Finding Text
FINDING 2023-003
Subject: Coronavirus State and Local Fiscal Recovery Funds - Suspension and Debarment
Federal Agency: U.S. Department of Treasury
Assistance Listing Number: 21.027
Federal Award Number: FY 2021
Pass-Through Entity: Direct grant
Compliance Requirements: Procurement and Suspension and Debarment
Audit Findings: Material Weakness
Criteria: 2 CFR section 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 intend to 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.”
Condition: The City elected to receive the standard revenue loss allowance, allowing them to claim its total
State and Local Fiscal Recovery Funds (SLFRF) allocation as revenue loss to use for government services.
As such, all SLFRF program funds were expended under the revenue loss eligible use category. The U.S.
Department of the Treasury (Treasury) determined that there are no subawards under this eligible use
category, and that recipients’ use of revenue loss funds would not give rise to subrecipient relationships
given that there is no federal program or purpose to carry out in the case of the revenue loss portion of the
award.
Prior to entering into subawards and covered transactions with 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
non-procurement transaction (i.e. grant agreement) that are expected to equal or exceed $25,000. The
verification is to be done by checking the SAM exclusions, collecting a certification from that person, or
adding a clause or condition to the covered transaction with that person. Due to the Treasury’s
determination that the revenue loss eligible use category does not give rise to subawards, the City was only
required to comply with suspension and debarment requirements related to covered transactions.
Cause: Management had not established a system of internal control that would have ensured proper
Suspension and Debarment procedures are followed.
Context: We noted there was one vendor that the City entered into contract within the current year that
exceeded $25,000 paid from SLFRF funds. This transaction, totaling $364,374 was selected for testing.
The City was not able to provide support proving that the City had verified the vendor was not suspended
or debarred prior to entering into the contract. Management asserts that this is being done, but support is
not maintained.
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.
Identification as a repeat finding, if applicable: Yes. Comment appeared in prior year as Finding 2022-
002.
Recommendation: We recommended that the City’s management establish controls related to the grant
agreement and the Suspension and Debarment compliance requirement.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.