Finding Text
Finding: 2024-001 Program Title: Congressionally Funded Community Projects Assistance Listing: 84.215K Contract Grant Number: S215K230172 Federal Award Years: July 1, 2023 to May 31, 2025 Federal Agency: U.S. Department of Education Compliance Requirement: Procurement Other Compliance Requirement Affected: Allowable Costs Type of Finding: Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: Uniform Guidance 2 CFR sections 200.318 through 200.326 requires Non-Federal Entities to follow documented procurement procedures that ensure full and open competition and include, among other requirements: - Use of an appropriate procurement method based on the dollar value of the acquisition. As outlined in 2 CFR section 200.320, one of the following procurement methods must be used: the sealed bid method, the competitive proposals method, or the noncompetitive proposals method. - Avoidance of conflicts of interest, including prohibitions on employees, officers, or agents participating in the selection, award, or administration of a contract in which they have a real or apparent financial interest (2 CFR section 200.318(c)(1); and - Consolidation of procurements, where appropriate, to ensure economical purchasing and compliance with applicable procurement thresholds and competition requirements. Condition: During the current year’s audit, the Organization did not consistently comply with federal procurement requirements for expenditures charged to the program. Specifically: 1. Use of Inappropriate Procurement Methods - For acquisitions exceeding the simplified acquisition threshold, the Organization did not utilize an appropriate procurement method. Despite having a written procurement policy, formal procurement procedures were not followed, and documentation supporting competitive selection was not maintained. This condition represents a repeat of prior year finding 2023-001. 2. Conflict of Interest - A board member participated in the administration of the federal award while simultaneously being paid by the Organization for services related to the award, which created a financial interest. The Organization did not document safeguards or recusals to mitigate this conflict, resulting in a breach of federal conflictof-interest requirements. 3. Failure to Reasonably Consolidate Procurements - The Organization entered contracts that included duplicative or substantially similar items, which were not reasonably consolidated. As a result, procurements were fragmented in a manner that did not promote economical purchasing or compliance with procurement thresholds. While the Organization has limited staffing capacity and relies on a fiscal agent model, federal procurement requirements apply regardless of organizational size or structure. Because procurement was not conducted in accordance with federal requirements, the costs incurred under these contracts are considered to be unallowable, even though the services may have been received. Cause: The Organization lacked sufficient internal controls over procurement due to its governance-based operating structure and reliance on a fiscal agent to perform administrative functions. Procurement responsibilities were not clearly segregated from oversight responsibilities, and controls were not designed or implemented to address conflicts of interest involving board members. Additionally, procurement planning was informal and not subject to documented reviews to ensure compliance with federal procurement standards. Effect: As a result of these conditions, costs totaling $302,695 charged to the federal award do not meet federal allowability requirements because the underlying procurement did not comply with Uniform Guidance. These are considered questioned costs. This is considered material to the Congressionally Funded Community Projects. These deficiencies increase the risk that procurements were not conducted with full and open competition and that decisions were influenced by conflicts of interest. Additionally, failure to consolidate procurements may have resulted in inefficient use of federal funds. Repeat Finding: Yes, however, the current year finding has been modified to reflect additional instances of noncompliance, including conflicts of interest and procurement fragmentation, which were not identified in the prior year. Recommendation: We recommend that the Organization do the following: (1) Ensure acquisitions exceeding the simplified acquisition threshold are procured using appropriate formal procurement methods that are adequately documented, (2) Enforce conflict-of-interest policies requiring disclosure and recusal of board members and officers with financial interests in federal awards, and (3) Implement procurement planning procedures to reasonably consolidate purchases to avoid duplicative or fragmented procedures. Views of Responsible Officials: Management agrees with the finding and has developed a corrective action plan to address the issues noted.