Finding Text
Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Federal Financial Assistance Listing Number: 21.027 Federal Grantor: U.S. Department of the Treasury Award Number and Year: 2021 Compliance Requirement: Procurement and Suspension and Debarment Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: 2 CFR section 200.303(a), Internal Controls, states that the non-Federal entity must 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. Title 2 CFR Section 200.214 of the Uniform Guidance states that the City must comply with 2 CFR part 180, which implements Executive Orders 12549 and 12689. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Per 2 CFR Section 180.300, 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, as defined in 2 CFR section 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA) and available at https://www.sam.gov/SAM/, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity. 2 CFR 200.327 Contract provisions. The recipient's or subrecipient's contracts must contain the applicable provisions described in Appendix II to Part 200—Contract Provisions for Non-Federal Entity Contracts Under Federal Awards. Condition: During our testing of the City’s provisions for procurement requirements, we noted the following: • For seven (7) out of seven (7) contracts selected for testing, the City did not include the applicable provisions described in 2 CFR 200 Appendix II. • For seven (7) out of seven (7) contracts tested, we noted that there was no evidence that the City verified that the contracted entities were not suspended or debarred or otherwise excluded from participating in federal programs prior to entering the contract. Cause: The City did not follow their policy to verify the information described in the conditions prior to entering the transactions. The City’s policy does not include the requirement to include each of the applicable provisions identified in 2 CFR 200 Appendix II in its contracts or purchase orders. Effect: Failure to implement and maintain a proper control process could result in payments to vendors that are suspended or debarred or improper awarding of contracts under the procurement guidance. Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: A nonstatistical sample of seven (7) out of fifteen (15) procurement contracts were tested. This represented a total of $23,361,562 in contracted services under the grant. Repeat Finding from Prior Year: No. Recommendation: We recommend the City strengthen its policies and procedures to ensure that the verification of the debarment and suspension is documented and retained and that contracts include all applicable provisions of 2 CFR 200 Appendix II. Views of Responsible Officials and Planned Corrective Action: Management agrees. See separately issued Corrective Action Plan.