Finding Text
Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Emergency Solutions Grant Assistance Listing Number: 14.231 Award Period: January 1, 2025 to December 31, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or Specific Requirement: In accordance with 2 CFR §200.318(a) and §200.318(d), non-federal entities are required to maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts, and must follow documented procurement procedures that promote full and open competition. Additionally, 2 CFR §200.320 requires entities to use appropriate procurement methods based on the nature and size of each procurement and to perform cost or price analysis as applicable. Further, pursuant to 2 CFR §200.214, non-federal entities are prohibited from contracting with or making subawards to parties that are suspended or debarred and are required to verify the eligibility of vendors (e.g., through the System for Award Management (SAM)) prior to entering into transactions and periodically as appropriate. These requirements imply the need for ongoing evaluation and documentation of procurement decisions, vendor eligibility, and compliance, particularly when procurements span multiple funding periods or awards. Condition: During our review, we noted that the organization performed procurement procedures, including vendor selection, cost/price evaluation, and suspension and debarment verification, at the time of initial engagement with a vendor. However, the organization did not subsequently review, monitor, or reperform procurement procedures—including periodic suspension and debarment checks—in later years, despite continued use of the vendor across different grant awards and grant periods. Questioned Costs: None Context: The organization engages vendors to provide goods and services supported by multiple grant awards over varying grant periods. Procurement requirements, including verification that vendors are not suspended or debarred, apply at the time of vendor selection and should be periodically reassessed to ensure continued compliance with applicable regulations, particularly when funding sources, grant terms, or procurement thresholds change. Cause: This condition appears to be the result of a lack of formal policies or controls requiring periodic reassessment of vendor selection, including suspension and debarment verification, as well as insufficient awareness of ongoing procurement and eligibility requirements under federal regulations. Effect or Potential Effect of Finding: Failure to reassess procurement decisions, monitor vendor relationships, and reverify suspension and debarment status across grant periods increases the risk of noncompliance with federal procurement standards. This includes the risk of contracting with ineligible vendors, inadequate competition, or unsupported pricing. Such noncompliance may result in questioned costs, disallowed expenditures, repayment of grant funds, and increased exposure to vendor performance and compliance risks. Repeat Finding: No. Recommendation: We recommend that management implement formal procurement policies requiring periodic reassessment of vendors used in federally funded programs, particularly when new grant awards are received or grant periods change. This should include evaluating whether the original procurement method remains appropriate, performing updated cost or price analyses as necessary, and conducting and documenting periodic suspension and debarment checks (e.g., SAM verification). Additionally, management should establish oversight controls to ensure procurement compliance and vendor eligibility are maintained throughout the lifecycle of vendor relationships in accordance with 2 CFR §200.318–200.320 and §200.214. Views of Responsible Official: There is no disagreement with the audit finding.