Brighter Bites

Criteria The Organization is responsible for ensuring agreements entered into with external parties properly reflect the substance of the relationship and are accurately classified as either a subrecipient or contractor relationship. Proper classification and documentation are necessary to ensure that the appropriate compliance requirements and/or monitoring procedures are applied.

Condition and context We identified one instance in which the Organization executed a subaward agreement with a service provider that was providing contracting services to the Organization. Based on the nature of the services provided and the relationship between the parties, the entity met the characteristics of a contractor rather than a subrecipient. Because management understood the relationship to be that of a contractor, the Organization did not perform subrecipient monitoring procedures associated with the agreement. However, the executed agreement inaccurately characterized the arrangement as a subaward.

Cause The Organization relied on a subaward agreement template provided by the contractor and did not have sufficient procedures in place to review and evaluate whether the terms of the agreement accurately reflected the nature of the relationship prior to execution.

Effect Failure to properly classify and document relationships with contractors and subrecipients increases the risk that federal compliance requirements will not be applied appropriately and may result in inconsistencies between contractual documentation and the Organization's administration of federal awards. In addition, inaccurate classifications may result in compliance reporting errors and confusion regarding monitoring responsibilities under Uniform Guidance.

Questioned Cost: None

Recommendation We recommend that management review its policies, procedures, and internal controls surrounding the review, evaluation and approval of federally funded agreements to ensure contracts accurately reflect the substance of the relationship and are properly classified as either contractor or subrecipient arrangements prior to execution.

Views of responsible officials and planned corrective actions See Corrective Action Plan

Finding #2024-002 – Material Weakness and Other Noncompliance. Applicable federal programs: U. S. Department of Agriculture, State Administrative Matching Grants for Supplemental Nutrition Assistance Program (SNAP Cluster), Assistance listing #: 10.561, Passed through Texas Health and Human Services, Contract #: 529-16-002-00002, Contract Year: 10/01/23 – 09/30/24 and 10/01/24 – 09/30/25, Passed through New York Office of Temporary and Disability Assistance and City Harvest, Inc., Contract #: None, Contract Year: 10/01/23 – 09/30/24, Passed through New York Office of Temporary and Disability Assistance, Contract #: TDA01 – C00043GM-3410000, Contract Year: 10/01/24 – 09/30/25, Passed through The Regents of the University of California, Contract #: A22-1456-S002, Contract Year: 10/01/23 – 09/30/24, Passed through Pennsylvania State University, Contract #: S006438-COP-BRB, Contract Year: 10/01/24 – 09/30/25, Passed through New Mexico State University, Contract #: GSA 22-630-9000-0023, Contract Years: 10/01/23 – 09/30/24 and 10/01/24 – 09/30/25. Department of Treasury, Passed through Houston Food Bank, COVID-19 – Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing #: 21.027, Contract #: HHS000493200003, Contact Year: 02/08/23 – 12/31/25. Applicable state programs: Texas A&M AgriLife Extension Service, Surplus Agricultural Products Grant Program, Contract #: GA-555-01, Contract Years: 09/01/23 – 08/31/24 and 09/01/24 – 08/31/25. Criteria: Procurement – Nonprofit organizations are required to conduct procurement transactions in a manner providing full and open competition consistent with standards prescribed in Uniform Guidance, Subtitle III Procurement Standards and Texas Grant Management Standards Procurement Standards and conform to federal and state laws and regulations and other contractual requirements. Uniform Guidance requires simplified acquisition procedures to be used on procurements above the micro purchase threshold, which is $10,000, but below the simplified acquisition threshold, which for Brighter Bites is $250,000. The organization must obtain an adequate number of quotations from qualified sources and must maintain records sufficient to detail the history of each procurement. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis of the contract price. Additionally, Uniform Guidance requires public notice for proposal requests for purchases over the Simplified Acquisition Threshold. Condition and context: During testing of a sample of 5 transactions requiring procurement, we identified that simplified acquisition procedures of obtaining and documenting bids were not performed for a vendor with expenditures greater than $10,000 but less than $250,000 and competitive procurement procedures were not performed for 2 vendors with expenditures greater than $250,000. Brighter Bites’ rational for the selection of the vendor and approval was documented, however the procurement file did not include bids from other vendors under the simplified acquisition procedures and did not include a request for proposal, vendor responses, and an evaluation of the proposals to support Brighter Bites’ procurement rationale. Cause: Failure to follow Brighter Bites’ procurement policy by those responsible for procurement. Effect: Failure to follow Brighter Bites’ procurement policy may result in Brighter Bites purchasing goods or services for more than would be necessary if required competitive procurement procedures had been followed. Recommendation: Provide additional training to employees responsible for procurement on Brighter Bites’ procurement policy. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2024-003 – Significant Deficiency and Other Noncompliance. Applicable federal programs: U. S. Department of Agriculture, State Administrative Matching Grants for Supplemental Nutrition Assistance Program (SNAP Cluster), Assistance listing #: 10.561, Passed through Texas Health and Human Services, Contract #: 529-16-002-00002, Contract Year: 10/01/23 – 09/30/24 and 10/01/24 – 09/30/25, Passed through New York Office of Temporary and Disability Assistance and City Harvest, Inc., Contract #: None, Contract Year: 10/01/23 – 09/30/24, Passed through New York Office of Temporary and Disability Assistance, Contract #: TDA01 – C00043GM-3410000, Contract Year: 10/010/24 – 09/30/25, Passed through The Regents of the University of California, Contract #: A22-1456-S002, Contract Year: 10/01/23 – 09/30/24, Passed through Pennsylvania State University, Contract #: S006438-COP-BRB, Contract Year: 10/01/24 – 09/30/25, Passed through New Mexico State University, Contract #: GSA 22-630-9000-0023, Contract Years: 10/01/23 – 09/30/24 and 10/01/24 – 09/30/25. Department of Treasury, Passed through Houston Food Bank, COVID-19 – Coronavirus State and Local Fiscal Recovery Funds, Assistance Listing #: 21.027, Contract #: HHS000493200003, Contact Year: 02/08/23 – 12/31/25. Applicable state programs: Texas A&M AgriLife Extension Service, Surplus Agricultural Products Grant Program, Contract #: GA-555-01, Contract Years: 09/01/23 – 08/31/24 and 09/01/24 – 08/31/25. Criteria: Reporting – Management is responsible for preparing the schedule of expenditures of federal awards in accordance with §200.502 of 2 CFR Part 200 Uniform Administrative Requirements Cost Principles and Audit Requirements for Federal Awards and the Schedule of Expenditures of State Awards (SESA) in Accordance with Texas Grant Management Standards, which requires costs to be reported in accordance with generally accepted accounting principles (GAAP). Condition and context: During our testing of the Schedule of Expenditures of Federal Awards (SEFA) and the SESA, we noted that the expenditures were not reported in accordance with GAAP. An adjustment of $268,000 was recorded to properly state the expenditures. Cause: Brighter Bites reported the expenditures based on the cash basis grant billings. Effect: Failure to have an effective system of internal control over the preparation of the SEFA and SESA resulted in expenditures being understated. Recommendation: Implement policies and procedures to ensure that all expenditures have been properly recorded in accordance with GAAP in the SEFA and SESA. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.