Finding Text
2023-004 (2021-005) – FEDERAL AND FINANCIAL PROCUREMENT, SUSPENSION, AND DEBARMENT COMPLIANCE
Type of Finding: (B, F, G) – Significant Deficiency in Internal Control Over Financial Reporting, Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards
Funding Agency: U.S. Department of Housing and Urban Development (HUD)
Title: Emergency Solution Grant (ESG) Program
AL #: 14.231
Award #: 20-02-HDH-EHA-001, E-22-MC-35-0001
Award Period: July 1, 2022 – June 30, 2023
Questioned Costs: None
Statement of Condition
Heading Home did not follow federal procurement, suspension and debarment regulations or its federal procurement policy.
Context
During our testing of procurement, suspension, and debarment we noted the following:
• We sampled two (out of a population of two) vendors who received more than $10,000 in fiscal year 2023 and noted no evidence of obtaining bids or quotes. Additionally, adequate sole source documentation was absent to support the procurement.
• We sampled two (out of a population of two) vendors for tests of internal control over compliance and noted that Heading Home did not provide evidence of internal controls regarding suspension and debarment requirements.
Criteria
• Heading Home’s procurement policy states that for purchases exceeding $10,000, three (3) written competitive bids must be obtained before selecting a vendor.
• Per 2 CFR 200.320(a)(2)(i) Small purchases -
o (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold ($10,000 in fiscal year 2023) but does not exceed the simplified acquisition threshold ($249,999 in fiscal year 2023). 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.
• Additionally, 2 CFR 200.214 requires vendors awarded contracts expected to equal or exceed $25,000 to be checked for suspension and debarment via the System for Award Management Exclusions (SAM.gov).
Heading Home is required to verify that entities it plans to do business with are not excluded or disqualified under the federal procurement regulations and the non-procurement common rule, or otherwise declared ineligible under statutory or regulatory authority.
According to §200.303 Internal controls of 2 CFR Part 200, the nonfederal entity (Heading Home) must establish and maintain effective internal control over the Federal award that provide reasonable assurance that Heading Home 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).
According to §180.300 of Subpart C–Responsibilities of Participants Regarding Transactions Doing Business with Other Persons of 2 CFR Part 180, when you entering into a covered transaction with another person at the next lower tier, you must verify that the person you intend to conduct business with is not excluded or disqualified.
This can be done by:
(a) Checking SAM Exclusions; or
(b) Collecting a certification from that person; or
(c) Adding a clause or condition to the covered transaction with that person.
Cause
Heading Home has not followed its policies and procedures related to procurement. Additionally, the procurement policy does not include the requirement for checking suspension and debarment via SAM.gov.
Effect
Heading Home is not in compliance with its policies and the federal procurement, suspension, and debarment requirements. Heading Home may have entered into contracts with ineligible contractors, exposing itself to potential liability and the risk of losing federal funds.
Recommendation
We recommend Heading Home follow its internal control policies and procedures related to procurement, as well as the following:
• Document controls such as including the procurement files include proof of SAM.gov verification to ensure compliance with federal procurement regulations and internal procurement policy.
• Implement policies and procedures to verify contractor suspension or debarment status before awarding contracts using federal funds.
• Include the required suspension and debarment clause in contracts with federally funded contractors.
View of Responsible Official and Corrective Action Plan
Heading Home management agrees with this finding. Management has reviewed existing procurement policies and procedures found in Section III Policy #301 of Heading Home’s fiscal policies and procedures with appropriate staff and will enforce policies and procedures to ensure competitive bids are obtained where required.
Management has also reviewed the existing suspension and debarment policies and procedures found in Section III Policy #302 with appropriate staff, and which require vendors to be reviewed on the SAM website, to ensure they have not been suspended or debarred. Although this review was conducted after the fact, each of the five vendors noted in this finding has since been reviewed on the SAM website, and none of them returned a notice of suspension or debarment. Management is in the process of reviewing all vendors paid $10,000 or more against the SAM website and will ensure all vendors are checked against the website who currently meet this requirement, as well as for those anticipated to meet this threshold. Proof of the SAM website review and approval will be maintained in each vendor file.
Management reviewed the above mentioned vendors and noted none of them were suspended or debarred. Circumstantial evidence consisting of emails leads the organization to believe bids/quotes were in fact solicited but the actual procurement packets could not be located due to the extensive turnover in management during 2023.
Management anticipates the above corrective action plan will be fully implemented by September 30, 2025. The personnel responsible for overseeing implementation include Connie Chavez, Chief Executive Officer; Debbie Brickman, Chief Financial Officer; and Armando Sanchez, contract accountant team lead.