Finding Text
FINDING 2024-001
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - 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): 2024
Compliance Requirement: Procurement and Suspension and Debarment
Audit Finding: Material Weakness
Condition and Context
Prior to entering into subawards and covered transactions with the COVID-19 - 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.
An internal control system was not in place at the City to ensure compliance with the Procurement
and Suspension and Debarment compliance requirement. A population of nine covered transactions that
equaled or exceeded $25,000 paid from SLFRF award funds received from the U.S. Department of the
Treasury was identified. Three covered transactions were selected for testing. The City had procedures in
place to verify that the persons and entities related to each of the three covered transactions were not
suspended, debarred, or otherwise excluded; however, one person was responsible for verifying
compliance, without an oversight, review, or approval process in place.
The lack of internal controls was a systemic issue 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). . . ."
Cause
The City's procedures to verify vendors' suspension or debarment status were not adequate, as
only one employee was involved in this process, with no oversight. City officials were not aware that a
second review was necessary for suspension and debarment requirements.
Effect
Without the proper design or implementation of internal controls, the City cannot ensure that
contractors paid with federal funds are eligible to participate in federal programs. Any program funds the
City used to pay contractors that have been suspended or debarred would be unallowable, and the funding
agency could potentially recover the funds.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City establish a proper system of internal controls to
ensure that the current procedures in place are properly implemented for all persons and entities that are
paid $25,000 or more, all or in part with federal funds, to ensure they are not suspended, debarred, or
otherwise excluded from participating in federal programs.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.