Finding Text
System of Internal Controls Over Compliance: Procurement, Suspension, and Debarment; U.S.
Department of Treasury, Assistance Listing #21.027, Coronavirus State and Local Fiscal Recovery Funds, Passed Through St. Jude’s Ranch for Children, Boulder City Campus
Criteria: In accordance with 2 CFR 200.62(a)(3), the auditee must maintain a system of internal control over compliance to provide reasonable assurance that expenditures under federal award programs adhere to procurement standards as outlined in 2 CFR Part 200, Subpart D.
Condition: The organization did not adhere to the procurement standards as required under 2 CFR Part 200, Subpart D, and/or the written purchasing and procurement policy.
Context: On July 15, 2022, the organization entered into a construction contract to construct a capital asset. Subsequently, on June 24, 2024, the organization was awarded funding through the Coronavirus State and Local Fiscal Recovery Fund to construct said capital asset. As the capital project construction contract was executed prior to the federal award being received, the organization did not adhere to the procurement standards as required under 2 CFR Part 200, Subpart D, and/or the written purchasing and procurement policy.
Effect: Lack of adherence to procurement standards as outlined in 2 CFR Part 200, Subpart D, could result in contractual liabilities incurred by the organization that are related to suspended, debarred, or otherwise unauthorized contractors.
Cause: Upon receipt of the federal award intended to fund the capital project, the organization did not appropriately consider the potential remedial action(s) needed as related to adherence to 2 CFR Part 200, Subpart D.
Recommendation: We recommend management design and implement a system of internal controls over compliance whereby procurement standards are adhered to for all expenditures requested for reimbursement under federal award programs.
Views of Responsible Officials and Planned Corrective Actions: The CFO, Finance Director, and/or outsourced accountant will review all contracts involving federal funds prior to execution to verify adherence to 2 CFR Part 200, Subpart D. Given the unique nature of the contract in question being executed prior to the awarding of federal funds but subsequently using the federal funds to cover expenditures related to the contract, St. Jude’s Ranch for Children (the parent entity of HSB Holding Company) does not anticipate a similar scenario in the future. However, SJRC will meet with legal counsel to review existing boilerplate contracts and incorporate a 2 CFR Part 200, Subpart D compliance clause for use in any contracts with the potential to be funded by federal awards. Training will be provided to SJRC finance and program staff, led by legal counsel, covering: (i) contract negotiation basics; (ii) federal clauses that are non-negotiable (e.g., 2 CFR 200 provisions); and (iii) when legal review is required.