Finding 403580 (2023-002)

Finding 2023-002 – Procurement and Suspension and Debarment Identification of the federal program: Federal Agency: Department of Health and Human Services – Centers for Disease Control and Prevention United States Department of State Assistance Listing: 93.U02 – National Health Initiatives, Strategies and Action Plans for Infectious Diseases 19.415 – Professional and Cultural Exchange Programs – Citizen Exchanges Federal Award Identification Number: 93.U02 – HHSD2002015M88157B – 75D30120F08105 19.415 – SECAGD22CA0060 Award Year: FY 2022 – 2023 Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR Section 200.303 of the Uniform Guidance states the following regarding internal control: “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 FederalFamily Health International Schedule of Findings and Questioned Costs (continued) Year Ended September 30, 2023 2311-4384437 84 Section III – Federal Award Findings and Questioned Costs (continued) 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: During our testing of procurement and suspension and debarment compliance requirements we noted the following: • Under 93.U02, we noted for 5 transactions out of 25 tested, FHI 360 relied on the screening for suspension and debarment performed by a third-party service provider without having any additional control to validate that these specific vendors were part of the screening performed by the third-party service provider in their continuous monitoring procedures. • Under 19.415, we noted for 1 transaction out of 25 samples tested, FHI 360 did not perform the screening of the vendor prior to setting up the vendor in the system and executing the contract. Cause: Under 93.U02, FHI 360 performed suspension and debarment checks in prior periods and therefore relied on the “continuous monitoring” performed by its third-party service provider to monitor the suspension and debarment status. Under 19.415, FHI 360 performed suspension and debarment check after setting up the vendor in the system and executing the contract. Effect or Potential Effect: Under 93.U02, In the absence of having additional controls in place to verify and validate that the continuous monitoring performed by the third-party service provider includes all vendors and suppliers, FHI 360 could potentially contract with a vendor who is suspended or debarred and not detect the non-compliance timely. Similarly, under 19.415, FHI 360 could execute a contract with a vendor who is suspended or debarred. Questioned costs: NoneFamily Health International Schedule of Findings and Questioned Costs (continued) Year Ended September 30, 2023 2311-4384437 85 Section III – Federal Award Findings and Questioned Costs (continued) Context: FHI 360 internally performs suspension and debarment checks of its vendors and suppliers. FHI 360 also utilizes a third-party service provider to perform continuous monitoring of its vendors and suppliers for suspension and debarment and receives a daily monitoring report. Although, FHI 360 received a daily monitoring report from the service provider that showed there were no matches for vendors enrolled throughout the fiscal period, the third-party service provider does not have a SOC 1 report and there were no additional controls FHI implemented to rely on the completeness of the results provided by the third-party service provider. The total amount of procurement transactions subject to suspension and debarment screening under 19.415 for FY 2023 is $1,154,561. Total expenditures reported on the Schedule of Expenditures of Federal Awards is $4,981,200. The total amount of procurement transactions subject to suspension and debarment screening under 93.U02 for FY 2023 is $3,3319,092. Total expenditures reported on the Schedule of Expenditures of Federal Awards is $9,160,477. Identification as a Repeat Finding: This is not a repeat finding from prior year. Recommendation: We recommend FHI 360 monitor new vendor set up in the system and ensure the screening for suspension and debarment is performed prior to executing a contract with a vendor. We recommend FHI 360 implement additional validation controls, when relying on continuous monitoring for suspension and debarment checks performed by any third-party service provider.Family Health International Schedule of Findings and Questioned Costs (continued) Year Ended September 30, 2023 2311-4384437 86 Section III – Federal Award Findings and Questioned Costs (continued) Views of Responsible Officials: Management will reemphasize its established policies and procedures around the restricted party screenings’ (RPS) importance highlighting the timeliness component of when the RPS is required. Management will implement additional controls to ensure the suite of controls around its use of the third party service provider adequately minimizes any related risks. Specifically, we will periodically perform RPS via the service provider and the source databases to confirm results are the same. We will also periodically compare the complete list of active vendors within our internal vendor management systems reconciles to the list of vendors within the service provider where we are relying on continuous monitoring.