Procurement, Suspension and Debarment
Identification of the federal program:
Federal Agencies: U.S. Department of Health and Human Services and U.S. Department of Defense
Federal Cluster: Research and Development (R&D)
Pass-Through Entity: The University of Texas Health (93.853, NS119834)
Assistance Listing Nos.: 12.420, 93.310, 93.353, 93.393, and 93.853
Award Numbers: W81XWH-15-1-0292 (12.420), OD23121 (93.310), CA246568 (93.353), CA259201 (93.393), NS119834 (93.853), NS122096 (93.853)
Award Periods: Various
Criteria or specific requirement (including statutory, regulatory or other citation):
Section 200.303 of the Uniform Guidance states the following regarding internal control:
“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).”
Section 200.320(a)(2)(i) of the Uniform Guidance states the following regarding small purchases:
“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.”
Section 200.320(b) of the Uniform Guidance states the following regarding formal procurement methods to be followed:
“When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold (SAT), or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with § 200.319 or paragraph (c) of this section.”
Section 200.214 of the Uniform Guidance states “Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities.”
The Clinic procurement justification form for procurements more than $25,000 requires completion of the rationale for the procurement and a search of the federal government’s exclusion list to be performed and documented at the time of the procurement.
On a monthly basis, Supply Chain Management performs a review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures.
Condition:
Internal Control
For five (56%) of nine procurement transactions tested for operating effectiveness of internal controls, the procurement justification form used by the Clinic to document the history of the procurement and compliance with Uniform Guidance CFR 200.303, was not completed until after the purchase order was created and/or invoice received from the vendor. In addition, for these same five procurement transactions, the Clinic did not timely document its suspension and debarment check at the time of procurement as required by its procurement justification form.
In addition, for four (44%) of nine procurement transactions tested for operating effectiveness of internal controls (two of which relate to the five cited above), the procurement justification form used by the Clinic to document the procurement transaction’s compliance with policies, procedures and the Uniform Guidance was outdated.
Furthermore, the monthly review of completed procurement justification forms related to procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures was not operating effectively.
Compliance
For one (9%) of 11 procurement transactions tested for compliance, the procurement was an add-on purchase related to a larger procurement of the same product under a prior purchase order. The prior procurement was above the simplified acquisition threshold and the Clinic’s competitive bid threshold. The Clinic did not complete a procurement justification form for the add-on purchase (which was a small purchase), and the original procurement did not have adequate support to evidence that it had been competitively bid. As such, adequate documentation did not exist for the procurement in accordance with Uniform Guidance Section 230.320(a)(2)(i) and(b).
In addition, for five procurement transactions, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form.
Cause:
While management has internal controls in place to review procurements > $25,000 to ensure they are documented in accordance with the Clinic’s procurement, suspension and debarment policies and procedures and Uniform Guidance CFR 200.320, the review of the procurement justification form is not robust enough to identify errors and there is not a process in place to ensure the form is completed prior to the purchase.
Effect or potential effect:
The Clinic’s internal controls over procurement were not properly followed during the fiscal year. In addition, the Clinic did not follow the Uniform Guidance requirements related to small purchases and noncompetitive procurements.
Questioned costs:
$53,482, determined as the amount of the procurement expenditures included in the schedule of expenditures of federal awards for the year ended December 31, 2023, for the one procurement transaction that had inadequate support for compliance with CFR 200.320 at the time of procurement, as follows:
• Assistance Listing No. 93.310, OD023121 – $53,482
Context:
Internal Control
We sampled nine federal procurements over $25,000 to test operating effectiveness of internal controls, totaling $962,393, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following:
• For seven of the 11 federal procurements tested totaling $770,093, procurement controls were not operating effectively.
• For five of 11 procurement transactions tested totaling $529,273, the independent suspension and debarment check to be performed at the time of procurement was not performed until approximately two to eight months later.
Compliance
We sampled 11 federal procurements over $25,000 to test compliance, totaling $1,736,844, from a population of 74 federal procurements over $25,000, totaling $5,400,242 and noted the following:
• For one of 11 federal procurements tested totaling $53,482, documentation retained was not adequate to support that the procurement transaction was executed in accordance with the Uniform Guidance Sections 200.320(a)(2)(i) and (b).
• For five of 11 procurement transactions tested totaling $529,273, the Clinic did not follow its suspension and debarment procedures as required by its procurement justification form.
Procurement-related expenditures are approximately 9% of total Federal expenditures for the R&D Cluster of $445,961,340 for the year ended December 31, 2023.
Identification as a repeat finding, if applicable:
The finding is not a repeat of the finding of the prior year.
Recommendation:
The Clinic should ensure that all R&D awards that require procurement of goods and services follow established policies, procedures, and internal controls to comply with the Uniform Guidance procurement standards and that the procurement justification form is reviewed prior to entering into the purchase transaction. The Clinic should ensure that independent checks for suspension and debarment should be timely completed at the time of procurement in accordance with the Clinic documented policies, procedures, and internal controls.
Views of responsible officials:
Management will reinforce education and training to the research community and procurement teams regarding the procurement requirements, Justification of Source Selection Checklist/Form, and timely completion of the required documentation.
The Clinic utilizes a third party, Visual Compliance, to execute daily supplier sanction and debarment checks for all Mayo Clinic vendors. All third party suspension and debarment match alerts are reviewed and adjudicated as needed. Going forward, the Clinic will supplement this daily review by periodically validating a sample of vendors who are not flagged with an alert by Visual Compliance.