Finding No.: 2024-008 – Procurement and Suspension and Debarment Identification of the federal program: Federal Agency: U.S. Department of the Interior AL No. and Title: 15.875 Economic, Social and Political Development of the Territories Federal Award No.: Compact of Free Association Program, As Amended Criteria or specific requirement (including statutory, regulatory or other citation) #1: 2 CFR 200.318(a) states that “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 and the standards identified in 2 CFR 200.317 through 200.327.” Accordingly, documented procedures must ensure consistency to the following standards: a. 2 CFR 200.318 which includes oversight of contractors’ performance, maintaining written standards of conduct for employees involved in contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements; b. 2 CFR 200.320(a) which states that for micro-purchases, to the extent practicable, the recipient or subrecipient should distribute micro-purchases equitably among qualified suppliers; c. 2 CFR 200.324(a) which articulates that the recipient or subrecipient must perform a cost or price analysis for every procurement transaction, including contract modifications, in excess of the simplified acquisition threshold; d. 2 CFR 200.327 which ensure that every purchase order or other contract made by a non-federal entity includes applicable provisions as described in Appendix II to 2 CFR Part 200, “Contract Provisions for Contracts Under Federal Awards”; and e. 2 CFR 200.318(h) which ensures that recipient or subrecipient must award contracts only to responsible contractors that possess the ability to perform successfully under the terms and conditions of a proposed contract. The recipient or subrecipient must consider contractor integrity, public policy compliance, proper classification of employees, past performance record, and financial and technical resources when conducting a procurement transaction. Criteria or specific requirement (including statutory, regulatory or other citation) #2: Under the terms of the sub-awards administered by RepMar under the Compact of Free Association grant awards, RepMar authorizes the College to use its own procedures for procurement provided they meet the RepMar Procurement Code. RepMar’s Procurement Code states the following: (a) Section 119(b) - A contract may be awarded for a supply, service, or construction item without competition when, under regulations, the Chief Procurement Officer, the head of a Procurement Entity, or a designee of either officer above the head of a Procurement Entity, or a designee of either officer above the level of the Procurement Officer determines in writing that there is only one source for the required supply, service, or construction item. (b) Section 119(c) - Small Purchases. Any procurement not exceeding $50,000, or a lesser amount established by regulation, may be made in accordance with small purchase procedures promulgated in accordance with the Regulation; provided, however, that procurement requirements shall not be artificially divided so as to constitute a small purchase under this Section. (c) Section 119(d) – Emergency. Notwithstanding any other provision of this Act, the Chief Procurement Officer, the head of a Procuring Entity, or a designee of either officer may make or authorize others to make emergency procurement when there exists a threat to public health, welfare, or safety under emergency conditions as defined in regulations; provided, that such emergency procurement shall be made with such competition as is practicable under the circumstances. A written determination of the basis for the emergence and for the selection of the particular contractor shall be included in the contract file. According to the College’s Procurement Code, for small purchases with federal funds ($10,000 - $50,000), price quotes from several qualified vendors must be obtained to ensure that fair price is used during procurement. 2 CFR 200.320(a)(1)(i) states that for micro-purchases, to the extent practicable, the recipient or subrecipient should distribute micro-purchases equitably among qualified suppliers. 2 CFR 200.320(c) states that the noncompetitive procurement method may only be used if one of the following circumstances applies: (1) The aggregate amount of the procurement transaction does not exceed the micro-purchase threshold; (2) The procurement transaction can only be fulfilled by a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from providing public notice of a competitive solicitation; (4) The recipient or subrecipient requests in writing to use a noncompetitive procurement method, and the Federal agency or pass-through entity provides written approval; or (5) After soliciting several sources, competition is determined inadequate. Furthermore, 2 CFR 200.303(a) states that the subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition #1: Key provisions from the Compliance Supplement are not covered by the College’s procurement policy. Furthermore, the College does not have policies and procedures for verifying that an entity with which the College plans to enter into a covered transaction, is not debarred, suspended, or otherwise excluded. Condition #2: Supporting procurement documentation was not sufficient to substantiate compliance with the procurement method. Cause: Key provisions from the Compliance Supplement that should be included in the College’s procurement policy were not considered when the College revised its procurement policy on September 16, 2024. Moreover, the College did not follow internal control policies and procedures over documentation of the procurement process to satisfy compliance with applicable procurement requirements. Effect or potential effect: The College is in noncompliance with applicable procurement and suspension and debarment requirements. Questioned costs: $40,350 Context: We identified and tested all five procurement transactions during the year totaling $68,048. The samples were statistically valid. For 3 (or 60%) procurement transactions tested, supporting procurement documentation was not sufficient to substantiate compliance with the procurement method. Details of samples with noncompliance are as follows: For item #s 1 and 3, there were no adequate vendor quotations on file. For item # 2, procurement was sole sourced with written justification but does not appear to be justified as item procured can be sourced from various vendors. Identification as a repeat finding, if applicable: 2023-008 Recommendation: College management should revisit its procurement policies and ensure all required provisions stated in the Compliance Supplement are covered. Responsible personnel should ensure that documentation is adequate to comply with applicable procurement requirements. Specifically, documentation should indicate the history of procurement, including the solicitation process and rationale for contractors or vendor selection. Views of responsible officials: The College agrees with the finding and provides details in its Corrective Action Plan.