Finding Text
Finding 2023-006: 21.027 - Coronavirus State and Local Fiscal Recovery Funds:COVID-19 - Material Weakness Compliance Requirement: Procurement and Suspension and Debarment Criteria: Under 2 CFR Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, specifically 2 CFR §§200.317–200.327 (Procurement Standards), non-Federal entities must follow established procurement procedures when purchasing goods and services under a Federal award. These standards require organizations to maintain written procurement procedures, conduct procurement transactions in a manner providing full and open competition, and maintain documentation supporting the procurement method, contractor selection, and basis for price determination. Condition: During testing, we noted that the Organization entered into a contractor agreement to provide services under the Federal pass-through program; however, the Organization did not follow the procurement standards required under Uniform Guidance. Specifically: • The Organization did not document that competitive procurement procedures were performed prior to selecting the contractor. • There was no evidence that multiple bids or proposals were solicited or evaluated, or that a justification for noncompetitive procurement was prepared and approved. • Documentation supporting the basis for vendor selection and price reasonableness was not maintained. Effect: Failure to follow required procurement standards limits assurance that the Organization obtained goods and services through full and open competition and at a reasonable cost. This increases the risk that Federal funds may not be used in the most efficient and cost-effective manner and may result in noncompliance with Federal award requirements. Questioned Cost: None. Cause: The Organization does not have sufficient policies, procedures, or internal controls in place to ensure that procurement transactions funded with Federal awards comply with Uniform Guidance procurement standards. Additionally, staff responsible for contracting decisions were not fully aware of Federal procurement requirements. Pass-Through Entity Monitoring Results: The Colorado Department of Labor and Employment (CDLE), the pass-through entity, issued a Financial Desk Review in April 2023 covering the period from December 1, 2021 through July 31, 2022. The desk review identified deficiencies related to the Organization's procurement practices and required corrective action to strengthen compliance with the Uniform Guidance procurement standards. Based on our audit procedures, we identified procurement compliance deficiencies similar to those identified during the CDLE desk review. This information is provided as relevant background regarding the significance of the compliance deficiencies identified during our audit and is not intended to indicate the existence of a prior-year audit finding. Recommendation: We recommend the Organization strengthen internal controls over procurement related to Federal awards by: • Developing and implementing written procurement policies and procedures that align with 2 CFR §§200.317–200.327. • Ensuring that procurement transactions include documentation of the procurement method used, vendor selection process, and price or cost analysis when required. • Maintaining documentation to demonstrate full and open competition, or a properly approved sole-source justification when noncompetitive procurement is used. • Providing training to staff responsible for procurement and contracting on Federal procurement requirements. • Implementing a review process prior to executing vendor agreements funded with Federal awards. Response: There is no disagreement with the audit finding. In fact, ActivateWork worked towards developing and implementing enhancements to its procurement process as suggested by the CDLE Financial Desk Review, from the date ActivateWork received it and throughout the remainder of the year, including revisions to policies, procedures, and oversight activities.