Finding 393771 (2023-002)

Material Weakness
Requirement
I
Questioned Costs
$1
Year
2023
Accepted
2024-04-19
Audit: 303974
Organization: City of Satellite Beach (FL)

AI Summary

  • Core Issue: The City failed to obtain competitive quotes for purchases from two vendors, leading to non-compliance with federal and city procurement policies.
  • Impacted Requirements: Violations of 2 CFR Sections 202.303(a) and 200.320, as well as the City’s guidelines for purchases over $25,000 and for obtaining three quotes for purchases between $5,000 and $25,000.
  • Recommended Follow-Up: Ensure competitive quotes are obtained and documented as per procurement policies, and update policies to clarify requirements for purchases below the bid threshold.

Finding Text

2023-002 Procurement U.S. Department of the Treasury ALN 21.027 – COVID-19 Coronavirus State and Local Fiscal Recovery Fund Contract No. Y5283 FL0283 (2021) Criteria: 2 CFR Sections 202.303(a) and 200.320 set forth the requirements to establish and maintain effective internal controls over federal awards and for acquisition contracts awarded to vendors including the requirement to obtain price or rate quotations from an adequate number of qualified sources and the circumstances in which noncompetitive procurement methods can be used. The City’s Financial & Budget Operational Guidelines specify that purchases over $25,000 must go through a formal bid and proposal process. In addition, the City’s practice is to obtain three quotes for purchases between $5,000 and $25,000. Condition: Competitive quotes and/or bids were not appropriately obtained for purchases from two vendors. These purchases, however, were beneath the Simplified Acquisition Threshold required by Uniform Guidance. Cause of condition: The vendors were established vendors of the City selected for continuity of service and for their ability to obtain identical materials as previously used by the City. As a result, the City inadvertently exceeded procurement thresholds. Questioned costs: Known questioned costs $140,644. We calculated these costs by identifying all award expenses with vendors not subjected to competitive procurement practices. Perspective (context): We noted competitive procurement was not followed for three of the 40 expenses tested, representing two (2) different vendors (out of 14 vendors). The costs associated with these purchases were allowable costs for activities allowed under the grant program, confining the issue to procurement. While the City did not document competitive quotes for these purchases, we did not note any misuse of grant funds. Potential effect of condition: The City did not comply with Federal compliance requirements or City policies established to promote competition and make the procurement process more transparent. Recommendation: Competitive quotes should be obtained and retained as specified in the City’s procurement policies and Uniform Guidance. Non-competitive procurement (for sole source vendors) should be documented and approved prior to incurring expenses. The City should update and expand procurement policies to document competitive procurement practices for procurement less than the bid threshold Management’s response on planned corrective action: Staff have already implemented a procurement policy to attach all the quotes received from vendors to the purchase order. In the future when reviewing, staff will be able to see all the vendors that provided a quote and see the lowest quote was used to procure the item(s).

Corrective Action Plan

2023-002 Procurement Recommendation: Competitive quotes should be obtained and retained as a specified in the City’s procurement policies and Uniform Guidance. Non-competitive procurement (for sole source vendors) should be documented and approved prior to incurring expenses. The City should update and expand procurement polices to document competitive procurement practices for procurement less than the bid threshold. Management Response: Staff have already implemented a procurement procedure to attach all the quotes received from vendors to the purchase order. In the future when reviewing, staff will be able to see all the vendors that provided a quote and see the lowest quote was used to procure the item(s). Staff will be updating the procurement policy during the current fiscal year to expand the policy on procurement less than the bid threshold. Responsible Parties: Brittany Retherford, Assistant City Manager, Nick Walsh, Comptroller, and Mindy Brown, Assistant Comptroller Anticipated Completion Date: September 30, 2024

Categories

Questioned Costs Procurement, Suspension & Debarment

Other Findings in this Audit

  • 970213 2023-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.027 Covid-19 - Coronavirus State and Local Fiscal Recovery Funds $2.12M
97.036 Disaster Grants - Public Assistance (hurricane Ian) $198,421