Finding Text
Identification of the federal program:
Federal Agencies: U.S. Department of Health and Human Services
Pass-Through Entities: Ohio Department of Health
Assistance Listing No: 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response, 93.493 Congressional Directives, and 21.027 COVID-19 Coronavirus State and Local Recovery Funds
Award Period: 2023
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).”
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”.
Condition:
We identified the following matters during our testing of suspension and debarment control processes:
a) A third-party vendor performed the suspension and debarment validation process for Akron Children’s. The third-party vendor does not have a SOC 1 (System and Organization Controls) Report. For most of 2023, Akron Children’s 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 were accurate.
b) Akron Children’s did not retain the supporting documentation of the reconciliation of the vendor list that is received from the third-party vendor that is used to perform the suspension and debarment checks after the suspension and debarment checks are performed to ensure the listing is complete and agrees to the vendor list provided by Akron Children’s to the third-party vendor.
Cause:
Akron Children’s did not have policies and procedures that require a validation of the third-party’s controls be performed 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, Akron Children’s did not have policies and procedures in place to require that documentation is retained to support the reconciliations performed between the vendor list sent to the third-party vendor and the results provided by the third-party vendor.
Effect or potential effect:
Akron Children’s screening for suspension and debarment through the third-party vendor results may not be accurate.
By failing to retain the documentation of the reconciliation of vendor files to the third-party vendor search results, sufficient evidence was not retained to prove that the reconciliation took place.
As a result, there was not sufficient evidence to validate the appropriate internal controls took place to prevent Akron Children’s from transacting with a vendor that was suspended or debarred, which was ultimately charged to a federal program.
Questioned costs:
None.
Context:
The federal portion of expenditures subject to suspension and debarment represents approximately 84% of total federal expenditures for the programs of $10,888,195 for the year ended December 31, 2023.
Identification as a repeat finding, if applicable:
The finding is a repeat finding from the prior year – 2022-002, as it relates to 93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response.
Recommendation:
Management should add controls to validate the accuracy of the suspension and debarment search results performed by the third-party vendor when the search results in no match.
Views of responsible officials:
Akron Children's remediated these findings in the fourth quarter of 2023 by:
1) Implementing a periodic independent review of a sample of vendors sent to the third-party vendor to ensure that the processes employed by third-party vendor are accurate.
2) Developing a retention process for all vendor searches and file submissions to evidence compliance with the Federal regulations, including an independent review of the accuracy of file submissions. Further, a contract management system was installed in 2023 that holds the validation of new vendors as acceptable for federal procurements.