Finding 2022-003 Internal control deficiency and noncompliance over procurement Identification of the Federal Program: Assistance Listing Number 93.697: ? COVID-19 ? COVID-19 Testing and Mitigation for Rural Health Clinics ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Assistance Listing Number 93.912: ? COVID-19 ? Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement ? U.S. Department of Health and Human Services ? Federal award identification number ? Not Applicable ? Federal award year ? January 27, 2020 to December 31, 2022 Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A Chapter II Part 200 Subpart D 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.318 Procurement standards. The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A Chapter II Part 200 Subpart D 200.319 Procurement Standards. All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and ?200.320. The non-Federal entity must have written procedures for procurement transactions. These procedures must ensure that all solicitations: (1) Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description must not, in competitive procurements, contain features which unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, must set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use?Noncompetitive procurements can only be awarded in accordance with ?200.320(c). Title 2, Subtitle A Chapter II Part 200 Subpart D 200.320 Procurement Standards. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: 1. The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); 2. The item is available only from a single source; 3. The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; 4. The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or 5. After solicitation of a number of sources, competition is determined inadequate. Adventist Health Standard Policy No. 10345: Accounting and Reporting of Grant Funds Section F. Reporting. Facilities will maintain appropriate procurement records and files. Purchases that are less than $10,000 are considered micro-purchases and have no purchasing requirements outside of the items use is intended for the grants project. Small purchase threshold $10,000-$250,000 must include documentation to support contractor selection with a minimum of two (2) bids, or a justification for lack of competition (i.e., Sole Source) when competitive bids or offers are not obtained, and basis for award cost or price. Anything purchased greater than $250,000 must be done by sealed bids or competitive proposals. Condition: During our testing over procurement, we determined that the entity did not clearly document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, for noncompetitive procurements, there was no documentation to support which of the five criteria was met to allow for the noncompetitive procurement. Cause: Management did not have effective internal controls in place to ensure that procurement requirements were adequately documented and retained. Effect or potential effect: Procurement records were insufficient to meet the requirements noted in the Criteria section above, as well as Adventist Health Policy No. 10345. Questioned Costs: No. Context: For the 93.697 major program, we selected 9 items ($1,579,396) out of a population of 54 items ($3,343,564) for testing. We noted that 9 of the 9 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 8 ($1,567,804) out of the 9 items ($1,579,396) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. For the 93.912 major program, we selected 5 items ($172,495) out of a population of 23 items ($607,469) for testing. We noted that 5 of the 5 items did not document the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. In addition, 5 ($607,469) out of the 5 items ($607,469) tested were for noncompetitive procurements and did not maintain documentation of which of the five criteria were met to allow for the noncompetitive procurement. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that Adventist Health retain sufficient procurement documentation to meet the requirements noted in the Criteria section above. Views of Responsible Officials: The grants management team will be trained on procurement documentations. The documentation will be kept on a shared repository folder and be part of the Fund Transfer Request (FTR) review meetings.