Finding Text
2 CFR 1200.10 gives regulatory effect to 2 CFR 180.305 which provides that participants are prohibited from entering into a covered transaction with parties that are excluded or disqualified and 2 CFR 180.315 prohibits participants from entering into covered transactions with parties whose principals are excluded or disqualified, unless the Federal agency responsible for the transaction grants an exception under 2 CFR § 180.135, or unless the participants has obtained an exception under the disqualifying statute, Executive order, or regulation.
2 CFR 1200.10 gives regulatory effect to 2 CFR 180.200 identifies “covered transactions” as non-procurement or procurement transactions subject to the prohibitions of 2 CFR § 180 subpart B, and may be a transaction at the primary tier, between a Federal agency and a person; or at the lower tier, between a participant in a covered transaction and another person. Under 2 CFR § 180.220, procurement contracts for goods and services awarded by a participant in a non-procurement transaction (e.g., grant or cooperative agreement) are covered transactions if the contracts are expected to equal or exceed $25,000 or meet certain other specified criteria. All non-procurement transactions (i.e., sub-awards to subrecipients), irrespective of award amount, are considered covered transactions, unless exempt under 2 CFR § 180.215.
2 CFR 180.330 requires that before a participant enters into a covered transaction with another party, the participant must verify that the party the participant is seeking to do business with is not excluded or disqualified. This verification may be accomplished by checking SAM exclusions (https://sam.gov); collecting a certification from the entity, or adding a clause or condition to the covered transactions with that entity.
Additionally, the County established the "Federal Procurement Policy" through Resolution # 2018-868 which states “sub awards and contract will not be permitted with parties that are debarred, suspended or otherwise excluded from or ineligible for participation in federal assistance programs or activities. Departmental Fiscal Supervisors are responsible for checking the Excluded Parties List System (EPLS) website, also known as the Debarred Contractors List prior to the approval of federal sub-awards or contacts of any amount or purchased of $50,000 or higher of federal awards.”
The County did not have proper internal controls in place to help verify that all entities, with whom the County had entered into covered transactions, had not been suspended or debarred. During testing of nonpayroll disbursements for AL # 20.205 Highway Planning and Construction Program, we noted for all procurement transactions tested with a payment to a vendor of more than $25,000, there was no evidence the County checked the SAM exclusions, collected a certification from the entity, or added a clause or condition to the covered transaction with the vendor. Due to the deficient internal control structure, the required verification was not completed for the covered transaction in the AL # 20.205 Highway Planning and Construction Program during the fiscal year ended December 31, 2023. Failing to have the appropriate controls in place may result in vendors receiving federal funds that are suspended or debarred.
Prior to contracting with vendors that will be paid with federal funds, the County should verify the vendor is not suspended or debarred by checking the SAM exclusions, collecting a certification from the vendor, or adding a clause or condition to the covered transaction with the vendor. In addition, the County should amend their policy to ensure the dollar threshold agrees to the CFR.