Audit 368894

2 CFR § 376.10 gives regulatory effect to the Department of Health and Human Services for 2 CFR 180.305 which states that Non-Federal entities are prohibited from entering into a covered transaction with parties that are suspended or debarred or whose principals are suspended or debarred, unless the Federal agency responsible for the transaction grants an exception under 2 CFR § 180.135. Furthermore, 2 CFR § 180.200 identifies “covered transactions” as nonprocurement or procurement transactions at the primary tier, between a Federal agency and a person; or at the lower tier, between a participant in a covered transaction and another person. Procurement contracts for goods and services awarded under a nonprocurement transaction (e.g., grant or cooperative agreement) are covered transactions if the contracts are expected to equal or exceed $25,000 or meet certain other specified criteria outlined in 2 CFR § 180.220. All nonprocurement transactions (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless exempt by 2 CFR § 180.215. When a non-Federal entity enters into a covered transaction, the non-Federal entity must verify that the entity is not suspended or debarred or otherwise excluded. This verification may be accomplished by checking SAM exclusions (https://sam.gov/content/home), collecting a certification from the entity or adding a clause or condition to the covered transactions with that entity. The Mental Health and Recovery Board of Union County's (MHRBUC) Procurement Policy and Procedures states that MHRBUC shall not award funds to any person or company that is debarred, suspended or otherwise excluded from or ineligible for participation for state or federal funding. It furhter states MHRBUC shall confirm that the supplier is not debarred or suspended by doing one of the following: (i) checking the Federal government's System for Award Management (SAM), which maintains a list of such debarred or suspended suppliers at www.sam.gov; (ii) collecting a certification from the supplier; or (iii) adding a clause or condition to the covered transaction with that supplier. The County did not have the proper internal controls in place to verify that all entities with whom the County had entered covered transactions had not been suspended or debarred. During testing, we noted one vendor with payments of more than $25,000 in which there was no evidence the County checked the SAM exclusions, collected certifications from the entities, or added a clause or condition to the covered transactions with the vendors. Failing to have controls in place may result in vendors receiving federal funds that are suspended or debarred. Prior to contracting with vendors that will be paid with federal funds, the County should verify the vendor is not suspended or debarred by checking the SAM exclusions, collecting a certification from the vendor, or adding a clause or condition to the covered transaction with the vendor.