31 CFR § 19.305 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 31 CFR § 19.120. 31 CFR § 19.200 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 31 CFR § 19.220. All nonprocurement transactions as defined in 31 CFR § 19.970 (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless exempt by 31 CFR § 19.215. 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 Township has not established a policy for federal procurement requirements. The Township did not have the proper internal controls in place to verify that all entities, with whom the Township had entered into covered transactions, had not been suspended or debarred. During testing of procurement and suspension and debarment for the Coronavirus State and Local Fiscal Recovery Fund, we noted two instances in which the program had payments to vendors of more than $25,000 and there was no evidence the Township checked the SAM exclusions, collected a certification from the entities, or added a clause or condition to the covered transaction with the vendors. Due to the deficient internal control structure, the required verification was not completed for the covered transactions in the Coronavirus State and Local Fiscal Recovery Fund during Fiscal Year 2025. Failing to have the appropriate controls in place may result in vendors receiving federal funds that are suspended or debarred. This noncompliance also resulted in the opinion over this major federal program being qualified. Prior to contracting with vendors that will be paid with federal funds, the Township 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.
2 CFR 1000.10 gives regulatory effect to the Department of Treasury for 2 CFR part 200.302. 2 CFR 200.302(a) states, in part, the non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR 200.302(b)(2) further states, in part, the financial management system of each non-Federal entity must provide for accurate, current, and complete disclosures of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. Additionally, the U.S. Department of the Treasury Coronavirus Local Fiscal Recovery Fund (SLFRF) Award Terms and Conditions provides that "Recipient agrees to comply with any reporting obligations established by Treasury as they relate to this award." The U.S. Department of the Treasury requires non0entitlement unit’s (NEU’s) that are allocated less than $10 million in SLRF Funding to submit an annual Project and Expenditure Report. This report is required to include project descriptions, obligations and expenditures including current period obligation, cumulative obligation, current period expenditure, and cumulative expenditure, and other information. Due to deficiencies in the Township's internal controls over SLFRF reporting, the Township understated current period obligations, current period expenditures, and cumulative expenditures by $304,200, $786,589, and $786,589, respectively, in the annual project and expenditure report for the period of April 1, 2024 to March 31, 2025. Additionally, the Township overstated current period obligations and current period expenditures by $2,606,935 and $1,204,345, respectively, in the annual project and expenditure report for the period of April 1, 2025 to March 31, 2026. Failure to report accurate obligation and expenditure amounts could result in the Department of Treasury taking action against the Township for failure to comply with programmatic requirements. This noncompliance also resulted in the opinion over this major federal program being qualified. The Township should implement policies and procedures to review the reports prior to submission to help ensure the reports are complete and accurate.