Finding Text
2024-001 Verification of Suspension and Debarment (Material Weakness) Federal Agency: Department of Transportation Pass-through Agency: State of New Hampshire Department of Transportation Cluster/Program: Highway Planning and Construction Assistance Listing Number: 20.205 Passed-through Identification: 41366 & 44016 Compliance Requirement: Suspension and Debarment Type of Finding: Internal Control over Compliance – Material Weakness Material Noncompliance Criteria or Specific Requirement: In accordance with 2 CFR 180.300, recipients of federal funds are required to ensure that contractors, subcontractors, vendors, or persons are not suspended or debarred from participating in federal programs before awarding any contract or procurement that exceeds $25,000. This verification must be conducted through the System for Award Management (SAM) or by obtaining a certification or including an appropriate clause in the contract. Additionally, the grant agreement specifically requires that the “project sponsor [i.e., the City] also certifies that it will verify the state and federal suspension and debarment status for all parties (consultant, vendor, contractor, etc.) receiving funds under this Agreement as a sub-agreement and shall be solely responsible for any recoupment, penalties, or costs that might arise from use of a suspended or debarred party.” Condition: During our review of the City’s compliance with suspension and debarment requirements, we noted that the City procured services with four vendors under the federally funded projects. For two of the four vendors, the City demonstrated compliance by either (1) including a suspension and debarment clause within the executed contract documents or (2) obtaining a signed certification form confirming that the vendor was not suspended or debarred. For the remaining two vendors, the City did not provide evidence that a verification was performed through SAM.gov, nor was there a certification or clause included in the executed agreements. It should be noted that the New Hampshire Department of Transportation (NH DOT) performs its own review and approves all engineers and contractors prior to project initiation; however, the City’s grant agreement explicitly requires the City, as Project Sponsor, to independently verify the suspension and debarment status of all parties receiving funds under the agreement. Cause: The City’s procurement procedures did not consistently include a formalized step to verify the suspension and debarment status of all vendors receiving federal funds. While some verification occurred through contract language or certifications, there was no comprehensive internal control requiring documentation of this verification for every vendor. The City may have relied, in part, on NHDOT’s approval process, which does not substitute for the City’s own verification responsibilities under the federal requirements and the grant agreement. Effect: Failure to verify and document the suspension and debarment status of all vendors increases the risk of noncompliance with 2 CFR 180.300 and the terms of the grant agreement, potentially resulting in questioned costs, repayment of federal funds, or administrative findings during future audits or grant monitoring reviews. Questioned Costs: None identified. Although verification documentation was not available for two vendors, there is no evidence that the vendors were suspended or debarred; therefore, no questioned costs are being reported. Identification as Repeat Finding: This is not a repeat finding from the prior year. Recommendation: We recommend that the City establish and consistently apply a formalized process to verify and document the suspension and debarment status of all vendors, consultants, and contractors paid with federal funds. The process should include: Performing verification through SAM.gov prior to contract execution; Obtaining a signed certification from the vendor; or Including an appropriate clause within the contract addressing suspension and debarment status. Additionally, the City should maintain documentation of verification in procurement files to demonstrate compliance during audits and monitoring visits. The City should also ensure that reliance on NHDOT approvals does not replace its own verification responsibilities under federal requirements. Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.