Finding 1149609 (2024-004)

Assistance Listing, Federal Agency, and Program Name 81.087 and 81.089, U.S. Department of Energy, Research and Development Cluster Federal Award Identification Number and Year DE EE0009755 and DE FE0032176 Pass through Entity N/A Direct award Finding Type Significant deficiency Repeat Finding No Criteria Recipients of federal grant funds must establish and maintain effective internal controls that provide reasonable assurance that grant funds are being managed in compliance with federal statutes, regulations, and the terms and conditions of the federal award, according to the Code of Federal Regulations (CFR). GTI Energy policies and procedures require that every sole source procurement above the micro purchase threshold of $10,000 must be documented and approved prior to the purchase. Condition Controls in place did not ensure the procurement policy was followed consistently. Questioned Costs None Identification of How Questioned Costs Were Computed N/A There were no questioned costs identified. Context In our sample of 40 purchase orders (POs), we found two issues. One PO had sufficient procurement documentation for the estimated purchase, however, through our walk through of the blanket PO procedures, we noted a lack of controls to identify when a blanket PO exceeds the micropurchase threshold. Another PO had sole source documentation provided by the GTI Energy, but it was not approved before the purchase. Cause and Effect GTI Energy lacks controls to identify blanket purchase orders (POs) exceeding $10,000, which require documentation to prove competition standards were met. Additionally, the controls failed to detect that a sole source justification was not approved before payment. These lack of controls increases the risk of noncompliance and may result in noncompliance instances not being identified in a timely manner. Recommendation We recommend that GTI Energy review its procurement procedures and controls to ensure they address the issues mentioned above, including evaluating the need for preventive or detective controls specific to blanket purchase orders (POs). Additionally, GTI Energy should redistribute its existing procurement policy to relevant personnel and provide adequate training. To ensure compliance with the policy, GTI Energy should establish monitoring procedures to verify that purchasers are adhering to it. Furthermore, we recommend that GTI Energy implement a system limitation requiring approval of certain procurement documentation before submission for payment. Views of Responsible Officials and Planned Corrective Actions Management acknowledges the importance of adhering to the procurement policy and takes its compliance obligations seriously. Although this particular finding did not result in noncompliance, management recognizes that a recurrence could lead to noncompliance. To prevent future occurrences, management is committed to enhancing internal controls. The following corrective actions will be implemented to ensure consistent adherence to procurement standards: 1. Update purchasing policies, procedures, forms, and job aides to enhance the clarity of requirements, particularly requirements for blanket purchase orders. Target completion date: 6/30/2025 2. Retrain agency staff, purchasing staff, and accounts payable staff on their roles and responsibilities related to purchasing policies. Target completion date: 7/31/2025 3. Implement a monthly review process for all vouchers posted against blanket POs to verify compliance. Target completion date: 7/31/2025 4. Update standard terms and conditions for blanket purchase orders (POs) to prohibit any purchase under a blanket PO from exceeding $10,000, and communicate this limit to all vendors with open blanket POs, requiring an acknowledgement of this change of terms. Failure to return the acknowledgement will result in closure of the blanket PO. Target completion date: 9/31/2025 5. Investigate the feasibility of implementing a system control within the purchasing system to require review and approval of requisitions by senior staff or management prior to PO issuance. Target completion date: 8/31/2025