Finding Text
FINDING 2023-001
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery
Funds - Procurement and Suspension and Debarment
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): FY 2023
Pass-Through Entity: Direct
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
Prior to entering into subawards and covered transactions with State and Local Fiscal Recovery
Funds (SLFRF) award funds, recipients are required to verify that such contractors and subrecipients are
not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to,
contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that
are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties
List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered
transaction with that person.
Upon inquiry of the County, in order to review the procedures 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 County explained its process was for the Board of County Commissioner's Secretary to provide a list of
vendors to the County Auditor's office. The County Auditor, or designee, then verified each vendor on the
SAMs website to ensure they were not suspended, debarred, or otherwise excluded. A copy of the
verification was retained in the County Auditor's files.
A population of 13 covered transactions was identified, from which 5 were selected for testing. Of
the 5 tested, the County did not have documentation that 3 of the vendors were verified to ensure they were
not suspended, debarred, or otherwise excluded.
The lack of effective internal controls and noncompliance were systemic issues throughout the
audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over the Federal award that provides
reasonable assurance that the non-Federal entity is managing the Federal award in
compliance with Federal statutes, regulations, and the terms and conditions of the Federal
award. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
31 CFR 19.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you do business is not excluded or disqualified. You do this
by:
(a) Checking the EPLS; or
(b) Collecting a certification from that person if allowed by this rule; or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not designed by the management of the County.
Embedded within a properly designed and implemented internal control system should be internal controls
consisting of policies and procedures. Policies reflect the County's management statements of what should
be done to effect internal controls, and procedures should consist of actions that would implement these
policies. For two of the vendors, their suspension and debarment status was not verified until 2024, which
was after payment. For the other vendor, suspension and debarment was not verified as the County Auditor
was unaware that it should have been for that vendor.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded. Any program funds the County used to pay vendors
that have been suspended or debarred would be unallowable and the funding agency could potentially
recovery them. Furthermore, noncompliance with the provisions of federal statutes, regulations, and the
terms and conditions of the federal award could result in the loss of future federal funding to the County.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended the County strengthen its system of internal controls to ensure that all vendors
that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from
participating in federal programs before entering into any covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.