Finding Text
2025-004 Verification of Suspension and Debarment (Material Weakness) Federal Agency: U.S. Department of Health and Human Services Pass-through Agency: N/A Cluster/Program: Substance Abuse and Mental Health Services Projects of Regional and National Significance Assistance Listing Number: 93.243 Passed-through Identification: N/A Compliance Requirement: Procurement/Suspension/Debarment Type of Finding: Internal Control over Compliance – Material Weakness Criteria or Specific Requirement: In accordance with 2 CFR 180.300, recipients of federal funds are required to ensure that contractors, subcontractors, or vendors 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 through one of the other permitted methods, including obtaining a certification from the vendor or including a clause in the contract whereby the vendor certifies that it is not suspended or debarred. Condition: During our review of the School District’s procurement process related to federally funded expenditures, we noted that the School District awarded contracts to three vendors that were identified as sole source providers without verifying whether the vendors were suspended or debarred prior to contract execution. No evidence was provided demonstrating that the School District performed a search of the System for Award Management (SAM), obtained a certification from the vendors, or included a contract clause addressing suspension and debarment status as required under 2 CFR 180.300. While the School District utilizes a standard non-exclusion certification form when conducting competitive bid processes, this control is not applied when vendors are selected through non-competitive procurement methods, such as sole source procurements. As a result, the School District does not have a control in place to ensure that suspension and debarment verification is consistently performed for all federally funded procurements exceeding $25,000. This resulted in three instances where the required verification was not performed. Cause: The School District’s procurement procedures do not include clearly defined controls requiring suspension and debarment verification for all federally funded procurements regardless of the procurement method used. Existing procedures incorporate a non-exclusion certification form within the competitive bidding process; however, they do not require equivalent verification when vendors are procured through non-competitive methods, such as sole source procurements. Effect: Failure to verify the suspension or debarment status of vendors prior to contract award increases the risk that federal funds could be awarded to an ineligible entity. If a vendor were determined to be suspended or debarred, the School District could be subject to disallowance of related costs, repayment of federal funds, and potential administrative penalties, which could also negatively impact the School District’s eligibility for future federal funding. Questioned Costs: None identified. The School District subsequently performed a search on SAM.gov and confirmed that all three sole source vendors were not suspended or debarred. Identification as Repeat Finding: This is not a repeat finding from the prior year. Recommendation: We recommend that the School District update and strengthen its procurement policies and procedures to require verification of suspension and debarment status for all contractors and vendors receiving federally funded contracts exceeding $25,000, regardless of the procurement method used. Procedures should require documentation of the verification through one of the three methods permitted under 2 CFR 180.300, including: Checking the vendor’s status in SAM, Obtaining a certification from the vendor, or Including a suspension and debarment clause within the contract or procurement agreement. Additionally, the School District should ensure that its existing non-exclusion certification form, or equivalent documentation, is consistently applied to all federally funded procurements, including sole source and other non-competitive procurement methods, to ensure compliance with federal requirements. Views of Responsible Officials: Management’s views and corrective action plan is included at the end of this report.