FINDING 2023-001
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Suspension and Debarment
Federal Agency: U.S. Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number or Year (or Other Identifying Number): ARP Act
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number
was 2022-001.
Condition and Context
During the audit period, the SLFRF program funds totaling $11,258,475 were expended under the
premium pay and the water, sewer, and broadband eligible use categories. Transactions expended under
the water, sewer, and broadband eligible use category, totaling $9,778,321, were subject to suspension
and debarment provisions.
Prior to entering into subawards and covered transactions with the SLFRF award funds, recipients
are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise
excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded
under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000.
The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification
from that person, or adding a clause or condition to the covered transaction with that person.
The City's policies related to suspension and debarment requirements included the Executive
Secretary of the Engineering and Board of Works (Executive Secretary) verifying the SAMS exclusions.
The City had four ongoing contracts awarded in the prior audit period, with two vendors for various projects
under the water, sewer, and broadband eligible use category. Total payments made to the vendors during
the audit period were $9,778,321, all of which were subject to suspension and debarment. Per inquiry with
the City, the Executive Secretary verified the two vendors were not suspended or debarred by checking the
SAMs exclusions; however, retaining documentation of the verification was not part of the process. As
such, we could not determine if the City complied with the suspension and debarment requirements.
The lack of internal controls and noncompliance were systemic issues throughout the audit period.
Criteria
2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) 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. These internal controls should be in compliance with guidance in 'Standards for
Internal Control in the Federal Government' issued by the Comptroller General of the
United States or the 'Internal Control Integrated Framework', issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). . . ."
31 CFR 19.300 states:
"When you enter into a covered transaction with another person at the next lower tier, you must
verify that the person with whom you do business is not excluded or disqualified. You do this
by:
(a) Checking the EPLS, or
(b) Collecting a certification from that person if allowed by this rule, or
(c) Adding a clause or condition to the covered transaction with that person."
Cause
A proper system of internal controls was not implemented by management of the City. Policies
over suspension and debarment were in place; however, the procedures did not address the retention of
documentation. As such, the City was unable to provide documentation to demonstrate they checked
SAM.gov to verify that contractors were not suspended or debarred prior to payment.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, no documentation was retained to show the status of vendors to whom
payments equal to or in excess of $25,000 were made.
Program funds used to pay contractors that have been suspended or debarred would be
unallowable and the funding agency could potentially recovery them. Noncompliance with the provisions
of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss
of future federal funding to the City.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City strengthen its system of internal controls to ensure
that all contractors that are paid $25,000 or more, all in or in part with federal funds, are not suspended or
debarred from participating in federal programs. We also recommended strengthening its policies and
procedures to ensure appropriate supporting documentation for federal programs is retained to be present
for audit.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.