Finding No. 2021-005 - Procurement and Suspension and Debarment Identification of the federal program: Federal Agency: U.S. Department of Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Award Number: D20AP00115, D20AP00049 Criteria or specific requirement (including statutory, regulatory or other citation): In accordance with 2 CFR 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with the Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with 2 CFR 180.300, entities that enter into covered transactions must verify that the person with whom they intend to do business is not excluded or disqualified by: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Lastly, according to 2 CFR 180.200 (b) (1), a procurement transaction is considered a covered transaction if the contract amount is expected to equal or exceed $25,000. Condition: CHCC did not verify whether a person or a vendor is excluded or disqualified pursuant to the requirements of 2 CFR 180.300 prior to entering covered transactions. Cause: CHCC’s current policy or procedure for suspension and debarment monitoring only applies to newly contracted persons or vendors under a covered transaction, thus not pursuant to the requirements or provisions of 2 CFR § 180.300. Effect or potential effect: CHCC is in noncompliance with applicable Suspension and Debarment regulations. Questioned Costs: $304,590 Questioned Costs, continued: Questioned costs of $304,590 represent expenditures incurred under covered transactions entered into during the fiscal year. However, additional documentation provided by CHCC confirmed that the vendors were not actually suspended or debarred during when the procurements were completed. Context: For two (or 100%) of two covered transactions approved during the year, CHCC did not verify whether a person or a vendor is excluded or disqualified pursuant to the requirements of 2 CFR 180.300 prior to entering into a contract. Identification as a repeat finding, if applicable: Finding No. 2020-005. Recommendation: CHCC should revise or update their policies and procedures for monitoring suspension and debarment status of each vendor of covered transactions. These should be reflective of the requirements set by 2 CFR 180.300. Views of Responsible Officials: CHCC concurs with the compliance finding concerning the absence of documented, contemporaneous suspension and debarment verification but respectfully disagrees with the questioned costs of $304,590. Under 2 CFR 200.516(b)(5), the effect of an audit finding should establish a clear and logical link between the identified condition and its actual or potential impact. Although CHCC did not retain evidence that the vendors’ exclusion status was verified before entering into the covered transactions, the historical SAM.gov Exclusions reports confirm that neither vendor was suspended, debarred, or otherwise excluded during the relevant procurement periods. Accordingly, the procedural deficiency did not result in an award to an ineligible vendor. Additionally, 2 CFR 200.516(b)(6) requires questioned costs to be identified and their computation explained. The $304,590 represents the total expenditure under the two covered transactions rather than costs demonstrated to be unallowable, unsupported, unreasonable, or incurred with an excluded vendor. The expenditures were supported, incurred for authorized program purposes, and resulted in goods or services received by CHCC. This finding is substantially the same as the suspension and debarment findings reported in CHCC’s FY2020 Single Audit. The U.S. Department of the Interior, Office of Insular Affairs, subsequently reviewed CHCC’s corrective-action documentation and determined that CHCC had provided sufficient and appropriate evidence to resolve Finding 2020-005, which included questioned costs of $551,917 Auditor Response: In accordance with 2 CFR 200.1(1)(i)(ii), questioned cost means an amount, expended or received from a Federal award, that is the auditor’s judgment: i. Is noncompliant or suspected noncompliant with Federal statutes, regulations or the terms and conditions of the Federal award; ii. At the time of the audit, lacked adequate documentation to support compliance. Additionally, in accordance with 2 CFR 200.1(2), the amount calculated in (1)(ii) is as if the portion of a transaction that lacked adequate documentation were confirmed noncompliant. Lastly, in accordance with 2 CFR 200.1(6), questioned costs are not improper payments until reviewed and confirmed to be improper payments. When audit procedures were performed, no documentation was provided to support that suspension and debarment monitoring procedures were conducted in accordance with 2 CFR 180.300. Accordingly, we retain the questioned costs.