Finding 1182623 (2025-002)

Finding 2025-002 – Procurement and Suspension and Debarment Identification of the federal program: Federal Grantor: United States Department of the Treasury Assistance Listing Number: 21.027, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Pass-Through Grantor: Kansas Department for Aging and Disability Services Ascension Ministry Market: Kansas Pass-Through Award Number: N0237723 Pass-Through Award Period: 07/01/2023 – 06/30/2026 Pass-Through Grantor: State of Tennessee Department of Health Ascension Ministry Market: Tennessee Pass-Through Award Number: Not applicable Pass-Through Award Period: 03/03/2021 – 06/30/2026 Criteria or specific requirement (including statutory, regulatory, or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “The recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. The internal controls should align with the guidance in ‘Standards for Internal Control in the Federal Government’ issued by the Comptroller General of the United States or the ‘Internal Control — Integrated Framework’ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Section 200.318 states the following regarding general procurement standards: “(i) Procurement records. The recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price.” Section 200.320 states the following regarding procurement methods: “(c) Noncompetitive procurement. There are specific circumstances in which the recipient or subrecipient may use a noncompetitive procurement method. The noncompetitive procurement method may only be used if one of the following circumstances applies: (1) The aggregate amount of the procurement transaction does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); (2) The procurement transaction can only be fulfilled by a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from providing public notice of a competitive solicitation; (4) The recipient or subrecipient requests in writing to use a noncompetitive procurement method, and the Federal agency or pass-through entity provides written approval; or (5) After soliciting several sources, competition is determined inadequate.” Condition: Ascension Health did not prepare a sole source justification memo timely for two procurement transactions executed in fiscal year 2025. Cause: Internal controls were not enforced to ensure a sole-source justification memo was completed before the procurement transaction occurred. Effect or potential effect: Lack of or untimely preparation of the sole source justification memo results in noncompliance with the documentation requirements under the Uniform Guidance procurement standards and could potentially result in inadequate or inappropriate procurement methods followed. Questioned costs: $24,707 calculated as follows: Pass-Through Grantor: Kansas Department for Aging and Disability Services Pass-Through Award Number: N0237723 Questioned costs (COVID-19): $16,167, representing the costs reported on the schedule of expenditures of federal awards for the year ended June 30, 2025, for one procurement transaction that lacked sole-source justification memo at the time of procurement. Pass-Through Grantor: State of Tennessee Department of Health Pass-Through Award Number: Not applicable Questioned costs (COVID-19): $8,540, representing the costs reported on the schedule of expenditures of federal awards for the year ended June 30, 2025, for one procurement transaction that lacked sole-source justification memo at the time of procurement. Context: We tested a sample of five procurement transactions totaling $3,916,620 and noted exceptions related to two procurement transactions totaling $24,707. Total procurement transactions were $14,560,955, representing 91% of total federal expenditures of $15,919,235 for the year ended June 30, 2025. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: Management should implement more robust internal controls to ensure sole source justification memos are prepared and reviewed timely. Views of responsible officials: Personnel responsible for procurement transactions will be educated on the proper procedures for obtaining and retaining sole source memo justification letters before entering into these transactions.