Finding Text
2022-004 - Internal Control over Procurement (SD, NC)
Criteria: Pursuant to the Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI,
Compliance Supplement August 2022, sections 3.2-I-1 through 3.2-I-3:
"Non-Federal entities other than States... must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the
procurements conform to applicable Federal statutes and the procurement requirements
identified in 2 CFR part 200. A non-Federal entity must:
1. Meet the general procurement standards in 2 CFR section 200.318, which include oversight of contracters' performance, maintaining written standards of conduct for employees involved in
contracting, awarding contracts only to responsible contractors, and maintaining records to document history of procurements...
Cost-Reimbursement Contracts under the Federal Acquisition Regulation
subcontracts, non-Federal entities receiving cost-reimbursement contracts under the FAR must
comply with the clauses at 48 CFR section 52.244-2 (consent to subcontract), 52.244-5
(competition), 52.203-13 (code of business ethics), 52.203-16 (conflicts of interest), and
52.215.12 (cost or pricing data); and the terms and conditions of the contract. The FAR defines "subcontracts" as a contraact, i.e., a mutually binding legal relationship obligation the seller to
furnish the supplies or services (including construction) and the buyer to pay for them, entered
into by a subcontractor to furnish supplies or services for performance of a prime contract or a
subcontract. It includes, but is not limited to, purchase orders, and changes and modifications to
purchase orders.
Condition: The City does not have a current official written policy for procurement and contracts
conforming to applicable Federal statutes and the updated procurement requirements per 2 CFR part
200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
(Uniform Guidance). The City effective Conflict Interest Code did not include the required language per
the Uniform Guidance.
Cause: Lack of formal policies and procedures over current required procurement standards and lack of
internal controls and adequate staff training on effective requirements set forth by the Uniform Guidance
over procurement.
Effect or Potential Effect: Failure to document and retain evidence that procurement procedures were
followed could result in the need to reimburse Federal funds.
Questioned Cost: None
Context: The City does not have an effective purchasing manual for city-wide use. The City-provided
policy and procedure document establishing purchasing guidelines is for Finance Department use. We
noted that this document was last updated on September 7, 2004 and does not contain the language
required by the Uniform Guidance. We reviewed the City's current effective conflict of interest code and purchasing policy and procedure
document and noted no provisions containing the required language per the Uniform Guidance.
Statistical Sampling Validity: Non-statistical sampling was performed in relation to this finding.
Repeat of a Prior-Year Finding: Yes, 2019-014, 2021-006
Recommendation: We recommend the City establish an official written policy for procurement and
contracting and Conflict of Interest Code that are in line with the requirements of the Uniform Guidance.
(MW) (SD) (BP) (NC)
-17-
The policy should contain components for compliance with and references to Federal requirements, such
as language establishing contract files that document significant procurement history; methods of
procurement authorized including selection of contract type, contractor selection or rejection, and the
basis of contract price; verification that procurements provide full and open competition when required;
requirements for cost or price analysis, including for contract modifications; obtaining and reacting to
suspension and debarment. The City should strengthen its procurement internal controls based on this
official written policy.
Management Response and Corrective Action Plan
City's Response: The City concurs with the recommendation.
Corrective Action Plan: The City will continue to address this finding through updating of policies
and procedures for City-wide use. Update: in November 2023 the City updated the policies and
procedures manual that was accepted by the DOJ in December 2023.
Planned Implementation Date: June 30, 2024
Responsible Person: Finance Department