Finding Text
Finding 2024-001: Procurement (Significant Deficiency)
Information on the Federal Program: All
Criteria: According to 2 CFR §200.303, 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).
Additionally, according to 2 CFR §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."
Condition: The Organization has a procurement policy, which requires full and open competition
for purchases of goods and services in excess of a certain threshold. We noted one instance
where procurement procedures were not performed on a purchase in excess of the threshold
during the fiscal year.
Cause: The Organization's procurement policy is not properly updated to be in conformance with
Federal cost principals.
Effect or Potential Effect: Purchases of goods and services could be made above the prevailing
market rates if the prescribed procurement procedures are not adhered to, and thus, there lies
the potential that the Organization will not receive the best value for its purchases. The
procurement process should also allow for an evaluation of potential conflicts of interest with
prospective vendors and contractors. Furthermore, failure to perform the proper procurement
procedures could result in disallowance of Federal expenditures based on lack of fair
competition.
Questioned Costs: $36,000.
Context: The Organization has a procurement policy that is not in compliance with Federal cost
principals, and hence, noncompliance with Federal standards. Our audit work in this area
consisted of internal control testwork over a random sample of expenditures, as well as
substantive testwork over transactions above a defined threshold from select expense accounts
that were charged to the Federal program. We consider our samples to be representative of the
respective populations, and thus, are statistically valid samples.
Identification as a Repeat Finding, if Applicable: Not a repeat finding.
Recommendation: We recommend that the Organization ensure its policy is updated and in line
with Federal cost principals, and distributed and communicated in a formal manner to its
employees, and that management properly enforce compliance with its policy. All procurement
actions should be clearly documented in writing and maintained in the vendor or contractor files.