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 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. Additionally, 2 CFR 184.4 states that the Buy America Preference applies to Federal awards where funds are appropriated or otherwise made available for infrastructure projects in the United States, regardless of whether infrastructure is the primary purpose of the Federal award. Furthermore, all Federal awards with infrastructure projects must include the Buy America Preference in the terms and conditions. The Buy America Preference must be included in all subawards, contracts, and purchase orders for the work performed, or products supplied under the Federal award. The terms and conditions of a Federal award flow down to subawards to subrecipients unless a particular section of the terms and conditions of the Federal award specifically indicate otherwise. The City did not have the proper internal controls in place to verify that all entities, with whom the City had entered into covered transactions, had not been suspended or debarred nor to ensure that Buy America Preference is included in the terms and conditions of contracts. During 2024, the City applied Coronavirus State and Local Fiscal Recovery Funds to an existing construction project that was started with, and contracted out, based on local funding. Due to this, during testing of vendor contracts, we noted one vendor contract (which accounted for $779,165 or 89.5% of program disbursements) for which there was no evidence the City checked the SAM exclusions, collected a certification from the entity, or added a clause or condition to the covered transaction with the vendor. Additionally, this contract did not include the Buy America Preference in the terms and conditions and no waiver to this requirement was received from the awarding agency. Failing to have the appropriate controls in place may result in vendors receiving federal funds that are suspended or debarred or the City spending Federal awards on infrastructure projects not compliant with the Build America, Buy America (BABA) Act. Prior to applying federal funds to an existing contract, the City should implement procedures to verify the contract would be in compliance with grant requirements, including, but not limited to, procurement, suspension and debarment and Buy America Preferences requirements.