2023-001 The District did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: 93.493 – Congressional Directives
Federal Grantor Name: Department of Health and Human Services
Federal Award/Contract Number: 1 CE1HS46512-01-00
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Description of Condition
The purpose of the Congressional Directives program is to improve health outcomes and achieve health equity through access to quality services, a skilled health workforce, and innovative, high-value programs. Congress designated funding for congressionally directed spending projects for the construction and renovation of health care and other facilities. During the 2022–2023 school year, the District spent $1,364,186 in program funds for the construction of a new health care facility in one of its high schools.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Federal requirements prohibit recipients from contracting with or purchasing from contractors suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The District may verify this by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred or checking for exclusion records in the U.S General Services Administration’s System for Award Management at sam.gov. The District must verify this before entering into the contract or, in this specific case, before charging the costs to a federal award, and must keep documentation demonstrating compliance with this federal requirement.
In fiscal year 2023, the District awarded one contract totaling $25,508,085. Our audit found the District did not have adequate controls and did not verify the contractor was not suspended or debarred before entering into the contract and subsequently charging costs to the program.
We consider these deficiencies in internal control to be material weaknesses that led to material noncompliance.
Cause of Condition
The District received notice of federal funding approval for the construction of the health care facility after it already began work. The District had not originally intended to use federal funds to pay for costs incurred under this contract. Upon receiving notice of the federal award, it issued a purchase order that included the required suspension and debarment language; however, the purchase order was not signed by the vendor as evidence of attesting that the vendor was not excluded.
Effect of Condition
The District did not obtain a written certification, insert a clause into the contract or check sam.gov to verify the contractor was not suspended or debarred.
Without this verification, the District increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible contractor would be unallowable and the federal grantor could potentially recover them.
We verified the contractor was not suspended or debarred. Therefore, we are not questioning these payments.
Recommendation
We recommend the District strengthen its internal controls to ensure compliance with federal requirements. Specifically, we recommend the District ensure that contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging their costs to the program.
District's Response
When the District entered into this contract there were no federal funds expected. As soon as the federal funds were awarded, the District updated the purchase order which did include the required suspension and debarment language. We believed our supporting documentation of mailing the purchase order with the acceptance of the purchase order was sufficient to meet this requirement. We have not yet made a claim for reimbursement for this grant so we were able to confirm this vendor was not suspended or debarred prior to the federal grant paying for program expenses. In the future, the District will ensure we have met suspension and debarment requirements by obtaining a written certification or by checking SAM.GOV.
Auditor's Remarks
We appreciate the District's commitment to resolving this finding, and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
Title 2 CFR Part 180, OMB, Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689
2023-001 The District did not have adequate internal controls for ensuring compliance with federal suspension and debarment requirements.
Assistance Listing Number and Title: 93.493 – Congressional Directives
Federal Grantor Name: Department of Health and Human Services
Federal Award/Contract Number: 1 CE1HS46512-01-00
Pass-through Entity Name: N/A
Pass-through Award/Contract Number: N/A
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Description of Condition
The purpose of the Congressional Directives program is to improve health outcomes and achieve health equity through access to quality services, a skilled health workforce, and innovative, high-value programs. Congress designated funding for congressionally directed spending projects for the construction and renovation of health care and other facilities. During the 2022–2023 school year, the District spent $1,364,186 in program funds for the construction of a new health care facility in one of its high schools.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Federal requirements prohibit recipients from contracting with or purchasing from contractors suspended or debarred from doing business with the federal government. Whenever the District enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The District may verify this by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred or checking for exclusion records in the U.S General Services Administration’s System for Award Management at sam.gov. The District must verify this before entering into the contract or, in this specific case, before charging the costs to a federal award, and must keep documentation demonstrating compliance with this federal requirement.
In fiscal year 2023, the District awarded one contract totaling $25,508,085. Our audit found the District did not have adequate controls and did not verify the contractor was not suspended or debarred before entering into the contract and subsequently charging costs to the program.
We consider these deficiencies in internal control to be material weaknesses that led to material noncompliance.
Cause of Condition
The District received notice of federal funding approval for the construction of the health care facility after it already began work. The District had not originally intended to use federal funds to pay for costs incurred under this contract. Upon receiving notice of the federal award, it issued a purchase order that included the required suspension and debarment language; however, the purchase order was not signed by the vendor as evidence of attesting that the vendor was not excluded.
Effect of Condition
The District did not obtain a written certification, insert a clause into the contract or check sam.gov to verify the contractor was not suspended or debarred.
Without this verification, the District increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments the District made to an ineligible contractor would be unallowable and the federal grantor could potentially recover them.
We verified the contractor was not suspended or debarred. Therefore, we are not questioning these payments.
Recommendation
We recommend the District strengthen its internal controls to ensure compliance with federal requirements. Specifically, we recommend the District ensure that contractors it pays $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging their costs to the program.
District's Response
When the District entered into this contract there were no federal funds expected. As soon as the federal funds were awarded, the District updated the purchase order which did include the required suspension and debarment language. We believed our supporting documentation of mailing the purchase order with the acceptance of the purchase order was sufficient to meet this requirement. We have not yet made a claim for reimbursement for this grant so we were able to confirm this vendor was not suspended or debarred prior to the federal grant paying for program expenses. In the future, the District will ensure we have met suspension and debarment requirements by obtaining a written certification or by checking SAM.GOV.
Auditor's Remarks
We appreciate the District's commitment to resolving this finding, and thank the District for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
Title 2 CFR Part 180, OMB, Guidelines to Agencies on Governmentwide Debarment and Suspension (Nonprocurement), establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689