Finding Text
Type of Finding: (F) Significant Deficiency in Internal Control Over Compliance of Federal Awards (G) Instance of Non-compliance related to Federal Awards Federal Award Information Funding Agency: U.S. Department of Defense, passed through the Air Force Research Laboratory Title: New Space New Mexico Small Satellite Manufacturing and Innovation Hub (iHub) AL #: 12.599 Award #: FA9453-21-3-1001 Compliance Requirement: Procurement Award Period: 06/01/2021-05/31/2026 Questioned Costs: $1,058,526 Condition We tested 6 noncompetitive/sole-source procurement(s) from a population of 22 procurement transactions charged to the award during 2022, totaling $1,142,531. For 6 of 6 procurement files (totaling $1,058,526), the files did not include (a) documentation supporting the rationale for using a noncompetitive method and (b) documentation of approvals required by New Space policy and/or award terms. New Space provided a sole-source justification during inquiry; however, it was not retained in the procurement file at the time of our testing. Criteria Management is responsible for establishing and maintaining internal controls to ensure procurement activities are conducted in accordance with applicable requirements and that sufficient documentation is maintained to support procurement decisions, including the use of noncompetitive procurement methods. NEW SPACE NEXUS SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended December 31, 2022 45 Recipients/subrecipients must maintain procurement records sufficient to detail the history of each procurement transaction, including the rationale for the procurement method, contractor selection/rejection, and the basis for the contract price. Noncompetitive procurement may be used only under specific circumstances (e.g., single source; emergency; written Federal/PTE approval when required; inadequate competition after solicitation). Recipients/subrecipients must establish, document, and maintain effective internal control over the Federal award. Effect Without adequate documentation supporting sole-source procurements, New Space cannot demonstrate that procurement decisions were appropriate or compliant. This increases the risk of noncompliance with procurement requirements, limits transparency, and may result in questioned costs or disallowed expenditures. Cause Procurement policy lacked a required checklist/control for documenting sole-source basis and retaining approvals; or control not operating due to training/turnover. Recommendation Management should implement a documented sole-source procurement control requiring: (1) pre-award written justification tying to an allowable noncompetitive circumstance, (2) documented price/cost basis, (3) documented required approvals, and (4) retention in the procurement file; assign ownership to the financial analyst and require periodic file quality reviews. Management should also review existing procurement files to identify and remediate missing documentation and provide training to staff responsible for procurement activities. Views of Responsible Officials and Planned Corrective Action Management concurs and will update procurement procedures to require pre-award sole-source justification, documented price or cost analysis, documented approvals, and retention of all required documentation in the procurement file. The executive director will review existing files for completeness, remediate missing documentation where possible, and provide training to staff, subcontractors, and vendors involved in procurement. Owned by: Financial Analyst By: January 31, 2023.