Internal control deficiency and noncompliance over Procurement.
Identification of the federal program:
Research and Development Cluster
See the Schedule of Findings and Questioned Costs for table.
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(i) – General 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, 200.320 – Methods of procurement to be followed. The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award: (a) (2) Small purchases – (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, formal procurement methods are required. Formal procurement methods require following documented procedures. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded; (c) Noncompetitive procurement. 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; (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.
Condition:
Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. During our testing over small purchase procurements, we observed management did not obtain price or rate quotations from an adequate number of qualified sources at the time of procurement.
Cause:
Management did not have effective internal controls in place over the compliance requirement as stated in the criteria or specific requirement section above.
Effect or potential effect:
Small purchase procurements, formal procurement methods, and noncompetitive procurements were not supported by effective internal controls and could potentially include unreasonable prices or rates.
Questioned costs:
$75,518 – Assistance Listing Number 93.398, Award Identification Number – 2 R25 CA171998
$67,225 – Assistance Listing Number 93.393, Award Identification Number – 1 R01 CA242218
$54,900 – Assistance Listing Number 93.394, Award Identification Number – 7 R01 CA202797
$48,980 –
Assistance Listing Number 93.395, Award Identification Number – 2 P01 CA163205-06A1
Assistance Listing Number 93.395, Award Identification Number – 1 U19 CA264512
Assistance Listing Number 93.395, Award Identification Number – 1 R01 CA266457
Assistance Listing Number 93.396, Award Identification Number – 7 R35 CA210087
Assistance Listing Number 93.396, Award Identification Number – 1 R01 CA247550
Assistance Listing Number 93.853, Award Identification Number – 7 R01 NS106170
$41,408 –
Assistance Listing Number 93.395, Award Identification Number – 1 R01 CA266457
Assistance Listing Number 93.396, Award Identification Number – 1 U01 CA275808
$12,195 –
Assistance Listing Number 93.394, Award Identification Number – 1R01CA241845-01A1
$5,805 – Assistance Listing Number 93.361, Award Identification Number – 1 R21 NR019866
Questioned costs were computed by taking the total small purchase procurements that were not supported by adequate documentation of $75,518 + $67,225 + $54,900 + $48,980 + $41,408 + $12,195 + $5,805 for a total of $306,031.
Context:
Management did not obtain price or rate quotations from an adequate number of qualified sources at the time of procurement. Given the prior year finding was not remediated, management evaluated the entire population of small purchase and formal procurements and we tested the entire population evaluated by management. We obtained a listing of 15 small purchase procurements and 1 formal procurement. The total value of small purchase procurements was $797,099 and formal procurements was $319,047 for a total of $1,116,146. There were 7 ($306,031) out of 15 ($797,099) items where price or rate quotations from an adequate number of qualified sources were not obtained at the time of procurement.
Identification as a repeat finding, if applicable:
Yes – 2022-001.
Recommendation:
We recommend that management develop and implement effective internal controls to ensure the compliance requirements over procurements are performed. In addition, management should review the items identified as questioned costs to identify if any improper payments were made to the entity.
Views of responsible officials:
In response to this finding COH had/will complete the following:
1. Management provided training to reinforce current policy requirements to Research, Accounting and Procurement personnel to emphasize procurement guidelines prior to requisition submission. Training was completed on September 7 and 15, 2023.
2. Accounting reviewed sample size of federally funded procurement to ensure controls have been remediated.
3. Accounting will review the items identified as questioned costs to identify if any improper payments were made to COH.