Finding 371920 (2023-006)

Federal Agency: U.S. Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Assistance Listing Number: 21.027 Federal Award Identification Number and Year: Pub. L. No. 117-2 2021 Award Period: 5/10/2021 - 12/31/2026 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: According to the 2023 Compliance Supplement Part 3, 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 SAM.gov I Home (click on Search Record, then click on Advanced Search-Exclusions) (Note: The o:tvlB guidance at 2 CFR Part 180 and agency implementing regulations still refer to the SAM Exclusions as the Excluded Parties List System (EPLS)), (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR section 180.300). According to the City's Federal Procurement Guidance, www.sam.gov print screen of vendor (debarment check). Condition: During our testing, we noted that the City did not follow federal suspension and debarment regulation nor its federal suspension and debarment procedures. Management's Progress for Repeat Findings: This is a repeated and modified.finding. While the City has improved its efforts, there are still opportunities for improvement to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements as well as compliance with City policy. Questioned costs: Unknown Context: During our testing, we noted the following exceptions related to suspension and debarment. • For one of the three procurement transactions, the City conducted an exclusion check at SAM.gov. However, there is no date and initial evidencing that the exclusion check was done nor reviewed and approved prior to the City entering into the covered transaction. • For one of the three procurement transactions, the executed contract/agreement was not provided to us. As such, we are unable to determine if the City collected the certification from the entity prior to the City entering into the covered transaction. • For two of the three procurement transactions and five of the five subawards, the City collected a certification from the entity rather than conduct an exclusion check on SAM.gov. Although collecting a certification from the entity is one of the three ways a non-federal entity may accomplish the verification, this is not in accordance with the City's suspension and debarment procedures which is a search at SAM.gov with a print out of the search results and date/initial to certify that the City has confirmed status. Cause: The City failed to follow suspension and debarment procedures. Effect: The auditor noted instances of noncompliance. Recommendation: We recommend the City update its procedures to allow for any of the three ways in which a non-federal entity may accomplish the verification that the entity it is entering into a covered transaction with is not suspended or debarred or otherwise excluded from participating in the transaction. Also, we recommend the City implement a quality control process to ensure documentation supports that the City's verification was accomplished prior to entering into the covered transaction. Management Response: The City agrees with the finding. Over the past several years, the City has developed a significant number of guidance documents and trainings in the area of federal procurement. All of the guidance documents for Central Purchasing are housed in the Purchasing SharePoint site. The guidance and training have in the past been directed at the members of the Purchasing Liaison User Group, but given the continued findings, the City intends to reach out to a much broader group to ensure compliance, including Directors, Deputy Directors, and program representatives. In addition, during Fiscal Year 2023 the City implemented a new system, Contracts Life :Management (CUA), which includes an intake form in the federal funding section. The intake form includes the question "Is the supplier suspended or debarred?" The user is required to upload the result of the SAMS check search, regardless of the status of the contractor. When the answer is yes, the contract process is not allowed to proceed. The system is set up for social services and professional services only at this time, with a slow rollout of the rest of the types of City contracts over the next year or so. This system did not go-live with the existing professional services contracts until the end of the Fiscal Year and management believes that, with sufficient time and build out of the system, this system will help to reduce the exceptions noted above. In addition, as discussed above, management will review and revise internal policies and procedures as appropriate and ensure changes are communicated to departments. This will be completed by June 30, 2024. Timeline and Responsible Position: June 2024 - Chief Procurement Officer and Grants Administrator