Audit 386420

2 CFR § 3485 gives regulatory effect to the Department of Education for 2 CFR 180.305 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. 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 as defined in 2 CFR § 180.970 (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 the System of Award Management (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. School District Federal Procurement Policy 6325 states that for contracts over $25,000, the School District shall confirm that the vendor is not debarred or suspended by either checking the Federal government's SAM exclusions website, which maintains a list of such debarred or suspended vendors; collecting a certification from the vendor; or adding a clause or condition to the covered transaction with that vendor. The School District did not have the proper internal controls in place to verify that all entities, with whom the School District had entered into covered transactions, had not been suspended or debarred. During testing of procurement for the Special Education Individuals with Disabilities Education Act (IDEA) program, we noted the School District expended more than $25,000 to the Knox County ESC and there was no evidence the School District checked the SAM exclusions, collected a certification from the ESC, or added a clause or condition to the covered transaction with the vendor. Due to the deficient internal control structure, the required verification was not completed for the only covered transaction in the Special Education IDEA program during fiscal year 2025. Failing to have the appropriate controls in place may result in vendors receiving federal funds that are suspended or debarred. As a result, we have qualified our opinion over the School District’s Special Education Cluster (IDEA) federal program. Prior to contracting with vendors who will be paid with federal funds, the School District should verify vendors are 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.