Finding Text
Criteria
Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow specific procurement standards set out in 2 CFR sections 200.318 through 200.326, which includes documenting the procurement methods used for vendor selection. These procedures are designed to ensure fair competition, cost-effectiveness, and federal requirements.
These procurement standards require, among other provisions, that a non-federal entity must:
1. Meet the general procurement standards in 2 CFR Section 200.318, which include oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to reliable contractors, and maintaining records to document the history of procurement.
2. Conduct all procurement transactions for the acquisition of property or services under a federal award in a manner providing full and open competition consistent with the standards of 2 CFR section 200.320.
3. Use documented procurement procedures, consistent with the standards of 2 CFR 200.317 to 320. 2 CFR 200.320 enumerates below the different procurement methods that a non-federal entity should use:
a) The micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR sections 200.320(a) (1) and (2). Under the micro-purchase method, the aggregate dollar amount does not exceed $50,000.
b) Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold.
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.
c) Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.320(a)). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (2 CFR section 200.320(b)).
4. For acquisitions exceeding the simplified acquisition threshold, the non-federal entity must use one of the following procurement methods: the sealed bid method if the acquisition meets the criteria in 2 CFR section 200.320(b) (1); the competitive proposals method under the conditions specified in 2 CFR section 200.320(b) (2); or the noncompetitive proposals method (i.e., solicit a proposal from only one source) but only when one or more of four circumstances are met, in accordance with 2 CFR section 200.320(c)).
5. Perform a cost or price analysis in connection with every procurement action in excess of the simplified acquisition threshold, including contract modifications (2 CFR section 200.323(a)). The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used (2 CFR section 200.323(b)).
6. Ensure that every purchase order or other contract includes applicable provisions required by 2 CFR section 200.326. These provisions are described in Appendix II to 2 CFR Part 200, “Contract Provisions for Non-Federal Entity Contracts Under Federal Awards.”
Condition
During our audit, the Foundation was unable to provide supporting documentation to demonstrate that the required procurement methods under the Uniform Guidance were performed on three out of four vendors tested. The expenditures paid to these vendors ranged from $75,000 to $675,000 in 2023.
Cause
The lack of documentation is attributed to oversight in maintaining appropriate records of vendor selection and compliance with procurement standards.
Effect
The absence of procurement documentation raises the risk of non-compliance with federal regulations, which could lead to potential disallowances or unnecessary sanctions.
Questioned Costs
None
Recommendation
The Foundation should strengthen its internal controls over procurement by ensuring that all procurement activities, particularly significant expenditures, are properly documented. This includes retaining evidence that procurement methods required by the Uniform Guidance were followed, such as bids, contracts, or justifications for sole-source vendors. The Foundation should also conduct training for staff involved in procurement to ensure awareness and adherence to the policies. Regular internal audits may be implemented to verify compliance with procurement procedures.
Views of Responsible Officials and Planned Corrective Action
We value your guidance and are committed to enhancing our compliance with the Uniform Guidance.
In response, we will:
1. Documentation Procedures: We will implement procedures to properly document procurement activities. This will help us maintain consistency and ensure compliance with the Uniform Guidance.
2. Monitoring and Accountability: Additionally, we will establish a system to regularly monitor our compliance with these policies and procedures. This will enable us to quickly address any issues that may arise.
The Finance Department will be responsible for implementing these changes and will have everything ready before the end of 2024.
We are dedicated to making these improvements and truly value your support as we work through this process.
Personnel responsible: Eduardo Cedeno, Director of Finance
Anticipated completion date: December 31, 2024