Audit 404827

Criteria - When a non-federal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR Section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. “Covered transactions” include those procurement contracts for goods and services awarded under non-procurement transaction (e.g. grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR Section 180.220. This requirement applies to contracts entered into to procure goods and services with Coronavirus State and Local Fiscal Recovery Funds. Condition - The Town of Foster has a specific procedure in place for verifying that an entity with which it plans to enter into a covered transaction is not suspended, debarred or otherwise excluded. The procedure includes maintaining on file documentation to support that the verification was performed by accessing the System of Award (SAM.gov) website and confirming that the vendor is not suspended or debarred. For three of the five transactions selected for testing that were subject to the suspension and debarment requirements, the Town did not have documentation to support that the verification procedures were performed prior to entering into the transactions. Cause – The Town did not implement the procedure that includes maintaining documentation on file until April 2025. The transactions noted above were incurred prior to April 2025. Effect – Contracts for goods and service that were “covered transactions” were entered into prior to verifying that an entity was not suspended, debarred or otherwise excluded. Questioned Costs – None Recommendation- We recommend that the Town maintain documentation on file to support that the verification procedures were performed to ensure that an entity with which it plans to enter into a covered transaction is not suspended, debarred or otherwise excluded. Auditee’s Views/Corrective Action - Upon identification of the issue, the Town reviewed its existing vendor procurement and vetting policy. The contracts identified in this finding existed prior to the implementation of controls designed for compliance with this policy. The Town has implemented corrective actions to formalize and document the verification process. Specifically, verification of suspension and debarment status is now documented through the System for Award Management (SAM.gov) prior to contract execution, and applicable staff have been trained on the requirements to ensure ongoing compliance.As part of its commitment to maintaining full compliance with federal procurement standards, the Town will further enhance these procedures by requiring all department heads to notify the Finance Department of any vendor proposed for use prior to making a purchase or entering into a contract. This additional control will ensure that the required suspension and debarment verification is completed and documented before any contractual commitment is made, thereby reducing the risk of similar occurrences in the future.