Finding 2023-003
Internal control deficiency and noncompliance over Procurement related to small purchases.
Identification of the federal program:
Research and Development Cluster
See the Schedule of Findings and Questioned Costs for table.
Criteria or specific requirement (including statutory, regulatory or other citation):
Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 – Internal controls. 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).
Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318(i) – General procurement standards states: 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, 200.320 – Methods of procurement to be followed – the non-Federal entity must have and use documented procurements procedures, consistent with the standards of this section and 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award: (a) (2) Small purchases – (i) small purchase procedures – the acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. 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.
Condition:
During our testing over small purchase procurements, we observed management did not have effective internal controls in place to ensure that price or rate quotations were obtained from an adequate number of qualified sources at the time of procurement.
Cause:
Management did not have effective internal controls in place over the compliance requirement as stated in the criteria or specific requirement section above.
Effect or potential effect:
Small purchase procurements were not supported by effective internal controls and could potentially include unreasonable prices or rate.
Questioned costs:
$18,869 – Assistance Listing Number 93.837, Award Identification Number – R01HL151398
$17,538 – Assistance Listing Number 93.396, Award Identification Number – 1R01CA273925-01
$13,294 – Assistance Listing Number 93.853, Award Identification Number – 5U01NS117839-03
$11,498 – Assistance Listing Number 93.273, Award Identification Number – U01AA026817
$10,785 – Assistance Listing Number 93.242, Award Identification Number – 1R01MH110831-01
$10,450 – Assistance Listing Number 93.855, Award Identification Number – 1R01AI165797-01
Questioned costs were computed by taking the total small purchase procurements that were not supported by adequate documentation of $18,868 + $17,538 + $13,294 + $11,498 + $10,785 + $10,450 for a total of $82,433.
Context:
During our testing over small purchase procurements, we obtained a listing of small purchase procurements and selected a sample of 18. The total value of the 18 small purchase procurements selected was $435,729 out of the total population of $5,473,204.
There were 6 ($82,433) out of 18 ($435,729) selections where price or rate quotations were not obtained from an adequate number of qualified sources at the time of procurement.
Identification as a repeat finding, if applicable:
No.
Recommendation:
We recommend management develop and implement effective internal controls to ensure small purchase procurements are supported by price or rate quotations from an adequate number of qualified suppliers.
Views of responsible officials:
In response to this finding management will implement the following:
1) We are implementing internal controls to ensure small purchase procurements are consistently supported by price and rate quotations from an adequate number of qualified suppliers. The Executive Director, or their designee, will conduct a quarterly audit of 8% of the total number of purchase orders issued to Research within a 12-month period. The Audit sample selection will be using a random algorithm that accounts for materiality to assure the documents listed for small purchase procurements are supported by price or rate quotations from an adequate number of qualifies suppliers. The results will be reviewed by the Executive Director or their designee who will address any deficiencies with the assigned buyer. These steps and controls will be updated and documented in the departmental policy.
2) An education session occurred on February 15, 2024, with the relevant parties across Cedars-Sinai Supply Chain Procurement department. This was to re-enforce our policy PUR00318 – Bid Guidelines Procedure: Purchasing detailing the procedures to follow for small purchase procurements and the role each one has to ensure the process is followed every time. The education session also highlights that all documents need to be properly stored for further review or audits.