Finding Text
Finding Number: 2024-003 AL Number and Title: AL 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number / Year: Not Available Federal Agency: U.S. Department of Treasury Compliance Requirement: Procurement, Suspension, and Debarment Pass-Through Entity: N/A Repeat Finding from Prior Audit? No Material Weakness and Noncompliance 2 CFR § 180.305 states that Non-Federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred or whose principals are suspended or debarred, unless the Federal agency responsible for the transaction grants an exception under 2 CFR § 180.135. 2 CFR § 180.200 identifies “covered transactions” as nonprocurement or procurement transactions at the primary tier, between a Federal agency and a person; or at the lower tier, between a participant in a covered transaction and another person. Procurement contracts for goods and services awarded under a nonprocurement transaction (e.g., grant or cooperative agreement) are covered transactions if the contracts are expected to equal or exceed $25,000 or meet certain other specified criteria outlined in 2 CFR § 180.220 and 2 CFR § 1200.220. All nonprocurement transactions as defined in 2 CFR § 180.970 (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless exempt by 2 CFR § 180.215. When a non-Federal entity enters into a covered transaction with an entity at a lower tier, the non-Federal entity must verify that the entity is not suspended or debarred or otherwise excluded. This verification may be accomplished by checking SAM exclusions (https://sam.gov/content/home); collecting a certification from the entity, or adding a clause or condition to the covered transactions with that entity. The City developed a detailed Uniform Guidance Policy which was adopted by City Council on March 21, 2022, under Resolution 41-22. The policy states that for contracts over $25,000, the City shall confirm that the vendor is not debarred or suspended by either checking the Federal government's System for Award Management, which maintains a list of such debarred or suspended vendors at www.sam.gov; collecting a certification from the vendor; or adding a clause or condition to the covered transaction with that vendor (2 CFR Part 180 Sub part C). The City did not have the proper internal controls in place to verify that all entities, with whom the City had entered covered transactions, had not been suspended or debarred. There were two instances in which the Coronavirus State and Local Fiscal Recovery Funds grant made total payments to vendors of more than $25,000 and there was no evidence supporting the City checked the SAM exclusions, collected a certification from the entity or added a clause or condition to the covered transaction with the vendors. Failing to have the appropriate controls in place may result in vendors receiving federal funds that are suspended or debarred. The City should verify vendors are not suspended or debarred by checking the SAM exclusions, collecting a certification from the vendor, or adding a clause or condition to the covered transaction with the vendor prior to contracting with vendors that will be paid with federal funds.