Finding 2023–003: Procurement
Federal Department: U.S. Department of Treasury
Pass-through Agencies: Cook County, Illinois and Women's Business Development Center
COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027
Criteria
2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.318, General procurement standards (a) states “the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in Section 200.317 through 200.327.”
Section 200.318 (i) 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.” Also, Section 200.327 Contract provisions states that the non-Federal entity's contracts must contain the applicable provisions described in Appendix II to Part 200 – Contract Provisions for Non-Federal Entity Contracts Under Federal Award.
SDA’s Fiscal Policies and Procedures Manual updated July 21, 2022 (“the Manual”) states “Procurement shall be made using one of the following methods: 1) Micro and Small Purchase Threshold; 2) Competitive Sealed Bids and Competitive Negotiations; and 3) Non-Competitive Negotiations. All methods of procurement, when funded by federal grants or contracts, must follow procurement requirements contained in the OMB, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for federal awards. Any purchases over $10,000 must bid competitively if subject to a single federal audit.”
In addition, the Manual states “purchases related to Federally funded grants over $10,000 will be bid through either a Request for Proposal (RFP) or Request for Qualifications (RFQ) process. In addition, Request for Information (RFI) process may be used to help inform the development of either RFP, RFQ or other forms of procurement. Awards will be awarded to responses that meet the outlined criteria and reflect the lowest responsible bid. Contractors will be excluded from conducting business with SDA if the contractor has been debarred and/or suspended from conducting business with the federal government. On a regular basis, SDA will check vendors for any debarment status change on the federal System for Award Management (SAM). All source documents supporting any given transaction (e.g., receipts, invoices, and RFP data) will be retained and filed with SDA contract files in a centralized location. At a minimum, source document data must be sufficient to establish the basis for selection, the basis for the cost (including the reasonableness of cost), the rationale for the method of procurement and selection of contract type, and the basis for payment.”
Condition
During the current audit period, SDA did not adequately ensure federally funded contracts issued to vendors/contractors followed federal regulations and its internal policy, which includes maintaining documents to support its procurement decisions.
Cause
Based on our discussions with management, SDA completed a formal RFQ process for all vendors selected but did not maintain adequate documentation of the decision-making process.
Effect
The failure to maintain adequate documentation to support the procurement of federally funded contracts is a violation of federal regulations.
Questioned Costs
None.
Context
During our tests of procurement, we noted a total of four federally funded contracts were awarded by SDA during fiscal year 2023 (based on SDA’s procurement policy that required contracts with expenditures over the $10,000 threshold requiring competitive bid). We selected all four contracts for testing and noted the following:
For all four contracts, we noted no evidence that debarment/suspension verification checks were performed prior to awarding the contract.
For two contracts, we noted no evidence (justification memo) to support the basis for contractor selection (based on evaluation criteria and scoring outlined in the RFQs).
We noted that while the contract agreement includes language that the contractor shall comply with all appliable laws, ordinances, and codes of federal, state and local government. To avoid any confusion on the part of the contractors regarding federal compliance, a direct reference to 2 CFR Part 200 Appendix II should be included in the contract.
Identification of Repeated Findings
Repeated (Prior Finding No. 2022-003).
Recommendation
We recommend that SDA’s management adhere to its written policy and maintain documentation, including its justification memo to support all management decisions related to federally funded procurements to comply with federal regulations.
Views of Responsible Officials and Planned Corrective Action
SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.