Finding Text
We identified a significant deficiency in internal control over compliance related to procurement requirements due to missing federal contract clauses and certifications for the REAP program. Criteria: Federal regulations require nonfederal entities to include specific contract provisions in all contracts made under federal awards, as described in 2 CFR 200.327 and Appendix II to 2 CFR part 200, as applicable to the type and dollar amount of the procurement. In addition, the Center must ensure that it does not enter into a covered transaction with a party that is suspended or debarred by verifying the Center’s status in SAM.gov, collecting a certification, or including appropriate contract clauses (2 CFR 200.214 and 2 CFR part 180). Condition: The Center’s contracts did not include the required clauses, certifications, and/or language to meet the conditions listed in 2 CFR 200 Appendix II to Part 200. We selected 9 budgeted contracts totaling $1,633,265 under the REAP program. Seven of the nine included a required termination clause. None of the contracts tested contained the other required federal provisions from Appendix II to 2 CFR part 200. In addition, the Center did not perform or document alternative suspension and debarment procedures (such as SAM.gov checks, certifications, or contract clauses) at the time of contract execution. These conditions evidence a significant deficiency in internal control over compliance with procurement requirements for this major program. Cause: Management had not finalized and implemented procurement policies and procedures designed to ensure contracts executed under federal awards included required federal provisions and documented suspension and debarment checks. There was no standard contract template or addendum incorporating required federal clauses, and no control requiring review of contracts for compliance with 2 CFR 200.327 and Appendix II before execution. As a result, contractors were permitted to use their own templates without inclusion of required federal provisions.Potential Effect: Absent required contract provisions and documented suspension and debarment procedures, there is an increased risk that the Center could enter into agreements with entities that are ineligible or fail to comply with other federal requirements. If this were to occur, related expenditures could be determined to be unallowable, resulting in disallowed costs, potential repayment, and possible impact on future awards. Questioned Costs: $-0-. We performed alternative procedures by searching SAM.gov for each contractor to determine whether they were excluded or debarred; none were listed. Accordingly, we did not identify any known questioned costs related to this finding. Recommendation: Management should (1) develop and require the use of a standard contract addendum for all contractors under federal awards that includes all required clauses, certifications, and language required by Appendix II to 2 CFR part 200, as applicable to each contract; (2) implement written procurement policies and procedures that incorporate these requirements and require documented suspension and debarment checks (e.g., SAM.gov verification or certifications) before execution; and (3) establish a review control to verify that required provisions and documentation are present before contracts are approved. Based on the nature and dollar value of the contracts, we recommend that the addendum address applicable paragraphs (e.g., Sections A, B, G, H, I, J, K, and L) of Appendix II. To further correct this finding, management should develop and send each contractor an addendum to execute for the original contract that includes all required clauses, certifications, and/or language to meet the conditions listed in 2 CFR 200 Appendix II to Part 200 paragraphs where applicable. Views of Responsible Officials: Management agreed that the clauses, certifications, and/or language was missing from the original contracts and that addendums to the originals will be done to address the finding.