Finding 1105397 (2024-001)

Identification of the Federal Programs: Assistance Listing Number:21.027 Assistance Listing Title:Coronavirus State and Local Fiscal Recovery Funds Federal Agency: Department of Treasury Federal Award Number:N/A Federal Award Year:FY 2024 Criteria or Specific Requirements: Non-federal entities must comply with the Suspension and Debarment compliance requirement, which prohibits entering into covered transactions with parties that are suspended, debarred, or otherwise excluded. Covered transactions include procurement contracts for goods and services under nonprocurement transactions (e.g., grants or cooperative agreements) that are expected to equal or exceed $25,000, or as specified in 2 CFR § 180.220. Additionally, all subawards to subrecipients are considered covered transactions, regardless of the award amount, unless exempt per 2 CFR § 180.215. To verify vendor eligibility, non-federal entities must confirm that lower-tier entities are not suspended, debarred, or excluded, as defined in 2 CFR § 180.995. This can be achieved through one of the following methods: 1. Checking the SAM: Use the SAM Exclusions database, managed by the General Services Administration (GSA), at SAM.gov. 2. Collecting a Certification: Obtain a certification directly from the entity confirming their eligibility to participate. 3. Including Contractual Clauses: Add a clause or condition to the transaction that requires the entity to comply with suspension and debarment requirements. Identified Condition: During the audit, the City was unable to provide evidence demonstrating that vendor eligibility had been verified prior to entering into contracts with two of the eight sampled vendors. This lapse in documentation raises concerns regarding compliance with the suspension and debarment requirements and highlights the need for strengthened internal controls over vendor verification processes. Cause: Lack of knowledge regarding alternative procedures for verifying the suspension and debarment status of vendors not registered in the SAM. Effect or Potential Effect: The City’s lack of knowledge regarding alternative procedures to verify the suspension and debarment status of vendors not registered in SAM increases the risk of engaging vendors who may be suspended or debarred. This could result in noncompliance with federal regulations, jeopardize the integrity of procurement processes, and expose the City to potential financial and reputational consequences. Questioned Costs: None Recommendation: We recommend that the City: 1. Implement Alternative Verification Procedures • Establish clear alternative methods, such as obtaining vendor certifications or including suspension and debarment compliance clauses in contracts, to verify vendors not listed in SAM. 2. Provide Staff Training • Educate staff on the suspension and debarment requirements and alternative verification options to ensure consistent compliance practices. 3. Develop Internal Policies • Create formal policies outlining the verification process, including steps for handling vendors not registered in SAM, to standardize procedures across all departments. 4. Enhance Monitoring and Oversight • Implement regular monitoring and oversight mechanisms to ensure verification processes are consistently followed for all covered transactions. 5. Document Verification Efforts • Maintain detailed records of vendor eligibility verification to provide evidence of compliance during audits. By adopting these measures, the City can address the issue, mitigate risks, and ensure adherence to suspension and debarment requirements. Views of Responsible Officials and Planned Corrective Action Plan: Former City Manager Ernie Hernandez has instructed department heads and grant analysts to enhance the City’s practice in the suspension/debarment verification process starting Quarter 4, FY2023 -24. However, the two service providers noted for not having proper debarment search in the current fiscal year 2023-24 Single Audit were MiSalud, a healthcare service provider, which normally does not warrant a search, and Tanner, whose service was acquired by the City prior to the previous year’s audit. Julian Lee, Interim City Manager, will ensure staff better adhering to the Uniform Guidance in the suspension/debarment verification process. For existing vendors that the City has not verified debarment or for vendors who do not register with SAM.gov, the City would accomplish the verification by (1) collecting a certification from the entity, or (2) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). Personnel Responsible for Implementation: Julian Lee Position of Responsible Personnel: Interim City Manager Expected Date of Implementation: March 31, 2026