Finding No.: 2023-011 Federal Agency: U.S. Department of Education AL Program: 84.425 Education Stabilization Fund AL Sub-Program: 84.425F HEERF - Institutional Portion Federal Award No.: COVID-19 P425F202732 Area: Procurement and Suspension and Debarment Questioned Costs: $179,015 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 200.319 states that: (a) All procurement transactions under the Federal award must be conducted in a manner that provides full and open competition and is consistent with the standards of this section and § 200.320. (c) (6) Examples of situations that may restrict competition include specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement. (d) (2) The recipient or subrecipient must have written procedures for procurement transactions. These procedures must ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the property, equipment, or service being procured. The description may include a statement of the qualitative nature of the property, equipment, or service to be procured. When necessary, the description must provide minimum essential characteristics and standards to which the property, equipment, or service must conform. Detailed product specifications should be avoided if at all possible. When it is impractical or uneconomical to clearly and accurately describe the technical requirements, a “brand name or equivalent” description of features may be used to provide procurement requirements. The specific features of the named brand must be clearly stated. 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 200.320(c) states that 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. 2 CFR 200.324(a) states that the recipient or subrecipient must perform a cost or price analysis for every procurement transaction, including contract modifications, in excess of the simplified acquisition threshold. The method and degree of analysis conducted depend on the facts surrounding the particular procurement transaction. For example, the recipient or subrecipient should consider potential workforce impacts in their analysis if the procurement transaction will displace public sector employees. However, as a starting point, the recipient or subrecipient must make independent estimates before receiving bids or proposals. 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: Of four items (or 100%), aggregating $179,015 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. Further for item #s 2 and 3, there was no documentation on file to support compliance with 2 CFR 200.324(a). For item #4, procurement did not provide full and open competition in the solicitation process. The solicitation specified particular models, including a requirement for a specific “brand name” product instead of allowing “an equal” product to be offered. Furthermore, for solicitation with brand name indicated, solicitation did not include “brand name or equivalent” description. In addition, the selected vendor was not among the vendors who provided quotations. 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; 2) verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded; and 3) performance of a cost or price analysis for every procurement transaction in excess of the simplified acquisition threshold. Effect: The College is in noncompliance with applicable procurement requirements. The reportable questioned cost is $179,015 based on the items identified in Condition above. Identification as a Repeat Finding: 2022-022 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; 2) verification that an entity with which the College plans to enter into a covered transaction is not debarred, suspended, or otherwise excluded; and 3) performance of a cost or price analysis for every procurement transaction in excess of the simplified acquisition threshold. Views of Auditee and Planned Corrective Actions: The College agrees with the finding and provides details in its Corrective Action Plan.