Finding Text
2024-003 Procurement, Suspension, and Debarment Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Agriculture Program: 10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Award Number and Year: 242MN101S2514; 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 U.S. Code of Federal Regulations § 200.318(i) states that the Health and Human Services 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. Additionally, the Health and Human Services must follow further federal guidance over full and open competition as provided in Title 2 U.S. Code of Federal Regulations § 200.319, and perform a cost or price analysis as provided in Title 2 U.S. Code of Federal Regulations § 200.324. Federal requirements prohibit non-federal entities from contracting with or making subawards under covered transactions to parties that are suspended or debarred. Title 2 U.S. Code of Federal Regulations § 180.300 describes a required verification process. Prior to entering into the transaction, one of the following must be performed: (1) checking SAM.gov exclusions, (2) collecting a certification, or (3) adding a clause or condition to the covered transaction. Condition: The following exceptions were noted in the procurements testing: • All five small purchases tested did not have documentation of price or rate quotations obtained from an adequate number of qualified sources detailing the history of procurement or documentation of full and open competition. • For the five micro-purchase procurements tested, Southwest Health and Human Services did not document how purchases are distributed among qualified suppliers, as practical. • For one of the four covered transactions tested, the verification for suspended or debarred vendors was not performed before entering into the procurement. • For the one transaction over the simplified acquisition threshold tested, no documentation was maintained detailing the history of the procurement, demonstrating full and open competition, or that a cost or price analysis was performed. Questioned Costs: None. Context: The threshold used for the procurement testing was based on the Health and Human Services’ policy for simplified acquisition threshold (over $150,000), small purchases ($3,000 to $150,000), and micro-purchases ($3,000 or less). The suspension and debarment covered transaction threshold is $25,000. The population consisted of one procurement over the simplified acquisition threshold, 37 small purchases, 38 micro-purchases, and 18 covered transactions. The sample was one over the simplified acquisition threshold, five small purchases, five micro-purchases, and four covered transactions. The sample size was based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing and Single Audits. Effect: It cannot be determined that the contracting process was open and fair because the Health and Human Services did not document the rationale for the contractor selection. It also cannot be determined that an entity was not suspended, debarred, or otherwise excluded from conducting business with the Health and Human Services. Cause: Southwest Health and Human Services does not have processes in place to ensure federal requirements for procurement are followed. Recommendation: We recommend the Health and Human Services maintain documentation on the history of a procurement, provide for full and open competition, and perform a cost or price analysis to support compliance with Title 2 U.S. Code of Federal Regulations §§ 200.318, 200.319, and 200.324. We further recommend the Health and Human Services maintain documentation to demonstrate that vendors were not debarred, suspended, or otherwise excluded from conducting business with the Health and Human Services; this documentation should be completed prior to entering into a covered transaction. View of Responsible Official: Concur