Finding Text
Finding 2024-002 Failure to Follow Procurement Policy Type of Finding Noncompliance and Significant Deficiency in Internal Control over Compliance Condition The Organization maintains a procurement policy that establishes spending thresholds and outlines the requirements for obtaining rate quotations at each of these levels. During audit procedures, it was noted that the Organization did not follow the policy’s requirements for obtaining and documenting rate quotations for two of the transactions reviewed. The Organization explained that the vendor was considered a unique partner, and competition was intentionally limited based on the specialized nature of the services provided. However, no documentation was retained to justify this decision to limit competition, as required by federal procurement standards. The absence of such documentation resulted in questioned costs for these transactions. Criteria: Federal regulations require non-federal entities to maintain written procurement procedures that are consistent with applicable laws and standards, including the requirement to conduct procurement transactions in a manner that provides full and open competition, except in limited circumstances, as specifically defined in 2 CFR 200.320. When competition is restricted, entities are required to document the basis for their determination, including the rationale for selecting a particular vendor. Additionally, entities must maintain documentation to support procurement actions and decisions to ensure compliance with applicable requirements. Cause This issue appears to stem from a lack of adherence to the Organization’s procurement policy and an underdeveloped process for documenting exceptions to competitive procurement requirements. While management considered the vendor relationship justified, there was no formal documentation of the rationale, resulting in noncompliance with both internal policy and federal procurement requirements. Possible of Known Effect As a result of this deficiency, the Organization cannot demonstrate that the procurement process complied with the federal requirements under 2 CFR 200.320, nor can it substantiate its rationale for limiting competition. This lack of documentation increases the risk of unsupported or inappropriate expenditures, and in this instance, led to questioned costs related to the two transactions tested. Questioned Costs Known questioned costs of $29,164 were identified. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Organization strengthen its procurement practices by ensuring that all procurements, including those where competition is intentionally limited, are fully documented in accordance with federal requirements and the Organization’s procurement policy. Documentation should include the rationale for limiting competition and evidence of compliance with the applicable procurement threshold requirements. Implementing a review process to ensure procurement files are complete prior to payment or grant charging would further reduce the risk of noncompliance. Views of Responsible Officials Prior to the award of ARPA grant funding in 2023, the Organization did not have a formal procurement policy in place. Implementation of such a policy was required to receive the award. At the time of implementation, however, partnerships had already been established and were identified in the original grant proposal. With respect to legal services, the Organization engaged the two primary organizations in Indianapolis that provide expungement assistance. Indiana Legal Services ("ILS") was the first entity contacted, but after multiple attempts, no response was received from the designated point of contact. Subsequently, the Organization engaged with another nonprofit organization, which responded promptly and agreed to serve as a partner under the grant. For grant compliance services, the Organization engaged a third party. This decision was based on recommendations from community partners, as well as her demonstrated work quality, professional reliability, and commitment to serving the target population.