Finding No.: 2023-008 Pass-Through Entity: Republic of the Marshall Islands Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Area: Procurement and Suspension and Debarment Questioned Costs: $66,667 Criteria: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 126.7 - Award shall be made to the responsible offeror whose proposal is determined in writing to be the most advantageous to the Government taking into consideration price and the evaluation factors set forth in the Request for Proposals. No other factors or criteria shall be used in the evaluation. The contract file shall contain the basis on which the award is made. (b) Section 127 - Procurement of goods and services not exceeding $25,000 may be made in accordance with small purchase procedures promulgated by RepMar’s Policy Office. Small purchase procedures are those relatively simple and informal methods for securing services, supplies, or other property that do not cost more than $25,000. RepMar’s Ministry of Finance has previously declared that if small purchase procedures are used, price or rate quotations shall be obtained from an adequate number of qualified sources. (c) Section 128 - a contract may be awarded for supply, service, or construction item without competition when it is determined in writing that there is only one source for the required supply, service, or construction item. (d) Section 129 - Notwithstanding any other provision of this Chapter, the Chief Procurement Officer, the head of a Purchasing Agency, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations promulgated by the Policy Office; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. 2 CFR 180.300 states that when an entity enters into a covered transaction with another person at the next lower tier, the entity must verify that the person with whom the entity intends to do business is not excluded or disqualified by doing the following: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. 2 CFR 200.320(a) states that for micro-purchases, to the extent practicable, the recipient or subrecipient should distribute micro-purchases equitably among qualified suppliers. 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These 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 COSO. Condition: For six (or 50%) of twelve items, aggregating $157,536 in total non-payroll expenditures, supporting procurement documentation was not sufficient to substantiate compliance with the procurement method, as follows: For item #s 1 through 3, there were no vendor quotations on file. For item #s 4 and 6, procurement was sole sourced with written justification but does not appear to be justified. For item # 5, there were no adequate vendor quotations on file. Additionally, the College has no formal policies and procedures over compliance with the requirement of 2 CFR 200.320 which requires that the College distribute micro-purchases equitably among qualified suppliers. Moreover, the College has no internal control policies and procedures over verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Cause: The College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Furthermore, the College lacks internal control policies and procedures over: 1) distribution of micro-purchases equitably among qualified suppliers; and 2) verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Effect: The College is in noncompliance with applicable procurement requirements. The reportable questioned cost is $66,667 based on the items identified in Condition above. Identification as a Repeat Finding: 2022-012 Recommendation: Responsible personnel should ensure that documentation be adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Furthermore, the College should establish internal control policies and procedures over: 1) distribution of micro-purchases equitably among qualified suppliers; and 2) verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.