Finding Text
Finding 2024-002: Lack of Internal Controls Over Key Compliance Requirement Significant Deficiency Federal Agency: U.S. Department of Homeland Security Program Name: Transit Security Grant Programs ALN Number: 97.075 Award Number: 97.075 Award Year: 2024 Criteria: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Uniform Guidance) requires compliance with provisions of procurement, suspension, and debarment. Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. When a nonfederal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.985 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. 2 CFR § 200.303, also states non-Federal entities must establish and maintain effective internal control over federal awards to ensure compliance with applicable statutes, regulations, and the terms and conditions of the award. Condition: During the audit of the Transit Security Grants Program, we identified a deficiency in the design of internal controls related to the suspension and debarment compliance requirement, particularly concerning certain external government entities. Specifically, the Authority had not established documented procedures, oversight mechanisms, or review processes sufficient to ensure compliance on funded special agreements, including these Memorandums of Understanding, negotiated independent of the procurement process. This design gap limited the entity’s ability to potentially prevent or detect noncompliance effectively. Cause: The Authority had not sufficiently developed or implemented internal control procedures to verify suspension and debarment status for funded memorandums of understanding with external governments involved in the grant. These contracts were negotiated without the participation of the Office of Procurement and Materials of the Authority and therefore were not subject to the procurement process, which includes such controls Effect or Potential Effect: The internal controls insufficiency creates a reasonable possibility that material noncompliance with the suspension and debarment requirement could occur and not be prevented or detected and corrected in a timely manner. As a result, this represents a significant deficiency in internal control over compliance. Although no federal funds were disbursed to an excluded party, the lack of timely verification represents noncompliance with federal requirements and increases the risk of future violations. Context: Of the five items tested during the FY24 restatement test work completed in 2026, two lacked documented procedures, and sufficient oversight and review processes to potentially prevent or detect noncompliance. Additionally, two other government entities were identified that may fall under the same compliance gap. Question Costs: None Repeat Finding: No Recommendation: We recommend the Authority design and implement internal control procedures to ensure compliance with the suspension and debarment requirements for federal grants. This may include developing written policies, assigning responsibilities, and establishing monitoring and reviewing processes. View of Responsible Officials: Management agrees with the finding: As this deficiency was identified concurrently with the FY25 audit cycle, management will implement corrective actions based on recommendations prospectively to prevent future occurrences starting from the FY26 reporting year. The Authority acknowledges that controls established in the procurement process are not consistently followed for funded special agreements if they are negotiated without participation of the Procurement and Materials. While Procurement and Materials has controls in place to verify whether entities, including government entities, are suspended or debarred prior to awarding any contract, it does not perform these checks for funded special contracts for which they do not participate in the process. The condition identified pertains specifically to funded transactions executed by the Metro Transit Police Department through Memorandums of Understanding in accordance with the Compact and Policy Instructions (PI) 9.6 Delegation of Authority - Special Agreements, which did not go through the standard procurement process. The Authority will revise PI 9.6 to provide clarity on roles, responsibilities, and compliance steps. including a documented process requiring verification of suspension and debarment status through SAM.gov or other appropriate mechanism for all funded transactions under delegated authority. This requirement will be communicated to all departments and integrated into standard operating practices. Additionally, targeted training sessions will be provided to staff on the revised PI 9.6 and SAM.gov verification procedures to ensure consistent application across the Authority.