Memorial Hermann Health System

Federal Program:Research and Development Cluster Assistance Listing Nos.93.432, 93.369, 93.433, 93.421 Federal Award Numbers and Grant Period - see 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: The Health System did not maintain records for procurements made with federal funds sufficient to detail the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Questioned Costs: $149,194 Context: We selected and tested five procurements with expenditures totaling $149,194 from a population of 12 procurements over $10,000 each with expenditures totaling $411,649. For all five procurements, the Health System did not have sufficient evidence to detail the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. We did not observe multiple quotes or sole source justification for any of the five procurements. The Health System’s total R&D expenditures were $6,288,755. Of this amount, $513,467 related to procurements of good and services. Effect: The Health System did not comply with the general procurement standards per the OMB to maintain sufficient detail of the history of the procurement, including the rationale of the method of procurement. Cause: The Health System did not have effective internal controls and procedures in place to ensure the Health System maintained records for procurements sufficient to detail the history of procurement, including the rationale for the method of procurement and other required elements. Identification as a repeat finding, if applicable: Not Applicable Recommendation: The Health System should retain written documentation for procurements documenting the history of the procurement prior to the procurement of goods or services including, but not limited to, the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. This would include obtaining quotes from vendors for competitive procurements and documenting sole source justification for procurements, when applicable. Views of responsible officials and planned corrective actions: Management agrees with the finding and has developed a corrective action plan.