Audit 394623

Federal Agency: U.S Dept of Agriculture and U.S. Dept of the Treasury (Passed through MD DHCD) Program: Water and Waste Disposal Systems for Rural Communities (ALN #10.760) and Coronavirus State and Local Fiscal Recovery Funds (ALN #21.027) Criteria: In accordance with the Uniform Guidance, recipients who receive federal funding shall fully comply with Subpart C of 2 CFR Part 180, which details that non-Federal entities are prohibited from entering into covered transactions with parties that are suspended or debarred from participating in federal programs. A covered transaction includes procurement contracts and other transactions expected to equal or exceed $25,000 that are funded with federal awards. A non-federal entity has three options for performing this verification: 1) checking SAM exclusions; 2) collecting a certification from that person; or 3) adding a clause or condition to the covered transaction with that person. These procedures should be performed prior to entering into the covered transaction and on a routine/frequent basis, as well as documentation of the verification being maintained as part of the procurement records. Condition: During the fiscal year, six vendors were subject to the suspension & Debarment provisions, as the total amount paid with federal funds was greater than $25,000. For three of the six vendors, suspension and debarment was checked upon contract award which was in August 2023 for two vendors and April 2024 for the third. Checks were not performed again closer to the start of fiscal year 2025. During the audit, the Town performed suspension and debarment checks in December 2025 for all vendors identified as subject to these requirements and none of the vendors were identified as suspended or debarred. Cause: The Town did not have a formalized control requiring suspension and debarment verification to be performed prior to entering into covered transactions and periodically thereafter, nor was there a centralized process to ensure documentation of these checks. Effect: Without consistent suspension and debarment verification procedures, the Town is at risk of entering into covered transactions with vendors that are suspended or debarred, which would result in noncompliance with federal requirements. Questioned Costs: N/A Repeat Finding: No Recommendation: We recommend the Town implement formal procedures to ensure compliance with federal suspension and debarment requirements. Procedures should include: - Performing and documenting SAM.gov exclusion checks prior to entering into covered transactions for vendors paid with federal funds exceeding the applicable threshold. - Maintaining documentation of the verification in procurement or vendor files. - Implementing a periodic monitoring process to ensure vendors remain eligible throughout the contract period when appropriate. View of Responsible Officials: The Town will implement a policy requiring that debarment checks be completed prior to a bid being awarded by the Board of Commissioners for new projects. Also, for ongoing projects, the Town will implement a process to review the vendors suspension and debarment status annually.