidance CFR 200.303, was not completed until after the purchase order was created and/or invoice received from the vendor. In addition, for these same five procurement transactions, the Clinic did not timely document its suspension and debarment check at the time of procurement as required by its procurement justification form. In addition, for four (44%) of nine procurement transactions tested for operating effectiveness of internal controls (two of which relate to the five cited above), the procurement justification form used by the Clinic to document the procurement transaction’s compliance with policies, procedures and the Uniform Guidance was outdated. Furthermore, the monthly review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures was not operating effectively. Compliance For one (9%) of 11 procurement transactions tested for compliance, the procurement was an add-on purchase related to a larger procurement of the same product under a prior purchase order. The prior procurement was above the simplified acquisition threshold and the Clinic’s competitive bid threshold. The Clinic did not complete a procurement justification form for the add-on purchase (which was a small purchase), and the original procurement did not have adequate support to evidence that it had been competitively bid. As such, adequate documentation did not exist for the procurement in accordance with Uniform Guidance Section 230.320(a)(2)(i) and(b). In addition, for five procurement transactions, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Cause: While management has internal controls in place to review procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures and Uniform Guidance CFR 200.320, the review of the procurement justification form is not robust enough to identify errors and there is not a process in place to ensure the form is completed prior to the purchase. Effect or potential effect: The Clinic’s internal controls over procurement were not properly followed during the fiscal year. In addition, the Clinic did not follow the Uniform Guidance requirements related to small purchases and noncompetitive procurements. Questioned costs: $53,482, determined as the amount of the procurement expenditures included in the schedule of expenditures of federal awards for the year ended December 31, 2023, for the one procurement transaction that had inadequate support for compliance with CFR 200.320 at the time of procurement, as follows: • Assistance Listing No. 93.310, OD023121 – $53,482 Context: Internal Control We sampled nine federal procurements over $25,000 to test operating effectiveness of internal controls, totaling $962,393, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For seven of the 11 federal procurements tested totaling $770,093, procurement controls were not operating effectively. • For five of 11 procurement transactions tested totaling $529,273, the independent suspension and debarment check to be performed at the time of procurement was not performed until approximately two to eight months later. Compliance We sampled 11 federal procurements over $25,000 to test compliance, totaling $1,736,844, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For one of 11 federal procurements tested totaling $53,482, documentation retained was not adequate to support that the procurement transaction was executed in accordance with the Uniform Guidance Sections 200.320(a)(2)(i) and (b). • For five of 11 procurement transactions tested totaling $529,273, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Procurement-related expenditures are approximately 9% of total Federal expenditures for the R&D Cluster of $445,961,340 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat of the finding of the prior year. Recommendation: The Clinic should ensure that all R&D awards that require procurement of goods and services follow established policies, procedures, and internal controls to comply with the Uniform Guidance procurement standards and that the procurement justification form is reviewed prior to entering into the purchase transaction. The Clinic should ensure that independent checks for suspension and debarment should be timely completed at the time of procurement in accordance with the Clinic documented policies, procedures, and internal controls. Views of responsible officials: Management will reinforce education and training to the research community and procurement teams regarding the procurement requirements, Justification of Source Selection Checklist/Form, and timely completion of the required documentation. The Clinic utilizes a third party, Visual Compliance, to execute daily supplier sanction and debarment checks for all Mayo Clinic vendors. All third party suspension and debarment match alerts are reviewed and adjudicated as needed. Going forward, the Clinic will supplement this daily review by periodically validating a sample of vendors who are not flagged with an alert by Visual Compliance.
Procurement, Suspension and Debarment Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services and U.S. Department of Defense Federal Cluster: Research and Development (R&D) Pass-Through Entity: The University of Texas Health (93.853, NS119834) Assistance Listing Nos.: 12.420, 93.310, 93.353, 93.393, and 93.853 Award Numbers: W81XWH-15-1-0292 (12.420), OD23121 (93.310), CA246568 (93.353), CA259201 (93.393), NS119834 (93.853), NS122096 (93.853) Award Periods: Various Criteria or specific requirement (including statutory, regulatory or other citation): 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).” Section 200.320(a)(2)(i) of the Uniform Guidance states the following regarding 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.” Section 200.320(b) of the Uniform Guidance states the following regarding formal procurement methods to be followed: “When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section.” Section 200.214 of the Uniform Guidance states “Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 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.” The Clinic procurement justification form for procurements more than $25,000 requires completion of the rationale for the procurement and a search of the federal government’s exclusion list to be performed and documented at the time of the procurement. On a monthly basis, Supply Chain Management performs a review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures. Condition: Internal Control For five (56%) of nine procurement transactions tested for operating effectiveness of internal controls, the procurement justification form used by the Clinic to document the history of the procurement and compliance with Uniform Guidance CFR 200.303, was not completed until after the purchase order was created and/or invoice received from the vendor. In addition, for these same five procurement transactions, the Clinic did not timely document its suspension and debarment check at the time of procurement as required by its procurement justification form. In addition, for four (44%) of nine procurement transactions tested for operating effectiveness of internal controls (two of which relate to the five cited above), the procurement justification form used by the Clinic to document the procurement transaction’s compliance with policies, procedures and the Uniform Guidance was outdated. Furthermore, the monthly review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures was not operating effectively. Compliance For one (9%) of 11 procurement transactions tested for compliance, the procurement was an add-on purchase related to a larger procurement of the same product under a prior purchase order. The prior procurement was above the simplified acquisition threshold and the Clinic’s competitive bid threshold. The Clinic did not complete a procurement justification form for the add-on purchase (which was a small purchase), and the original procurement did not have adequate support to evidence that it had been competitively bid. As such, adequate documentation did not exist for the procurement in accordance with Uniform Guidance Section 230.320(a)(2)(i) and(b). In addition, for five procurement transactions, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Cause: While management has internal controls in place to review procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures and Uniform Guidance CFR 200.320, the review of the procurement justification form is not robust enough to identify errors and there is not a process in place to ensure the form is completed prior to the purchase. Effect or potential effect: The Clinic’s internal controls over procurement were not properly followed during the fiscal year. In addition, the Clinic did not follow the Uniform Guidance requirements related to small purchases and noncompetitive procurements. Questioned costs: $53,482, determined as the amount of the procurement expenditures included in the schedule of expenditures of federal awards for the year ended December 31, 2023, for the one procurement transaction that had inadequate support for compliance with CFR 200.320 at the time of procurement, as follows: • Assistance Listing No. 93.310, OD023121 – $53,482 Context: Internal Control We sampled nine federal procurements over $25,000 to test operating effectiveness of internal controls, totaling $962,393, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For seven of the 11 federal procurements tested totaling $770,093, procurement controls were not operating effectively. • For five of 11 procurement transactions tested totaling $529,273, the independent suspension and debarment check to be performed at the time of procurement was not performed until approximately two to eight months later. Compliance We sampled 11 federal procurements over $25,000 to test compliance, totaling $1,736,844, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For one of 11 federal procurements tested totaling $53,482, documentation retained was not adequate to support that the procurement transaction was executed in accordance with the Uniform Guidance Sections 200.320(a)(2)(i) and (b). • For five of 11 procurement transactions tested totaling $529,273, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Procurement-related expenditures are approximately 9% of total Federal expenditures for the R&D Cluster of $445,961,340 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat of the finding of the prior year. Recommendation: The Clinic should ensure that all R&D awards that require procurement of goods and services follow established policies, procedures, and internal controls to comply with the Uniform Guidance procurement standards and that the procurement justification form is reviewed prior to entering into the purchase transaction. The Clinic should ensure that independent checks for suspension and debarment should be timely completed at the time of procurement in accordance with the Clinic documented policies, procedures, and internal controls. Views of responsible officials: Management will reinforce education and training to the research community and procurement teams regarding the procurement requirements, Justification of Source Selection Checklist/Form, and timely completion of the required documentation. The Clinic utilizes a third party, Visual Compliance, to execute daily supplier sanction and debarment checks for all Mayo Clinic vendors. All third party suspension and debarment match alerts are reviewed and adjudicated as needed. Going forward, the Clinic will supplement this daily review by periodically validating a sample of vendors who are not flagged with an alert by Visual Compliance.
Procurement, Suspension and Debarment Identification of the federal program: Federal Agencies: U.S. Department of Health and Human Services and U.S. Department of Defense Federal Cluster: Research and Development (R&D) Pass-Through Entity: The University of Texas Health (93.853, NS119834) Assistance Listing Nos.: 12.420, 93.310, 93.353, 93.393, and 93.853 Award Numbers: W81XWH-15-1-0292 (12.420), OD23121 (93.310), CA246568 (93.353), CA259201 (93.393), NS119834 (93.853), NS122096 (93.853) Award Periods: Various Criteria or specific requirement (including statutory, regulatory or other citation): 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).” Section 200.320(a)(2)(i) of the Uniform Guidance states the following regarding 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.” Section 200.320(b) of the Uniform Guidance states the following regarding formal procurement methods to be followed: “When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section.” Section 200.214 of the Uniform Guidance states “Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 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.” The Clinic procurement justification form for procurements more than $25,000 requires completion of the rationale for the procurement and a search of the federal government’s exclusion list to be performed and documented at the time of the procurement. On a monthly basis, Supply Chain Management performs a review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures. Condition: Internal Control For five (56%) of nine procurement transactions tested for operating effectiveness of internal controls, the procurement justification form used by the Clinic to document the history of the procurement and compliance with Uniform Guidance CFR 200.303, was not completed until after the purchase order was created and/or invoice received from the vendor. In addition, for these same five procurement transactions, the Clinic did not timely document its suspension and debarment check at the time of procurement as required by its procurement justification form. In addition, for four (44%) of nine procurement transactions tested for operating effectiveness of internal controls (two of which relate to the five cited above), the procurement justification form used by the Clinic to document the procurement transaction’s compliance with policies, procedures and the Uniform Guidance was outdated. Furthermore, the monthly review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures was not operating effectively. Compliance For one (9%) of 11 procurement transactions tested for compliance, the procurement was an add-on purchase related to a larger procurement of the same product under a prior purchase order. The prior procurement was above the simplified acquisition threshold and the Clinic’s competitive bid threshold. The Clinic did not complete a procurement justification form for the add-on purchase (which was a small purchase), and the original procurement did not have adequate support to evidence that it had been competitively bid. As such, adequate documentation did not exist for the procurement in accordance with Uniform Guidance Section 230.320(a)(2)(i) and(b). In addition, for five procurement transactions, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Cause: While management has internal controls in place to review procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures and Uniform Guidance CFR 200.320, the review of the procurement justification form is not robust enough to identify errors and there is not a process in place to ensure the form is completed prior to the purchase. Effect or potential effect: The Clinic’s internal controls over procurement were not properly followed during the fiscal year. In addition, the Clinic did not follow the Uniform Guidance requirements related to small purchases and noncompetitive procurements. Questioned costs: $53,482, determined as the amount of the procurement expenditures included in the schedule of expenditures of federal awards for the year ended December 31, 2023, for the one procurement transaction that had inadequate support for compliance with CFR 200.320 at the time of procurement, as follows: • Assistance Listing No. 93.310, OD023121 – $53,482 Context: Internal Control We sampled nine federal procurements over $25,000 to test operating effectiveness of internal controls, totaling $962,393, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For seven of the 11 federal procurements tested totaling $770,093, procurement controls were not operating effectively. • For five of 11 procurement transactions tested totaling $529,273, the independent suspension and debarment check to be performed at the time of procurement was not performed until approximately two to eight months later. Compliance We sampled 11 federal procurements over $25,000 to test compliance, totaling $1,736,844, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following: • For one of 11 federal procurements tested totaling $53,482, documentation retained was not adequate to support that the procurement transaction was executed in accordance with the Uniform Guidance Sections 200.320(a)(2)(i) and (b). • For five of 11 procurement transactions tested totaling $529,273, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form. Procurement-related expenditures are approximately 9% of total Federal expenditures for the R&D Cluster of $445,961,340 for the year ended December 31, 2023. Identification as a repeat finding, if applicable: The finding is not a repeat of the finding of the prior year. Recommendation: The Clinic should ensure that all R&D awards that require procurement of goods and services follow established policies, procedures, and internal controls to comply with the Uniform Guidance procurement standards and that the procurement justification form is reviewed prior to entering into the purchase transaction. The Clinic should ensure that independent checks for suspension and debarment should be timely completed at the time of procurement in accordance with the Clinic documented policies, procedures, and internal controls. Views of responsible officials: Management will reinforce education and training to the research community and procurement teams regarding the procurement requirements, Justification of Source Selection Checklist/Form, and timely completion of the required documentation. The Clinic utilizes a third party, Visual Compliance, to execute daily supplier sanction and debarment checks for all Mayo Clinic vendors. All third party suspension and debarment match alerts are reviewed and adjudicated as needed. Going forward, the Clinic will supplement this daily review by periodically validating a sample of vendors who are not flagged with an alert by Visual Compliance.
U.S. Department of Treasury Passed-through the Colorado Department of Local Affairs FFAL #21.027 COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Procurement Material Noncompliance Material Weakness in Internal Control Criteria: As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations, and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. Prior to entering a covered transaction, a non-federal entity must ensure the vendor was not suspended, debarred, or otherwise excluded. A contract award must not be made to parties listed on the governmentwide exclusions in the System for Award Management (SAM), in accordance with the OMB guidelines at 2 CFR 180. Further, 2 CFR section Appendix II to Part 200, Contract Provisions for Non-Federal Entity Contracts Under Federal Awards states that in addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal award must contain certain provisions, as applicable. Finally, the procurement method used must be appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. The procurement file must contain evidence that supports the rationale for the method of procurement, selection of the contract type, basis for contractor selection, and basis of contract price. Condition: The County was not able to provide evidence that they verified the vendors used in the program were not suspended, debarred, or otherwise excluded prior to entering the contract for 2 of 2 vendors tested. The County also failed to provide certain provisions required by the Uniform Guidance in the contracts with both vendors specifically for the Davis Bacon Act and the Equal Employment Opportunity provisions. The County was not able to provide evidence to support the rationale for the method of procurement, for 1 of 2 vendors testing. This included whether the procurement method was appropriate, whether it provided for full and open competition, or if a cost/price analysis was performed. Cause: Due to the County’s failure to understand the procurement requirements the procurement files did not contain the required information to support compliance with the standards. Effect: Insufficient procedures and internal controls related to procurement resulted in a finding. 13 14 Summit County, Colorado Schedule of Findings and Questioned Costs Year Ended December 31, 2023 Questioned Costs: None to report Context/Sampling: The population consisted of 3 vendors, 2 of which were selected for procurement, suspension and debarment testing. Repeat Finding from Prior Year(s): No Recommendation: We recommend the County modify and strengthen its current policies and procedures to ensure documentation is retained regarding verification of vendor suspension/debarment, selection of procurement method in accordance with 2 CFR section 200.320 and that all applicable required provisions are communicated to contractors in accordance with 2 CFR Appendix II to Part 200. Views of Responsible Officials: Agree
U.S. Department of Treasury Passed-through the Colorado Department of Local Affairs FFAL #21.027 COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Procurement Material Noncompliance Material Weakness in Internal Control Criteria: As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations, and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. Prior to entering a covered transaction, a non-federal entity must ensure the vendor was not suspended, debarred, or otherwise excluded. A contract award must not be made to parties listed on the governmentwide exclusions in the System for Award Management (SAM), in accordance with the OMB guidelines at 2 CFR 180. Further, 2 CFR section Appendix II to Part 200, Contract Provisions for Non-Federal Entity Contracts Under Federal Awards states that in addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal award must contain certain provisions, as applicable. Finally, the procurement method used must be appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. The procurement file must contain evidence that supports the rationale for the method of procurement, selection of the contract type, basis for contractor selection, and basis of contract price. Condition: The County was not able to provide evidence that they verified the vendors used in the program were not suspended, debarred, or otherwise excluded prior to entering the contract for 2 of 2 vendors tested. The County also failed to provide certain provisions required by the Uniform Guidance in the contracts with both vendors specifically for the Davis Bacon Act and the Equal Employment Opportunity provisions. The County was not able to provide evidence to support the rationale for the method of procurement, for 1 of 2 vendors testing. This included whether the procurement method was appropriate, whether it provided for full and open competition, or if a cost/price analysis was performed. Cause: Due to the County’s failure to understand the procurement requirements the procurement files did not contain the required information to support compliance with the standards. Effect: Insufficient procedures and internal controls related to procurement resulted in a finding. 13 14 Summit County, Colorado Schedule of Findings and Questioned Costs Year Ended December 31, 2023 Questioned Costs: None to report Context/Sampling: The population consisted of 3 vendors, 2 of which were selected for procurement, suspension and debarment testing. Repeat Finding from Prior Year(s): No Recommendation: We recommend the County modify and strengthen its current policies and procedures to ensure documentation is retained regarding verification of vendor suspension/debarment, selection of procurement method in accordance with 2 CFR section 200.320 and that all applicable required provisions are communicated to contractors in accordance with 2 CFR Appendix II to Part 200. Views of Responsible Officials: Agree
U.S. Department of Treasury Passed-through the Colorado Department of Local Affairs FFAL #21.027 COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Procurement Material Noncompliance Material Weakness in Internal Control Criteria: As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations, and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. Prior to entering a covered transaction, a non-federal entity must ensure the vendor was not suspended, debarred, or otherwise excluded. A contract award must not be made to parties listed on the governmentwide exclusions in the System for Award Management (SAM), in accordance with the OMB guidelines at 2 CFR 180. Further, 2 CFR section Appendix II to Part 200, Contract Provisions for Non-Federal Entity Contracts Under Federal Awards states that in addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal award must contain certain provisions, as applicable. Finally, the procurement method used must be appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. The procurement file must contain evidence that supports the rationale for the method of procurement, selection of the contract type, basis for contractor selection, and basis of contract price. Condition: The County was not able to provide evidence that they verified the vendors used in the program were not suspended, debarred, or otherwise excluded prior to entering the contract for 2 of 2 vendors tested. The County also failed to provide certain provisions required by the Uniform Guidance in the contracts with both vendors specifically for the Davis Bacon Act and the Equal Employment Opportunity provisions. The County was not able to provide evidence to support the rationale for the method of procurement, for 1 of 2 vendors testing. This included whether the procurement method was appropriate, whether it provided for full and open competition, or if a cost/price analysis was performed. Cause: Due to the County’s failure to understand the procurement requirements the procurement files did not contain the required information to support compliance with the standards. Effect: Insufficient procedures and internal controls related to procurement resulted in a finding. 13 14 Summit County, Colorado Schedule of Findings and Questioned Costs Year Ended December 31, 2023 Questioned Costs: None to report Context/Sampling: The population consisted of 3 vendors, 2 of which were selected for procurement, suspension and debarment testing. Repeat Finding from Prior Year(s): No Recommendation: We recommend the County modify and strengthen its current policies and procedures to ensure documentation is retained regarding verification of vendor suspension/debarment, selection of procurement method in accordance with 2 CFR section 200.320 and that all applicable required provisions are communicated to contractors in accordance with 2 CFR Appendix II to Part 200. Views of Responsible Officials: Agree
U.S. Department of Treasury Passed-through the Colorado Department of Local Affairs FFAL #21.027 COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Procurement Material Noncompliance Material Weakness in Internal Control Criteria: As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations, and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. Prior to entering a covered transaction, a non-federal entity must ensure the vendor was not suspended, debarred, or otherwise excluded. A contract award must not be made to parties listed on the governmentwide exclusions in the System for Award Management (SAM), in accordance with the OMB guidelines at 2 CFR 180. Further, 2 CFR section Appendix II to Part 200, Contract Provisions for Non-Federal Entity Contracts Under Federal Awards states that in addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal award must contain certain provisions, as applicable. Finally, the procurement method used must be appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. The procurement file must contain evidence that supports the rationale for the method of procurement, selection of the contract type, basis for contractor selection, and basis of contract price. Condition: The County was not able to provide evidence that they verified the vendors used in the program were not suspended, debarred, or otherwise excluded prior to entering the contract for 2 of 2 vendors tested. The County also failed to provide certain provisions required by the Uniform Guidance in the contracts with both vendors specifically for the Davis Bacon Act and the Equal Employment Opportunity provisions. The County was not able to provide evidence to support the rationale for the method of procurement, for 1 of 2 vendors testing. This included whether the procurement method was appropriate, whether it provided for full and open competition, or if a cost/price analysis was performed. Cause: Due to the County’s failure to understand the procurement requirements the procurement files did not contain the required information to support compliance with the standards. Effect: Insufficient procedures and internal controls related to procurement resulted in a finding. 13 14 Summit County, Colorado Schedule of Findings and Questioned Costs Year Ended December 31, 2023 Questioned Costs: None to report Context/Sampling: The population consisted of 3 vendors, 2 of which were selected for procurement, suspension and debarment testing. Repeat Finding from Prior Year(s): No Recommendation: We recommend the County modify and strengthen its current policies and procedures to ensure documentation is retained regarding verification of vendor suspension/debarment, selection of procurement method in accordance with 2 CFR section 200.320 and that all applicable required provisions are communicated to contractors in accordance with 2 CFR Appendix II to Part 200. Views of Responsible Officials: Agree
U.S. Department of Treasury Passed-through the Colorado Department of Local Affairs FFAL #21.027 COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Procurement Material Noncompliance Material Weakness in Internal Control Criteria: As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations, and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. Prior to entering a covered transaction, a non-federal entity must ensure the vendor was not suspended, debarred, or otherwise excluded. A contract award must not be made to parties listed on the governmentwide exclusions in the System for Award Management (SAM), in accordance with the OMB guidelines at 2 CFR 180. Further, 2 CFR section Appendix II to Part 200, Contract Provisions for Non-Federal Entity Contracts Under Federal Awards states that in addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal award must contain certain provisions, as applicable. Finally, the procurement method used must be appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. The procurement file must contain evidence that supports the rationale for the method of procurement, selection of the contract type, basis for contractor selection, and basis of contract price. Condition: The County was not able to provide evidence that they verified the vendors used in the program were not suspended, debarred, or otherwise excluded prior to entering the contract for 2 of 2 vendors tested. The County also failed to provide certain provisions required by the Uniform Guidance in the contracts with both vendors specifically for the Davis Bacon Act and the Equal Employment Opportunity provisions. The County was not able to provide evidence to support the rationale for the method of procurement, for 1 of 2 vendors testing. This included whether the procurement method was appropriate, whether it provided for full and open competition, or if a cost/price analysis was performed. Cause: Due to the County’s failure to understand the procurement requirements the procurement files did not contain the required information to support compliance with the standards. Effect: Insufficient procedures and internal controls related to procurement resulted in a finding. 13 14 Summit County, Colorado Schedule of Findings and Questioned Costs Year Ended December 31, 2023 Questioned Costs: None to report Context/Sampling: The population consisted of 3 vendors, 2 of which were selected for procurement, suspension and debarment testing. Repeat Finding from Prior Year(s): No Recommendation: We recommend the County modify and strengthen its current policies and procedures to ensure documentation is retained regarding verification of vendor suspension/debarment, selection of procurement method in accordance with 2 CFR section 200.320 and that all applicable required provisions are communicated to contractors in accordance with 2 CFR Appendix II to Part 200. Views of Responsible Officials: Agree
U.S. Department of Treasury Passed-through the Colorado Department of Local Affairs FFAL #21.027 COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Procurement Material Noncompliance Material Weakness in Internal Control Criteria: As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations, and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. Prior to entering a covered transaction, a non-federal entity must ensure the vendor was not suspended, debarred, or otherwise excluded. A contract award must not be made to parties listed on the governmentwide exclusions in the System for Award Management (SAM), in accordance with the OMB guidelines at 2 CFR 180. Further, 2 CFR section Appendix II to Part 200, Contract Provisions for Non-Federal Entity Contracts Under Federal Awards states that in addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal award must contain certain provisions, as applicable. Finally, the procurement method used must be appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. The procurement file must contain evidence that supports the rationale for the method of procurement, selection of the contract type, basis for contractor selection, and basis of contract price. Condition: The County was not able to provide evidence that they verified the vendors used in the program were not suspended, debarred, or otherwise excluded prior to entering the contract for 2 of 2 vendors tested. The County also failed to provide certain provisions required by the Uniform Guidance in the contracts with both vendors specifically for the Davis Bacon Act and the Equal Employment Opportunity provisions. The County was not able to provide evidence to support the rationale for the method of procurement, for 1 of 2 vendors testing. This included whether the procurement method was appropriate, whether it provided for full and open competition, or if a cost/price analysis was performed. Cause: Due to the County’s failure to understand the procurement requirements the procurement files did not contain the required information to support compliance with the standards. Effect: Insufficient procedures and internal controls related to procurement resulted in a finding. 13 14 Summit County, Colorado Schedule of Findings and Questioned Costs Year Ended December 31, 2023 Questioned Costs: None to report Context/Sampling: The population consisted of 3 vendors, 2 of which were selected for procurement, suspension and debarment testing. Repeat Finding from Prior Year(s): No Recommendation: We recommend the County modify and strengthen its current policies and procedures to ensure documentation is retained regarding verification of vendor suspension/debarment, selection of procurement method in accordance with 2 CFR section 200.320 and that all applicable required provisions are communicated to contractors in accordance with 2 CFR Appendix II to Part 200. Views of Responsible Officials: Agree
U.S. Department of Treasury Passed-through the Colorado Department of Local Affairs FFAL #21.027 COVID 19 – Coronavirus State and Local Fiscal Recovery Funds Procurement Material Noncompliance Material Weakness in Internal Control Criteria: As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations, and the provisions of grant agreements and contracts, and to maintain internal control to provide reasonable assurance of compliance with these requirements. Prior to entering a covered transaction, a non-federal entity must ensure the vendor was not suspended, debarred, or otherwise excluded. A contract award must not be made to parties listed on the governmentwide exclusions in the System for Award Management (SAM), in accordance with the OMB guidelines at 2 CFR 180. Further, 2 CFR section Appendix II to Part 200, Contract Provisions for Non-Federal Entity Contracts Under Federal Awards states that in addition to other provisions required by the Federal agency or non-Federal entity, all contracts made by the non-Federal entity under the Federal award must contain certain provisions, as applicable. Finally, the procurement method used must be appropriate based on the dollar amount and conditions specified in 2 CFR section 200.320. The procurement file must contain evidence that supports the rationale for the method of procurement, selection of the contract type, basis for contractor selection, and basis of contract price. Condition: The County was not able to provide evidence that they verified the vendors used in the program were not suspended, debarred, or otherwise excluded prior to entering the contract for 2 of 2 vendors tested. The County also failed to provide certain provisions required by the Uniform Guidance in the contracts with both vendors specifically for the Davis Bacon Act and the Equal Employment Opportunity provisions. The County was not able to provide evidence to support the rationale for the method of procurement, for 1 of 2 vendors testing. This included whether the procurement method was appropriate, whether it provided for full and open competition, or if a cost/price analysis was performed. Cause: Due to the County’s failure to understand the procurement requirements the procurement files did not contain the required information to support compliance with the standards. Effect: Insufficient procedures and internal controls related to procurement resulted in a finding. 13 14 Summit County, Colorado Schedule of Findings and Questioned Costs Year Ended December 31, 2023 Questioned Costs: None to report Context/Sampling: The population consisted of 3 vendors, 2 of which were selected for procurement, suspension and debarment testing. Repeat Finding from Prior Year(s): No Recommendation: We recommend the County modify and strengthen its current policies and procedures to ensure documentation is retained regarding verification of vendor suspension/debarment, selection of procurement method in accordance with 2 CFR section 200.320 and that all applicable required provisions are communicated to contractors in accordance with 2 CFR Appendix II to Part 200. Views of Responsible Officials: Agree
Finding # 2023-002 Procurement, Suspension and Debarment (Significant Deficiency) Information on the Federal Programs: Assistance Listing #98.001 USAID Foreign Assistance for Programs Overseas Criteria or Specific Requirement: § 200.318 (i) General procurement standards, states that 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. Furthermore: §200.320 (f) Methods of procurement to be followed, states that procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source and may be used only when certain requirements have been met. Additionally, §200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal award states that 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. The nonfederal entity must verify that the person with whom you intend to do business is not excluded or disqualified, by (a) checking SAM Exclusions; (b) collecting a certification from that person; (c) adding a clause or condition to the covered transaction with that person. Condition: During our audit, we noted contractual relationships under the federal awards for which evidence of procurement procedures and documentation of SAM Exclusion checks were unavailable for our inspection. It is our understanding that some contracts were procured under noncompetitive (sole source) justification. However, in certain instances we were unable to review documentation (prepared at the time the contracts were executed) detailing the history and rationale of the procurements. Cause: The Institute's processes in place during 2023 did not provide for the formalization and retention of procurement records and vendor screenings consistent with the expectations outlined in 2 CFR 200 and related guidance provided by USAID. Effect or Potential Effect: Purchases of goods and services could be made above the prevailing market rates if the prescribed procurement procedures are not adhered to. Additionally, the Institute may have inadvertently selected noncompetitive proposals method when the circumstances did not meet the requirements noted in § 200.320 (f) Methods of procurement to be followed, and thereby failing to administer full and open competition as required by the regulations. Finally, the Institute could inadvertently enter into a contractual relationship with an entity that is suspended, debarred or otherwise included on the US Federal sanction list. Questioned Costs: N/A Context: Our audit sample consisted of transactions incurred by both JGI USA and JGI Tanzania. The finding relates to a transaction incurred by both entities. Both entities have defined procurement policies. Identification as a Repeat Finding: N/A Recommendation: We recommend that the Institute ensure its policy is distributed and communicated in a formal manner to its employees, and that management properly enforce compliance with its policy. All procurement actions should be clearly documented in writing and maintained in the vendor or contractor files. Such documentation should include, but is not limited to; (1) Bids (2) Bid Analysis with documentation of vendor selection and rationale (3) Minutes of meetings of procurement committee (4) for sole source procurements, documentation of which of the allowable sole source criteria the procurement was done under. Additionally, we recommend that the procurement policies are enhanced to include compliance with §200.320 (f) Methods of procurement to be followed and, §200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal award.
Finding # 2023-002 Procurement, Suspension and Debarment (Significant Deficiency) Information on the Federal Programs: Assistance Listing #98.001 USAID Foreign Assistance for Programs Overseas Criteria or Specific Requirement: § 200.318 (i) General procurement standards, states that 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. Furthermore: §200.320 (f) Methods of procurement to be followed, states that procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source and may be used only when certain requirements have been met. Additionally, §200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal award states that 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. The nonfederal entity must verify that the person with whom you intend to do business is not excluded or disqualified, by (a) checking SAM Exclusions; (b) collecting a certification from that person; (c) adding a clause or condition to the covered transaction with that person. Condition: During our audit, we noted contractual relationships under the federal awards for which evidence of procurement procedures and documentation of SAM Exclusion checks were unavailable for our inspection. It is our understanding that some contracts were procured under noncompetitive (sole source) justification. However, in certain instances we were unable to review documentation (prepared at the time the contracts were executed) detailing the history and rationale of the procurements. Cause: The Institute's processes in place during 2023 did not provide for the formalization and retention of procurement records and vendor screenings consistent with the expectations outlined in 2 CFR 200 and related guidance provided by USAID. Effect or Potential Effect: Purchases of goods and services could be made above the prevailing market rates if the prescribed procurement procedures are not adhered to. Additionally, the Institute may have inadvertently selected noncompetitive proposals method when the circumstances did not meet the requirements noted in § 200.320 (f) Methods of procurement to be followed, and thereby failing to administer full and open competition as required by the regulations. Finally, the Institute could inadvertently enter into a contractual relationship with an entity that is suspended, debarred or otherwise included on the US Federal sanction list. Questioned Costs: N/A Context: Our audit sample consisted of transactions incurred by both JGI USA and JGI Tanzania. The finding relates to a transaction incurred by both entities. Both entities have defined procurement policies. Identification as a Repeat Finding: N/A Recommendation: We recommend that the Institute ensure its policy is distributed and communicated in a formal manner to its employees, and that management properly enforce compliance with its policy. All procurement actions should be clearly documented in writing and maintained in the vendor or contractor files. Such documentation should include, but is not limited to; (1) Bids (2) Bid Analysis with documentation of vendor selection and rationale (3) Minutes of meetings of procurement committee (4) for sole source procurements, documentation of which of the allowable sole source criteria the procurement was done under. Additionally, we recommend that the procurement policies are enhanced to include compliance with §200.320 (f) Methods of procurement to be followed and, §200.213 Reporting a determination that a non-Federal entity is not qualified for a Federal award.
Finding 2023-002: Procurement 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. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description must not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use. Noncompetitive procurements can only be awarded in accordance with §200.320(c). According to 2 CFR §200.320 Procurement Standards, 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 (see paragraph (a)(1) of this section); 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. Condition: During our testing over procurement, we determined that ASCB did not clearly document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place to ensure that procurement requirements were adequately documented and retained. Effect or Potential Effect: Procurement records were insufficient to meet the requirements noted in the Criteria section above, as well as ASCB's internal procurement policy. Questioned Costs: None. Context: We noted one item selected for testing did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Identification as a Repeat Finding: Not applicable. Recommendation: We recommend ASCB retain sufficient procurement documentation to meet the requirements noted in the Criteria section above.
Finding 2023-002: Procurement 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. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description must not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use. Noncompetitive procurements can only be awarded in accordance with §200.320(c). According to 2 CFR §200.320 Procurement Standards, 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 (see paragraph (a)(1) of this section); 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. Condition: During our testing over procurement, we determined that ASCB did not clearly document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place to ensure that procurement requirements were adequately documented and retained. Effect or Potential Effect: Procurement records were insufficient to meet the requirements noted in the Criteria section above, as well as ASCB's internal procurement policy. Questioned Costs: None. Context: We noted one item selected for testing did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Identification as a Repeat Finding: Not applicable. Recommendation: We recommend ASCB retain sufficient procurement documentation to meet the requirements noted in the Criteria section above.
2023 – 004 Procurement Federal Agency: U.S. Department of Agriculture Federal Program Name: Water and Waste Disposal Systems for Rural Communities Assistance Listing Number: 10.760 Federal Award Identification Number and Year: CPAP1186083 2022 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Period: September 1, 2022 – December 31, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Section 320.318(i) requires the District to 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. CFR 200.320(c) states that 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. Condition: The City did not maintain documentation of the justification for the noncompetitive procurement and that it was done in accordance with Uniform Guidance requirements. Questioned costs: None Context: The City entered into one noncompetitive proposal during the course of the grant and did not maintain documentation of the consideration of the procurement method. Cause: The City does not receive frequent federal awards and was unfamiliar with the documentation requirements surrounding procurement procedures. Effect: Procurement practices may not be in compliance with the Uniform Guidance. Repeat Finding: No Recommendation: City personnel should familiarize themselves with the documentation requirements required by the CFR related to procurement. In addition, City policies and procedures should be modified to ensure documentation is maintained on the justification for any noncompetitive procurement transactions that are entered into and that the justification is reviewed and approved by someone other than the one making that determination. Views of responsible officials: There is no disagreement with the audit finding.
INTERNAL CONTROL – MATERIAL WEAKNESS AND NONCOMPLIANCE COVID-19 – Coronavirus State and Local Fiscal Relief Funds – 21.027 2023-004 – Procurement Criteria: The City is responsible for establishing and maintaining a procurement policy which is compliant with the Uniform Guidance in 2 CFR 200.320. In addition, the City is responsible for maintaining adequate records relating to procurements. Condition: The City’s procurement policy lacks the specific methods of procurement to be followed and the respective thresholds for procurements using federal funds. Furthermore, there is not adequate pre-award documentation maintained relating to each of the City’s procurements. Cause: The City’s procurement policy was not adequately updated with necessary Uniform Guidance requirements. In addition, the City’s procurement process is not centralized and there is inadequate or missing pre-award documentation pertaining to the City’s various procurements. Effect: The condition above could result in material program and internal control issues relating to procurements whereby: appropriate methods of procurement may not be followed, debarred or suspended vendors or contractors could be awarded purchase orders or contracts, open and fair competition may not be achieved, etc. Context: Audit procedures noted that the procurement policy is inadequate and not in line with Uniform Guidance. Furthermore, audit procedures noted that there is no centralized process in place for tracking the City’s various procurements along with inadequate pre-award documentation. There was a total of $1,609,137 of expenditures relating to procurements during the year ended December 31, 2023; however, documentation was not deemed adequate to substantiate the procurements and whether they complied with Uniform Guidance. Questioned Costs: We questioned $1,609,137 of costs because this was the total that was expended during the year ended December 31, 2023, for items or services for which procurement policies should have been followed. Our testing surrounding procurement in the current year noted that there is not appropriate pre-award documentation and an improper procurement policy that would permit the testing of procurements. Recommendation: We recommend that the City adopt a proper procurement policy that is in line with Uniform Guidance. We further recommend that the City develops a centralized procurement process whereby appropriate procurement type is documented along with the maintenance of proper pre-award documentation.
INTERNAL CONTROL – MATERIAL WEAKNESS AND NONCOMPLIANCE COVID-19 – Coronavirus State and Local Fiscal Relief Funds – 21.027 2023-004 – Procurement Criteria: The City is responsible for establishing and maintaining a procurement policy which is compliant with the Uniform Guidance in 2 CFR 200.320. In addition, the City is responsible for maintaining adequate records relating to procurements. Condition: The City’s procurement policy lacks the specific methods of procurement to be followed and the respective thresholds for procurements using federal funds. Furthermore, there is not adequate pre-award documentation maintained relating to each of the City’s procurements. Cause: The City’s procurement policy was not adequately updated with necessary Uniform Guidance requirements. In addition, the City’s procurement process is not centralized and there is inadequate or missing pre-award documentation pertaining to the City’s various procurements. Effect: The condition above could result in material program and internal control issues relating to procurements whereby: appropriate methods of procurement may not be followed, debarred or suspended vendors or contractors could be awarded purchase orders or contracts, open and fair competition may not be achieved, etc. Context: Audit procedures noted that the procurement policy is inadequate and not in line with Uniform Guidance. Furthermore, audit procedures noted that there is no centralized process in place for tracking the City’s various procurements along with inadequate pre-award documentation. There was a total of $1,609,137 of expenditures relating to procurements during the year ended December 31, 2023; however, documentation was not deemed adequate to substantiate the procurements and whether they complied with Uniform Guidance. Questioned Costs: We questioned $1,609,137 of costs because this was the total that was expended during the year ended December 31, 2023, for items or services for which procurement policies should have been followed. Our testing surrounding procurement in the current year noted that there is not appropriate pre-award documentation and an improper procurement policy that would permit the testing of procurements. Recommendation: We recommend that the City adopt a proper procurement policy that is in line with Uniform Guidance. We further recommend that the City develops a centralized procurement process whereby appropriate procurement type is documented along with the maintenance of proper pre-award documentation.
INTERNAL CONTROL – MATERIAL WEAKNESS AND NONCOMPLIANCE COVID-19 – Coronavirus State and Local Fiscal Relief Funds – 21.027 2023-004 – Procurement Criteria: The City is responsible for establishing and maintaining a procurement policy which is compliant with the Uniform Guidance in 2 CFR 200.320. In addition, the City is responsible for maintaining adequate records relating to procurements. Condition: The City’s procurement policy lacks the specific methods of procurement to be followed and the respective thresholds for procurements using federal funds. Furthermore, there is not adequate pre-award documentation maintained relating to each of the City’s procurements. Cause: The City’s procurement policy was not adequately updated with necessary Uniform Guidance requirements. In addition, the City’s procurement process is not centralized and there is inadequate or missing pre-award documentation pertaining to the City’s various procurements. Effect: The condition above could result in material program and internal control issues relating to procurements whereby: appropriate methods of procurement may not be followed, debarred or suspended vendors or contractors could be awarded purchase orders or contracts, open and fair competition may not be achieved, etc. Context: Audit procedures noted that the procurement policy is inadequate and not in line with Uniform Guidance. Furthermore, audit procedures noted that there is no centralized process in place for tracking the City’s various procurements along with inadequate pre-award documentation. There was a total of $1,609,137 of expenditures relating to procurements during the year ended December 31, 2023; however, documentation was not deemed adequate to substantiate the procurements and whether they complied with Uniform Guidance. Questioned Costs: We questioned $1,609,137 of costs because this was the total that was expended during the year ended December 31, 2023, for items or services for which procurement policies should have been followed. Our testing surrounding procurement in the current year noted that there is not appropriate pre-award documentation and an improper procurement policy that would permit the testing of procurements. Recommendation: We recommend that the City adopt a proper procurement policy that is in line with Uniform Guidance. We further recommend that the City develops a centralized procurement process whereby appropriate procurement type is documented along with the maintenance of proper pre-award documentation.
U.S. Department of Transportation Federal Audit Cluster 20.507 Federal Transit Formula Grant (applies to all grants) 2023-004 Procurement and Suspension and Debarment Criteria: The Uniform Guidance regulations (2 CFR section 200.320) require, among other things, that procurement for purchases of goods and services follow certain procedures related to obtaining and awarding of contracts based on sealed bid, competitive-, and non-competitive proposals. Additionally, 2 CFR Section 200.318(d) provides that written policies and procedures must document the avoidance of the acquisition of unnecessary or duplicative items and 2 CFR section 200.303(a) regulations require the entity to establish and maintain effective internal control over compliance with Federal statues, regulations, and the terms and conditions of grant awards. In addition, non-federal entities are prohibited from contracting with parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA) and available at SAM.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Condition: The portion related to procurement is a repeated finding from 2019, 2020, 2021, and 2022. During our testing of purchases under the procurement regulations, for 3 out of 8 vendors selected for testing, the System was unable to provide supporting documentation that these vendor services or supplies were procured in accordance with the standards in 2 CFR section 200.320. Additionally, while the System does maintain written policies and procedures related to procurement standards, these procedures were followed for items procured directly through the procurement department, however, FTA expenditures procured by the maintenance department did not follow the approved procedures and internal controls in accordance with the regulations referenced in the criteria above. During our testing of compliance with the suspension and debarment regulations, for 3 out of 8 vendors selected for testing (same vendors selected for procurement testing above), the System was unable to provide documentation of its conclusions that these vendors were not suspended or debarred. Based on a review of SAM.gov, none of these vendors were suspended or debarred. Questioned Costs: Known - $214,478, Likely - $561,548 for Procurement but not Suspension and Debarment. Cause: A significant deficiency exists in the internal controls over procurement and suspension and debarment for expenditures procured outside the normal processes of the procurement department. The System does not have adequate controls in place to ensure that appropriate supporting documentation is maintained for purchases made under the procurement standards to support the System’s consideration and/or conclusion for obtaining and awarding of contracts based on sealed bid, competitive, and non-competitive proposals or its determination of whether the vendor is suspended or debarred, when procured outside of the procurement department. Effect: The System may not be receiving the overall lowest cost for services and supplies procured by the agency. Without ensuring documentation is maintained over whether a vendor is suspended or debarred, the System may enter into contracts with unauthorized parties. Recommendation: We recommend the System implement internal controls to ensure that supporting documentation is maintained for the procurement of goods and services in accordance with 2 CFR Section 200.320. Additionally, we recommend that the System enhance its written policies and procedures to ensure that documentation is included regarding the avoidance of the acquisition of unnecessary or duplicative items. Documentation and policies should include procedures for the competitive bidding of bus parts on a annual basis and evidence that purchases are from these bid responses and from the lowest qualified vendor. A review of all contracts to ensure the appropriate language exists regarding suspension and debarment regulations or the System should consider an annual review of SAM.gov for all vendors. View of Responsible Official: The Agency will implement internal controls to ensure that supporting documentation is maintained for the procurement of goods and services in accordance with 2 CFR Section 200.320. The Agency will update our written policies and procedures to ensure that documentation is included regarding the avoidance of the acquisition of unnecessary or duplicative items. Documentation and policies will include procedures for the competitive bidding of bus parts on a quarterly basis and evidence that purchases are from these bid responses and from the lowest qualified vendor. Procurement will perform an annual review of SAM.gov for all vendors.
FINDING 2023-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY2023 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement Federal regulations require formal procurement methods when the value of the procurement for property or services exceeds the simplified acquisition threshold (SAT), which is set at $250,000 unless a lower more restrictive threshold is set by a nonfederal entity. As Indiana Code has a more restrictive threshold of $150,000, this threshold and formal procurement methods must be used when procuring goods and services in excess of $150,000. Formal procurement methods require following documented procedures and obtaining sealed bids or proposals. The Town had a documented procurement policy; however, the Town did not follow its policy for one of the two vendors that exceeded the simplified acquisition threshold. The vendor, paid $2,419,821, was chosen without obtaining sealed bids or proposals, nor was a formal contract entered into with the vendor. Furthermore, there was no documentation detailing the history of the procurement or the Town's justification for limiting competition. The lack of effective internal controls and noncompliance were isolated to the one vendor noted above. INDIANA STATE BOARD OF ACCOUNTS 15 TOWN OF BROWNSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Suspension and Debarment Prior to entering into subawards and covered transactions with the State and Local Fiscal Recovery Funds (SLFRF) award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is done by checking the Excluded Parties List System (EPLS), collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. The Town's policies related to the SLFRF suspension and debarment requirements included a clause or condition added to covered transactions expected to equal or exceed $25,000 with that vendor. Three vendors were identified as having transactions that equaled or exceeded $25,000. All three vendors were selected for testing. The three vendors, with total expenditures of $4,333,484, were reviewed. For all three vendors, the Town did not have documented evidence that the clause was included in the contract with the vendor nor that any other methods were employed to verify the vendor was not suspended, debarred, or other excluded prior to entering into the transactions. The lack of internal controls and noncompliance were systematic 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. . . . (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. . . ." INDIANA STATE BOARD OF ACCOUNTS 16 TOWN OF BROWNSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.324(a) states: "The Non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals." 2 CFR 200.320 states in part: ". . . (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance awards exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. The sealed bids method is the preferred method for procuring construction, if the conditions. (i) In order for sealed bidding to be feasible, the following conditions should be present: (A) A complete, adequate, and realistic specification or purchase description is available; (B) Two or more responsible bidders are willing and able to compete effectively for the business; and (C) The procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price. (ii) If sealed bids are used, the following requirements apply: (A) Bids must be solicited from an adequate number of qualified sources, providing them sufficient response time prior to the date set for opening the bids, for local, and tribal governments, the invitation for bids must be publicly advertised; (B) The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond; (C) All bids will be opened at the time and place prescribed in the invitation for bids, and for local and tribal governments, the bids must be opened publicly; INDIANA STATE BOARD OF ACCOUNTS 17 TOWN OF BROWNSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (D) A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest. Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of; and (E) Any or all bids may be rejected if there is a sound documented reason. (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); (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." INDIANA STATE BOARD OF ACCOUNTS 18 TOWN OF BROWNSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you do business is not excluded or disqualified. You do this by: (a) Checking the EPLS, or (b) Collecting a certification from that person if allowed by this rule, or (c) Adding a clause or condition to the covered transaction with that person." Cause The Town did not adhere to its procurement policy as written. Instead, a vendor was selected based on factors other than solicited bids. In addition, the Town was unable to provide documentation to demonstrate they included a clause in contracts or otherwise verified contractors were not suspended, debarred, or otherwise excluded prior to entering into the transaction as a direct result of the Town's policy not addressing those vendors not requiring a contract and not following the policy for those vendors who had a contract. Effect Without the proper implementation of an effectively designed system of internal controls, the Town cannot ensure goods and services were properly procured. As a result, one vendor paid did not have adequate documentation to support that the appropriate bid process was followed or that nonprocurement procedures were permissible. Furthermore, without the proper implementation of an effectively designed system of internal controls, the Town cannot ensure the vendors paid with federal funds are eligible to participate in federal programs. Any program funds the Town used to pay vendors that have been suspended or debarred would be unallowable. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future funding to the Town. Questioned Costs There were no questioned costs identified. Recommendation We recommend that management of the Town establish a proper system of internal controls and develop policies and procedures to ensure contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering contracts or subawards, and document reasons for vendors that are chosen without adhering to formal procurement methods. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Federal Grants Management - Procurement Policy Federal Agency: Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: N/A Pass-Through Agency: N/A Award Period: March 1, 2021 – December 31, 2024 Type of Finding • Significant Deficiency in Internal Control Over Compliance and Other Matters Criteria or Specific Requirement: 2 CFR 200.320(a)(2)(ii) requires that "The non-Federal entity is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement procedures which must not exceed the threshold established in the FAR. When applicable, a lower simplified acquisition threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations." When a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. Condition: The County did not follow controls related to ensuring procurement policies were followed. Questioned Costs: None. Context: There were 18 transactions that exceeded procurement thresholds during the granting period. The sample size selected tested was 6. During our testing, it was noted on 4 of the 6 items tested that the County was not following the requirements under the adopted procurement policies. Cause: The County 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: Repeat finding of 2022-004. Recommendation: We recommend the County review procurement policies for the entire County to ensure it meets the minimum requirements of 2 CFR 200 for all federal grants. View of Responsible Officials: There is no disagreement with the finding.
Federal Grants Management - Procurement Policy Federal Agency: Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: N/A Pass-Through Agency: N/A Award Period: March 1, 2021 – December 31, 2024 Type of Finding • Significant Deficiency in Internal Control Over Compliance and Other Matters Criteria or Specific Requirement: 2 CFR 200.320(a)(2)(ii) requires that "The non-Federal entity is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement procedures which must not exceed the threshold established in the FAR. When applicable, a lower simplified acquisition threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations." When a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. Condition: The County did not follow controls related to ensuring procurement policies were followed. Questioned Costs: None. Context: There were 18 transactions that exceeded procurement thresholds during the granting period. The sample size selected tested was 6. During our testing, it was noted on 4 of the 6 items tested that the County was not following the requirements under the adopted procurement policies. Cause: The County 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: Repeat finding of 2022-004. Recommendation: We recommend the County review procurement policies for the entire County to ensure it meets the minimum requirements of 2 CFR 200 for all federal grants. View of Responsible Officials: There is no disagreement with the finding.
Federal Grants Management - Procurement Policy Federal Agency: Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: N/A Pass-Through Agency: N/A Award Period: March 1, 2021 – December 31, 2024 Type of Finding • Significant Deficiency in Internal Control Over Compliance and Other Matters Criteria or Specific Requirement: 2 CFR 200.320(a)(2)(ii) requires that "The non-Federal entity is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement procedures which must not exceed the threshold established in the FAR. When applicable, a lower simplified acquisition threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations." When a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. Condition: The County did not follow controls related to ensuring procurement policies were followed. Questioned Costs: None. Context: There were 18 transactions that exceeded procurement thresholds during the granting period. The sample size selected tested was 6. During our testing, it was noted on 4 of the 6 items tested that the County was not following the requirements under the adopted procurement policies. Cause: The County 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: Repeat finding of 2022-004. Recommendation: We recommend the County review procurement policies for the entire County to ensure it meets the minimum requirements of 2 CFR 200 for all federal grants. View of Responsible Officials: There is no disagreement with the finding.
Federal Grants Management - Procurement Policy Federal Agency: Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: N/A Pass-Through Agency: N/A Award Period: March 1, 2021 – December 31, 2024 Type of Finding • Significant Deficiency in Internal Control Over Compliance and Other Matters Criteria or Specific Requirement: 2 CFR 200.320(a)(2)(ii) requires that "The non-Federal entity is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement procedures which must not exceed the threshold established in the FAR. When applicable, a lower simplified acquisition threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations." When a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. Condition: The County did not follow controls related to ensuring procurement policies were followed. Questioned Costs: None. Context: There were 18 transactions that exceeded procurement thresholds during the granting period. The sample size selected tested was 6. During our testing, it was noted on 4 of the 6 items tested that the County was not following the requirements under the adopted procurement policies. Cause: The County 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: Repeat finding of 2022-004. Recommendation: We recommend the County review procurement policies for the entire County to ensure it meets the minimum requirements of 2 CFR 200 for all federal grants. View of Responsible Officials: There is no disagreement with the finding.
FINDING 2023-004 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY2023 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 for suspension and debarment. The prior audit finding number was 2022-003. Condition and Context Procurement - Policy The County did not have a County Council approved procurement policy that would reflect applicable state laws and regulations, including procedures to avoid acquisition of unnecessary or duplicative items and procedures to ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Procurement - Small Purchases 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 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. 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 $50,000 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. INDIANA STATE BOARD OF ACCOUNTS 25 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County had five vendors that qualified for testing under small purchase procurement requirements (vendors paid $10,000-$150,000). Of the two chosen for testing, one was awarded a contract without the County obtaining quotes. The contract awarded was $31,000 for engineering services related to drain construction. The lack of effective internal controls and noncompliance was isolated to the small purchase identified above. Suspension and Debarment Prior to entering into subawards and covered transactions with State and Local Fiscal Recovery Funds (SLFRF), recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Due to the U.S. Department of the Treasury's (Treasury) determination that the revenue loss eligible use category does not give rise to subawards, the County was only required to comply with suspension and debarment requirements related to covered transactions. Upon inquiry of the County, in order to review the procedures in place for verifying that an entity with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the County explained they were aware of the suspension and debarment requirements related to the SLFRF awards; however, the County did not retain documentation of SAMs.gov checks nor was a clause always included in a contract. A population of ten covered transactions for goods or services, totaling $2,371,047, that equaled or exceeded $25,000 paid from SLFRF funds during the audit period was identified. A sample of three transactions, totaling $1,473,295, was selected for testing. For each of the three transactions, the County did not verify the vendors' suspension and debarment status prior to payment. Due to the number and magnitude of exceptions identified, per auditor judgment, we concluded it would not be appropriate to expand the sample size or perform any additional audit procedures. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 26 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.318 states: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." 2 CFR 200.214 states: "Non-federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are de-barred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or INDIANA STATE BOARD OF ACCOUNTS 27 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (c) Adding a clause or condition to the covered transaction with that person." Part 4 of the Treasury's Compliance and Reporting Guidance states in part: ". . . recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance . . ." Cause A proper system of internal controls was not designed by the management of the County. The County was unable to provide documentation to demonstrate it checked SAM.gov to verify that contractors and vendors were not suspended or debarred. The County was also unable to provide documentation explaining the rationale behind decisions to offer contracts without obtaining an adequate number of bids or quotes. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, one small purchase did not have an adequate number of quotes. In addition, vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended the County establish documented procurement procedures consistent with state and local laws for the acquisition of property or services required under a federal award or subaward as outlined in the code of federal regulations. In addition, we recommended the County adhere to the procurement policies and obtain required quotes and bids or adequately document a sole source situation. Finally, we recommended that the County strengthen its system of internal controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: Water and Wastewater Disposal Systems for Rural Communities - Procurement Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal Systems for Rural Communities Assistance Listings Number: 10.760 Federal Award Numbers or Years (or Other Identifying Numbers): EDA Grant / 06-79-06190, RD Loan 01 / 06-79-06190 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context 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 unless a lower, more restrictive threshold is set by a non-federal entity. As Indiana Code has set a more restrictive threshold of $150,000, informal procurement methods are permitted when the value of the procurement does not exceed $150,000. 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 micropurchase 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. INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF PETERSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) During the audit period, the City had five vendors with purchases over the $150,000 threshold that were considered simplified acquisition procurements. Only one vendor was selected for testing due to the procurement requirements being tested on the other four vendors during the prior audit. For the one vendor, the City could not provide the procurement history or the rationale for the method of procurement, the selection of vendor, or the basis for price. The total dollar amount spent with this vendor during 2023 was $414,465. The lack of internal controls and noncompliance were isolated to the one vendor noted above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320(b) states in part: "Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance awards exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. . . . INDIANA STATE BOARD OF ACCOUNTS 17 CITY OF PETERSBURG SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. . . ." Cause The City was unable to provide documentation to demonstrate they had properly procured services. A proper system of internal controls was not designed by management of the City. Embedded within a properly designed or implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot demonstrate it obtained an adequate number of price or rate quotations prior to selecting a vendor. Therefore, the City could have overpaid for the services obtained. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City strengthen its system of internal controls to ensure that an adequate number of price or rate quotations are obtained. We also recommended strengthening its policies and procedures to ensure appropriate supporting documentation for federal programs is retained to be presented for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Identification of the federal program U.S. Department of Health and Human Services Research and Development Cluster Assistance Listing Numbers: 93.351 – Research Infrastructure Programs 93.855 – Allergy and Infectious Diseases Research 93.855 – COVID-19 Allergy and Infectious Diseases Research 93.RD – NIAID Centers of Excellence for Influenza Research and Response 75N93021C00014 9/1/2021-8/31/2024 Icahn School of Medicine at Mount Sinai 1U19AI171403-01 5/16/2022-4/30/2025 Emory University 1U19AI171443-01 5/16/2022-4/30/2023 The Scripps Research Institute 1U19AI171110-01 5/16/2022-4/30/2023 University of California at San Francisco 5R01AI134240-05 7/1/2022-6/30/2024 N/A 5R01AI134245-07 5/1/2023-4/30/2025 N/A 5R01AI170197-02 2/1/2023-1/31/2024 N/A 5P51OD011133-25 5/1/2023-4/30/2024 N/A 1R21AI170148-01 8/18/2022-7/31/2023 N/A Criteria or specific requirement (including statutory, regulatory, or other citation) 2 CFR 200.303(a) requires that a non-federal entity must “(a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR 200.318 (i) General Procurement Standards states, “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.” Criteria or specific requirement (including statutory, regulatory, or other citation) (continued) 2 CFR 200.320 – Methods of procurement to be followed states, “the non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award: (a) (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity; (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate.” Condition Texas Biomed did not maintain records for procurements sufficient to detail the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause Texas Biomed did not have effective internal controls and procedures in place to ensure Texas Biomed maintained records for procurements sufficient to detail the history of procurement, including the rationale for the method of procurement and other required elements. Effect or potential effect Texas Biomed did not comply with the general procurement standards and methods of procurement to be followed per the Uniform Guidance to maintain sufficient detail of the history of the procurement, including the rationale of the method of procurement. Questioned costs $94,637 in total as follows: $27,795 – Assistance Listing Number 93.351, Award Identification Number – 5P51OD011133-25 $7,727 – Assistance Listing Number 93.855 (COVID-19), Award Identification Number – 1U19AI171443-01 $3,863 – Assistance Listing Number 93.855 (COVID-19), Award Identification Number – 1U19AI171403-01 $3,863 – Assistance Listing Number 93.855 (COVID-19), Award Identification Number – 1U19AI171110-01 $1,909 – Assistance Listing Number 93.855, Award Identification Number – 5R01AI134240-05 $2,520 – Assistance Listing Number 93.855, Award Identification Number – 5R01AI134245-07 Questioned costs (continued) $18,404 – Assistance Listing Number 93.855 (COVID-19), Award Identification Number – 5R01AI170197-02 $24,693 – Assistance Listing Number 93.855, Award Identification Number – 1R21AI170148-01 $3,863 – Assistance Listing Number 93.RD NIAID Centers of Excellence for Influenza Research and Response, Award Identification Number – 75N93021C00014 Questioned costs were computed by using the total small purchase procurements that were not supported by adequate documentation regarding the history of the procurement, including the rationale of the procurement. Context EY selected and tested 15 procurements over $10,000 with expenditures totaling $3,304,871 from a population of 86 procurements over $10,000 with expenditures totaling $5,901,397 charged to the Research and Development cluster during the year ended December 31, 2023. For 4 procurements with expenditures in the amounts of $12,715, $10,119, $27,795, and $24,693, Texas Biomed did not obtain quotes or document sole source justification or the history of the procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. For 1 procurement with expenditures in the amount of $19,315, Texas Biomed did not adequately document the history of the procurement, specifically the reason for the contractor selection, since the contractor selected did not provide the lowest quote. We consider the expenditures related to these procurements to be questioned costs due to lack of required supporting documentation for the procurements, as noted above. Identification as a repeat finding, if applicable This is not a repeat finding. Recommendation Texas Biomed should retain written documentation for procurements, documenting the history of the procurement prior to the procurement of goods or services including, but not limited to, the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Views of responsible officials Management agrees with the finding and will implement corrective action to ensure controls are in place to retain the required written documentation for procurements.