Finding Text
2024-005 Inadequate Contract Retention and Suspension/Debarment Verification (Material Weakness) Federal Agency: Department of Education Pass-through Agency: New Hampshire Department of Education Cluster/Program: Special Education Cluster Assistance Listing Number(s): 84.027, 84.173, 84.027X, 84.173X Passed-through Identification: 20220039, 20221010, 20221035, 20221036, 20221037, 20230209, 20230211, 20230212, 20230214, 20230215, 20230231, 20230232, 2024188, 20240189, 20240190, 20240191, 20240191, 20240199, 20240308 Compliance Requirement: Procurement and Suspension and Debarment Type of Finding: Internal Control over Compliance – Material Weakness Material Noncompliance Criteria or Specific Requirement: Federal regulations require that non-federal entities, including school administrative units (SAUs), maintain adequate documentation for all procurement transactions and ensure that vendors are eligible to participate in federal programs. Specifically, 2 CFR 200.318–200.327 outlines standards for procurement, including maintaining documentation that demonstrates compliance with federal requirements, ensuring fair and open competition, and retaining executed contracts and related procurement records. Additionally, 2 CFR 180 and 2 CFR 200.213 require verification that vendors are not suspended, debarred, or otherwise excluded from participation in federal programs prior to entering into a contract. Federal guidance emphasizes that all procurement documentation, including executed contracts, bid evaluations, and vendor eligibility verification, must be retained to provide an audit trail demonstrating compliance and prudent use of federal funds. Maintaining proper documentation and performing required verification steps helps prevent the risk of fraud, waste, or improper payments and ensures transparency and accountability in the use of public resources. Condition: During testing of procurement activities, we noted that two signed and executed contracts could not be located. Furthermore, for all vendors reviewed except one, there was no evidence that the School Administrative Unit (SAU) performed procedures to verify that the vendors were not suspended or debarred. Cause: The SAU did not have a consistent process for retaining executed contracts or for documenting the verification of vendor eligibility under suspension/debarment requirements. Staff were not aware of the federal verification requirements or lacked formal procedures to ensure compliance. Effect: The absence of executed contracts and verification procedures increases the risk of noncompliance with federal procurement regulations. This could potentially result in questioned costs during a federal audit and may expose the SAU to financial or reputational risk if funds were improperly paid to ineligible vendors. Questioned Costs: $679,147 Identification as Repeat Finding: This is not a repeat finding. Recommendation: The SAU should implement a formal procurement policy that ensures all contracts are properly executed, signed, and retained. The policy should also establish a standardized process to verify all vendors against federal suspension and debarment lists prior to awarding contracts, with documentation of all verification steps maintained as part of the procurement record. Additionally, staff should be trained on these procedures to ensure ongoing compliance with federal requirements. Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.