Finding Text
FINDING 2024-001 Information on the federal program: Federal Agency: Department of the Treasury Pass-Through Entity: N/A – Direct Grant Federal Program: Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Assistance Listing Number: 21.027 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Noncompliance Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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)...." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of 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. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: The City did not have internal controls in place to ensure compliance with the procurement and suspension and debarment requirements. The City had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchase and simplified acquisition procurement thresholds were followed. Cause: The City had not developed a system of internal controls that would have ensured compliance with Procurement and Suspension and Debarment compliance requirements for covered transactions. Effect: Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the City. Questioned costs: There are no questioned costs. Context: For one out of three samples selected for the small purchase procurement threshold, three quotes and rationale for selecting the vendor were not documented. Small purchase procurements require three competing quotes and rationale for selection of the vendor. The procurement was for park improvement design services. The City was unaware that professional services are required to follow the federal procurement process. Per grant requirements, all grant funded expenditures require appropriate procurement, regardless of whether it is a good or service. For two out of three samples selected for suspension and debarment testing, the City did not have support that vendors procured under CSLFRF funding were not suspended or debarred. Identification as a repeat finding, if applicable: Yes, finding 2023-003 in the prior year report. Recommendation: We recommend that the City establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include ensuring proper procurement methods are followed, suspension and debarment checks are performed and documented prior to entering into the transaction. Views of responsible officials and planned corrective actions: Management acknowledges the finding. See management’s corrective action plan attached to this audit report.