2025-010 ALN 14.850 – Public Housing Operating Fund – Procurement and Suspension and Debarment Condition and Criteria: During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority’s compliance with the Housing Capital Fund Program’s procurement and suspension and debarment compliance provisions. In accordance with 2 CFR part 215.40 through 215.48, all procurement transactions should be conducted in a manner in which to provide, to the maximum extent practical, open and free competition. It also states that some form of cost or price analysis shall be made and documented in the procurement files in connection with every procurement action. Lastly, in accordance with the Authority’s Procurement Policy, small purchase procedures for purchases or procurements of goods and services in excess of $10,000 but not exceeding $40,000 requires documentation of all quotes that must be maintained in the procurement file. Also, in accordance with 2 CFR part 180, for covered transactions, non-Federal entities are required to verify that entities are not suspended, debarred, or otherwise excluded before contracting with the entities. Additionally, the Authority's Procurement Policy did not include any Policy guidelines for procurements that piggyback off of Federal or State governmental agencies as was done for one of the two procured contracts tested above and no support for how the original Federal or State Contract was procured (which method) was obtained by the Authority for this contract. This also resulted in our inability to determine whether competition was open and competitive and whether the contractor was debarred, suspended, or otherwise excluded for this procured contract. For the other procured contract that was tested, it was noted that the Authority did not select the proper procurement method based on their Procurement Policy as the Small Purchases Process was used instead of Sealed Bidding. Also, the Authority had smaller contracts within the Small Purchases threshold that were procured that either did not have adequate or complete documentation to verify that the Procurement Policy was followed, or they did not have an executed contract in place. Also, supporting documentation for costs expended on contracts during the year did not include works orders and purchase orders. Per 24 CFR § 85.36(b)(9), “grantees and subgrantees will maintain records sufficient to detail the significant history of a 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.” Therefore, the PHA must maintain information supporting their selection for procurements. Lastly, HUD conducted an onsite Procurement Review of the Authority on January 29, 2025, to provide a review on procurement. The review was prompted by concerns raised from multiple sources regarding the Authority’s, expenditure of federal funds. This assessment found there is non-compliance within the Authority and HUD concerns related to procurement activities and regulations. Amount of Questioned Costs: Unknown. Context: As a result of the determination that the internal controls over procurement and suspension and debarment were likely to be ineffective, and due to the fact that the Authority explained that they could not locate or provide certain procurement documentation for our audit, 100% of contracts tested had issues with noncompliance. All 3 of these tested disbursements lacked supporting procurement documentation evidencing whether or not proper procurement actions were taken, or compliance requirements were followed. Cause: The Authority’s internal controls over the Program’s procurement that were in place were deficient. Authority employees with the ability to procure goods and services were not complying with Federal procurement regulations or the Board-approved Procurement Policy as adequate documentation of all procurement actions was not being maintained on file, including documentation of bids or quotes, cost or price analysis, and verification of suspension and debarment from the System for Award Management (SAM) Exclusions website. Effect or Potential Effect: As a result of a lack of supporting procurement documentation on file, the Authority may have procured goods and services that did not provide for open and free competition, or that were not reasonably priced, which could have led to Federal funding waste. Also, the lack of evidence that the Authority obtained verification that awarded contractors were not suspended or debarred means that the Authority may have entered into covered transactions with contractors who were prohibited from contracting on projects using Federal awards, which opens up the Authority to the potential for contracting with a contractor who may have previously committed fraud, embezzlement, theft, etc., or that has a history of failing to perform. Auditor’s Recommendation: We recommend that the Authority review over all their ongoing contracts and, for those contracts that are either missing or expired, perform the necessary procurement actions and ensure that all procurement actions are adequately documented and maintained on file in accordance with the Authority's Board-approved Procurement Policy. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.