Finding Text
Reference Number: 2025-004 Compliance Requirement: Procurement and Suspension/Debarment Type of Finding: Internal Control and Compliance Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance AL Number(s) and Title(s): 84.027 – Special Education Cluster Federal Awarding Agency: U.S. Department of Education Federal Award Number: None Pass-through Entity: Alabama Department of Education Pass-through Award Number: A250254 Questioned Costs: $264,966.68 The Institute failed to comply with Federal procurement standards and the Code of Alabama 1975. The U. S. Code of Federal Regulations Title 2, Part 200.318(a), of the Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards (Uniform Guidance) states “the recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations.” Part 200.318(i), states “The recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction.” Section 200.320 describes the methods of procurement to be followed. This guidance includes procedures for small purchases. Small purchases are purchases higher than the micro-purchase threshold but not exceeding the simplified acquisition threshold. During the 2025 fiscal year, the thresholds were $10,000 and $250,000, respectively. When small purchase procedures are used, price or rate quotations should be obtained from an adequate number of sources. Article 5 of the Code of Alabama 1975, Section 41-4-124(b), states that all educational or eleemosynary institutions are subject to the article except as it relates to the purchase of professional services and the oversight and authority of the Chief Procurement Officer. It further states that those entities should maintain procurement offices and personnel and adopt rules as may be necessary to comply with the article. The Institute’s procurement policy references the Code of Alabama 1975, Section 41-16-50, which no longer applies to the Institute due to passage of Act 2021-296, now codified at Code of Alabama 1975, Section 41-4-110, et seq. Since the Institute has not updated their procurement policies and procedures to comply with current State law and regulations, the Institute did not have adequate policies and procedures in place to ensure compliance with the U.S. Code of Federal Regulations Title 2, Part 200.318 and 200.320. Additionally, the Institute’s procurement policy states the bid threshold is $15,000.00. Therefore, small purchase procedures can only be used for purchases between the micro-purchase threshold ($10,000) and the threshold set by the Institute ($15,000). Furthermore, non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR section 180.220. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the nonfederal entity must verify that the entity is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). The Institute failed to adopt rules as necessary to comply with Code of Alabama 1975, Section 41-4-124(b). Due to a lack of properly designed and implemented procurement policies and procedures, the Institute awarded three contracts during the fiscal year without obtaining price or rate quotations from an adequate number of sources. These purchases totaled $188,631.68. The Institute also purchased $76,335.00 in visual aid equipment without bidding the award in accordance with Institute policies. As a result, the Institute did not comply with Uniform Guidance procurement requirements or the Code of Alabama 1975 for these purchases. It was also noted that the Institute failed to verify that vendors were not suspended or debarred before entering into a covered transaction. As a result, procurements could be improperly entered into with vendors that are suspended or debarred. Recommendation The Institute should implement policies and procedures to ensure compliance with the Uniform Guidance and the Code of Alabama 1975 requirements related to procurement transactions and to ensure proper suspension and debarment verifications are performed and that documentation of the suspension and debarment status is retained. Views of Responsible Officials of the Auditee Management agrees that the Institute' s procurement policy was not updated for the passage of Act 2021-296 and will take corrective actions.