Common Single Audit Findings – Part 2: Procurement, Suspension and Debarment

Accountant uses magnifying glass to examine invoices and documents

Single audits under the Office of Management and Budget’s Uniform Guidance are a routine responsibility for nonprofit organizations. When the single audit produces findings that must be addressed, they typically fall into one of four categories: allowable costs; procurement, suspension and debarment; reporting; and sub-recipient monitoring.

We’ve already examined the first of these categories, allowable costs. Let’s take a closer look at procurement, suspension and debarment in the second of our four-part series on single audit findings.

The most common audit finding in this category is that an organization has not adequately verified one or more contractors’ current status regarding suspension and debarment. Before entering into a contract on which federal funds will be spent, organizations must confirm that the contracted individual or entity is not suspended or debarred. Luckily, there are multiple ways to meet the verification requirement and all are simple. Organizations can verify by:

  • Checking the System for Award Management maintained by the GSA
  • Obtaining a certification directly from the contractor
  • Including a suspension/debarment clause or condition in the contract

Whichever method a nonprofit chooses to use, it must maintain documentary evidence of the check in order to fulfill the verification requirement.

Another common finding involves the procurement process itself. All organizations that receive federal awards must have written procurement policies and procedures in place and must adhere to them when seeking contracts. Failure to meet either one of these requirements will trigger audit findings that the organization must address.

The contracting process varies slightly by organization, but in general it must include bids from multiple contractors, with the types of bids required dependent on the size of the contract. Procurement processes and policies should conform to the general federal requirements while also ensuring that the organization’s contracts are economical and that they avoid conflicts of interest.

Section 320 of Part 200 in the Uniform Guidance lists five procurement methods that subrecipients can utilize in obtaining contracts. These methods are:

  1. Procurement by micro-purchases – for purchases of $3000 or less. Competitive bids are not required for contracts that fall into this category.
  2. Procurement by small purchase procedures – for purchases under the Simplified Acquisition Threshold (currently $150,000). The procurement process for these contracts may be “relatively simple and informal” but must include “an adequate number of qualified sources” for price or rate quotations.
  3. Procurement by sealed bids – for purchases over the Simplified Acquisition Threshold. These contracts must utilize a formal bid solicitation process and go to the lowest bidder that meets the terms of the request.
  4. Procurement by competitive proposals – for purchases over the Simplified Acquisition Threshold. These contracts must include a formal bid solicitation process, with contracts awarded to the bidder that delivers the most advantageous proposal based on price and other factors.
  5. Procurement by noncompetitive proposals – allowed in specific situations such as a public emergency, when only one source can provide the item or following authorization by the federal agency that awards the associated funds.

As the guidance makes clear, any purchase above $3000 requires multiple bids. To avoid audit findings related to bidding, nonprofits must make sure to document the bidding process for contracts and purchases that exceed $3000. Screenshots or emails with different pricing options can serve as documentation of pre-purchase research for micropurchasing expenditures.

The requirements surrounding procurement, suspension and debarment are some of the more complex aspects of the Uniform Guidance that affect nonprofits. To avoid audit findings in this area, organizations must strive for a clear understanding of these regulations and apply them carefully. If you’d like to learn more ways to keep your organization in compliance with the Uniform Guidance and other key regulations, please contact the nonprofit experts at HBP.

Written by Allison Griesbach, Senior Accountant