Finding 1238379 (2025-002)

Material Weakness Repeat Finding
Requirement
I
Questioned Costs
-
Year
2025
Accepted
2026-09-29

AI Summary

  • Core Issue: Inconsistent documentation of procurement and suspension and debarment procedures makes it hard to verify compliance and control effectiveness.
  • Impacted Requirements: Internal controls must be documented clearly to show that all required procedures were performed and reviewed as per established policies.
  • Recommended Follow-Up: Implement standardized checklists and centralized documentation practices to ensure complete and traceable records for procurement activities.

Finding Text

Finding 2025-002 Internal Control Finding: Documentation of Procurement and Suspension and Debarment Control Procedures Condition: The Organization has established internal control policies and procedures related to procurement activities, including procedures intended to address suspension and debarment requirements for vendors, subcontractors, and contractors. However, during the audit, documentation supporting the performance of these procedures was not consistently maintained in a manner that allowed the control process to be readily traced, tested, and verified. Specifically, while management represented that procurement and suspension and debarment procedures were performed, the audit evidence available did not consistently demonstrate: • The specific procedures performed for each selected vendor, subcontractor, or contractor; • The timing of suspension and debarment verification relative to procurement or contract approval; • The individual responsible for performing and/or reviewing the procedures; • Evidence of review, approval, or resolution of exceptions, if applicable; and • A clear audit trail connecting procurement files, vendor approvals, contract documentation, and suspension and debarment checks. As a result, the audit team experienced difficulty following and testing the full control process from initiation through approval and verification. Criteria: An effective internal control system should include policies and procedures that are not only designed appropriately but also documented in a manner sufficient to demonstrate that the controls were performed as intended. For procurement and compliance-related controls, documentation should provide evidence that required procedures were completed timely, reviewed as applicable, and retained in a format that supports monitoring, oversight, and auditability. For vendors, subcontractors, and contractors subject to suspension and debarment requirements, the Organization should maintain adequate documentation showing that appropriate verification procedures were performed before entering into covered transactions or otherwise as required by the Organization’s policies and applicable compliance requirements. Cause: The Organization has policies in place; however, the related procedures and documentation practices did not consistently result in a complete, centralized, and readily testable audit trail. In certain instances, evidence of the procurement process and suspension and debarment verification was maintained across multiple files, systems, emails, or supporting documents, making it difficult to determine whether all required steps were completed and reviewed in accordance with established policies. This appears to be due, at least in part, to a lack of standardized documentation requirements, inconsistent retention of supporting evidence, and limited use of a uniform checklist or approval record to demonstrate completion of the control process. Effect: When documentation is not maintained in a consistent and readily testable manner, there is an increased risk that required procurement and suspension and debarment procedures may not be performed, reviewed, or retained consistently. In addition, management may have reduced ability to demonstrate compliance with internal policies and applicable requirements. The lack of clear documentation and process traceability may also result in: • Difficulty verifying that vendors, subcontractors, and contractors were appropriately reviewed prior to selection, approval, or contract execution; • Increased risk of entering into transactions with parties that are suspended, debarred, or otherwise ineligible; • Inconsistent application of procurement procedures across departments, programs, or personnel; • Reduced effectiveness of management review and monitoring controls; • Delays or inefficiencies during audits, monitoring reviews, or compliance examinations; and • Increased risk of questioned costs, compliance findings, or reputational harm if required procedures cannot be substantiated. Recommendation: We recommend that management enhance the documentation and traceability of its procurement and suspension and debarment control procedures. Although policies are already in place, management should consider implementing a standardized process to ensure evidence of control performance is complete, consistent, and readily available for review. Recommended actions include: 1. Develop a standardized procurement and eligibility verification checklist to be completed for applicable vendors, subcontractors, and contractors. 2. Require documentation of suspension and debarment checks, including the date performed, source used, name of the party searched, results of the search, and the individual performing the verification. 3. Document supervisory review or approval, including evidence of review prior to vendor approval, contract execution, or payment, as applicable. 4. Centralize retention of procurement and compliance documentation within the vendor, contract, or procurement file to provide a clear audit trail. 5. Establish clear documentation retention expectations for emails, screenshots, system reports, approval forms, and other supporting evidence. 6. Periodically monitor compliance with documentation requirements to confirm that procedures are being performed and retained consistently. 7. Provide training to personnel involved in procurement and contracting to reinforce documentation expectations and the importance of maintaining evidence of control performance. Implementing these enhancements would improve management’s ability to demonstrate that procurement and suspension and debarment controls are operating effectively and would support more efficient testing by internal or external reviewers.

Corrective Action Plan

Finding 2025-002 Finding Number: 2025-002 Finding Title: Documentation of Procurement and Suspension and Debarment Control Procedures Corrective Action Planned: Management believes this finding resulted from the Organization’s assessment that compliance procedures implemented through the Construction Manager were sufficient to address the suspension and debarment requirements associated with direct vendor payments. The Organization incorporated applicable federal compliance requirements into its agreement with the Construction Manager and the related subcontractor arrangements and documented its rationale regarding whether additional verification was required for vendors paid directly to preserve the Organization's sales tax exemption. The Organization has subsequently confirmed that none of the material vendors paid directly by RMHC were listed as suspended, debarred, or otherwise excluded from participation in federal programs. Therefore, management believes the finding relates to compliance documentation and retention requirements rather than the engagement of ineligible vendors. To strengthen compliance documentation in this area, management will update its procurement and federal award compliance procedures to clearly address situations in which the Organization makes direct payments to vendors using federal funds, including circumstances where the Organization does not have a direct contractual relationship with those vendors and where project procurement activities are administered through a Construction Manager or other third party. Management will update applicable checklists and written guidance, provide training to personnel responsible for federal award compliance, and implement supervisory review of covered-transaction evaluations involving direct vendor payments. Management will also ensure that documentation supporting suspension and debarment determinations and related compliance conclusions is retained in the applicable procurement and payment files. In addition, management notes that the circumstances giving rise to this finding were unique to the capital project and the Organization's previous practice of paying certain material vendors directly in order to preserve its sales tax exemption. Pursuant to Oklahoma Senate Bill 44, effective in 2026, sales tax exemptions were expanded to expressly apply to contractors and subcontractors performing work for qualified tax-exempt entities. As a result, the Organization does not anticipate the need to make direct payments to material vendors for future construction projects solely to preserve sales tax-exempt treatment, thereby significantly reducing the likelihood of similar circumstances occurring in the future. Management further notes that no federal funds were expended by the Organization during 2026. Nevertheless, management has implemented procedural revisions described above so that controls will be in place for any future federally funded activities. Responsible Person: Jenna Morey, President Anticipated Completion Date: December 31, 2026

Categories

Procurement, Suspension & Debarment Eligibility Internal Control / Segregation of Duties

Programs in Audit

ALN Program Name Expenditures
21.027 CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $3.92M