Finding Text
FINDING 2023-004
Information on the federal program:
Subject: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Procurement and Suspension
and Debarment
Federal Agency: Department of Treasury
Federal Program: COVID 19 – Coronavirus State and Local Fiscal Recovery Funds
Assistance Listing Number: 21.027
Federal Award Numbers and Years (or Other Identifying Numbers): FY2022
Compliance Requirement: Procurement and Suspension and Debarment
Audit Finding: Material Weakness, Qualified Opinion
Criteria: 2 CFR section 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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). . . ."
2 CFR section 200.318 states in part:
(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327.
(b) Non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders…
Section III – Federal Award Findings and Questioned Costs (Continued)
Finding 2023-003 (Continued)
(h) 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.
2 CFR section 200.320 states in part:
(b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate:…
(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 (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.
Condition: The City contracted a vendor utilizing federal funds without performing a formal bid process for projects exceeding the simplified acquisition threshold of $150,000 no did the City provide documentation supporting a noncompetitive procurement. There was available history of the procurement process, including a lack of documented City Council approval for the contract. The contract entered into also did not include the required Buy America Build America Provisions.
Cause: The City’s management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Also, the City does not have written Procurement Policies that comply with the Federal Uniform Guidance requirements for non-Federal entities. The City’s current policy does not address the following requirements:
• Written standards of conduct for employees involved in contracting.
• Written standards for solicitations to foster full and open competition.
• Micro-purchase threshold of $10,000 (listed at $25k)
• Written standards for solicitations requiring a formal bid process
• Written standards to rationalize limited competition purchases
• Written standards to maintain historical documentation of the procurement process
Effect: The failure to establish an effective internal control system placed the City at risk of noncompliance with the grant agreement and the compliance requirements.
Questioned Costs: There were no questioned costs identified.
Context: The City entered into three contracts funded by the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) grant during the audit period. Two of those contracts were selected for testing and the City was unable to provide any procurement history. Upon inquiry of the City on their purchasing policies and procedures, it was verified the City does not have procurement policies for purchases that conform to the requirements of the Uniform Guidance. There were $237,044 in expenditures incurred on the contracts tested in the current fiscal year.
Identification as a repeat finding: No.
Recommendation: We recommend that management of the City establish a proper system of internal controls and develop and implement procurement policies and procedures that adheres of the procurement requirements for purchases with federal awards as required by the 2 CFR 200 Uniform Guidance.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.