Finding Text
Finding 2022-004 Failure to Establish Documented Procurement Policy Type of Finding: Material Weakness in Internal Control over Procurement. Condition and Context: The Organization failed to have a formal, documented procurement policy. There was no written policy in place that detailed the steps to be followed for procurement processes, including requirements for soliciting bids or proposals, evaluating vendor qualifications, selecting vendors, and ensuring compliance with relevant laws and regulations. A comprehensive procurement policy is a crucial internal control mechanism that governs the acquisition of goods and services. This deficiency indicates a gap in the organization's internal controls and compliance framework, potentially leading to increased risks related to procurement activities. Criteria: Federal regulations and GAAP require organizations that receive federal funds to establish and maintain effective internal controls, including a documented procurement policy. A procurement policy outlines the procedures, thresholds, and guidelines for acquiring goods and services, ensuring transparency, competition, and cost-effectiveness while preventing fraud, waste, and abuse. Cause: The Organization had not recognized the significance of a well-structured procurement policy in safeguarding federal funds and ensuring compliance. This lack of awareness led to inadequate attention being given to the establishment of such a policy. Effect: The absence of a documented procurement policy exposes the Organization to several risks and potential consequences. First, without established guidelines, there is a higher likelihood of inconsistent procurement practices, leading to inefficiencies and increased costs. Second, the absence of a defined procurement process could result in a lack of transparency and accountability in vendor selection and contract award decisions. Third, failure to adhere to federal regulations and GAAP regarding procurement procedures could lead to noncompliance issues and potential loss of federal funding. Finally, the lack of a procurement policy increases the Organization's vulnerability to fraudulent activities, collusion, and other misuse of funds. Questioned Costs: There were no questioned costs identified. Recommendation: It is recommended that the Organization promptly develop and implement a comprehensive procurement policy in line with federal regulations and GAAP. The policy should address key aspects of procurement, including vendor selection, competitive bidding, conflict of interest, approval processes, contract management, and compliance with relevant laws and regulations. The policy should also outline roles and responsibilities for personnel involved in the procurement process. Views of Responsible Officials: The Organization?s Board and Executive Team consisting of the CEO and COO acknowledge the finding related to a procurement policy. In 2023 the Organization adopted a comprehensive procurement policy in line with federal regulations and GAAP.