AppleTree Institute for Education InnovationNon-Profit

Criteria and Condition: In accordance with the procurement standards as promulgated in Section 200.318 of 2 CFR Chapter 1, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, an organization that receives federal funding is required to have a written procurement policy and procedures manual, which reflect applicable federal laws and required procurement procedures as identified in the Uniform Guidance. The AppleTree Institute for Education Innovation, Inc., has a written Financial Policies and Procedures Handbook; however, it does not include the necessary requirements as they relate to federal procurement standards and compliance. Questioned Cost: $0. Context: The Institute referred the audit team to the section addressing compliance requirements. This section of the manual indicated that the Institute would comply with the requirements as required under the OMB Circulars, prior to the enactment of the Uniform Guidance. The section referenced did not detail the processes by which the Institute would conduct procurement transactions. Cause: The Institute had not previously been subject to a single audit or Uniform Guidance compliance testing. Management believed the Financial Policies and Procedures Handbook that had been adopted would satisfy the requirement of having a federal policy and procurement manual. Effect: Federal procurement standards have been established to ensure that all procurement actions are conducted in a manner to ensure, to the maximum extent practical, that the solicitation and award of a procurement transaction is most advantageous to both the federal government and the Institute. By utilizing procurement standards that do not fully conform to federal standards, a contract could be awarded that would otherwise not be considered most advantageous to one or either party. Recommendation: We recommend that the current written financial policies and procedures handbook be expanded to include the many additional provisions as required under the Uniform Guidance. This includes, but is not limited to, (1) micro-purchase procedures, (2) quotation and analysis processes between $10,000 and $250,000, (3) federal sole source provisions, (4) selection process, (5) contract provisions, and (6) procurement records. Views of Responsible Official: By November 30, the Finance Team will create a separate policy manual for Federal Grants to detail the many additional provisions as required under the Uniform Guidance. This manual will include, but will not be limited to: (1) micro-purchase procedures, (2) quotation and analysis processes between $10,000 and $250,000, (3) federal sole source provisions, (4) selection process, (5) contract provisions, and (6) procurement records.

Criteria and Condition: In accordance with Title 2, Section 200.318 of the OMB Code of Federal Regulations, non-federal organizations are prohibited from contracting with parties that are debarred or whose principals are suspended or debarred from performing under a federal award. When a non-federal organization enters into a contract with a party for goods or services in an amount greater than $25,000, or enters into a subrecipient agreement irrespective of the award amount, the organization must verify that the entity and its principals are not suspended or debarred or otherwise excluded from participating in a federal award. The AppleTree Institute for Education Innovation, Inc., did not comply with the requirements as it relates to "Debarred and Suspended Parties." Questioned Cost: $0. Context: The Institute entered into a contract with a not-for-profit organization, that has been classified as a vendor, for services where federal funds were utilized for the payment of such services. The Institute did not utilize procedures to ensure that the vendor was not debarred or suspended from working on the federal award program. Cause: During the year ended June 30, 2020, there was a turnover in the position of the Chief Operating Officer. Because of this turnover, as well as the timing of the transition, the requirement to obtain debarred party certifications was not conducted. The outgoing employee, who was responsible for ensuring debarred certifications were obtained, was not aware of this federal requirement nor of the need to obtain such certifications. Effect: Not obtaining the proper evidence to ensure that a party is not debarred or suspended from doing work on a federal award could ultimately result in the Institute entering into a vendor contract with an ineligible party. If payments are made to a vendor that is excluded from participating in a federal award, the Institute may be required to return such funds to the Federal granting agency. Recommendation: The Federal agency recommends that debarred and suspended verification be accomplished through one of three methods. These methods include (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration, (2) collecting a separately executed certification from the entity, or (3) adding a clause or condition to the actual subgrant agreement with the contracting party. We recommend the use of option number 2 or 3 above over option number 1 because it provides better assurance that not only is the organization permitted to participate in a federal award, but the principals are also permitted to work under a federal grant. Views of Responsible Officials: Beginning November 2020, and every six months thereafter while the Replicating High-Quality Charter Preschools grant is in effect, the Program Director will obtain from the subgrant entity a separately executed certification that verifies that the entity and its principals are not suspended or debarred or otherwise excluded from participating in a federal award. For other contracts greater than $25,000, the Controller will obtain this certification or will verify via the SAM Exclusions maintained by the General Services Administration that the company and its principals are not debarred or suspended from performing under a federal grant.