Finding Text
The U.S. Department of the Treasury Coronavirus State and Local Fiscal Recovery Funds Award Terms and Conditions signed by the County includes, in Section 9(b), that the award is subject to 2 CFR Part 180 and Treasury’s implementing regulation at 31 CFR Part 19.
2 CFR 180.305 states that Non-Federal entities are prohibited from entering into a covered transaction with parties that are suspended or debarred or whose principals are suspended or debarred, unless the Federal agency responsible for the transaction grants an exception under 2 CFR § 180.135.
2 CFR 180.200 identifies “covered transactions” as nonprocurement or procurement transactions 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. Procurement contracts for goods and services awarded under a nonprocurement 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 outlined in 2 CFR § 180.220. All nonprocurement transactions (i.e., subawards to subrecipients), irrespective of award amount, are considered covered transactions, unless exempt by 2 CFR § 180.215.
When a non-Federal entity enters into a covered transaction, the non-Federal entity must verify that the entity is not suspended or debarred or otherwise excluded. 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.
31 CFR Part 19 has analogous provisions to 2 CFR Part 180. 31 CFR § 19.100 states that Part 19 adopts a governmentwide system of debarment and suspension for Department of Treasury nonprocurement activities. 31 CFR § 19.305 prohibits participants from entering into a covered transaction with an excluded person unless the Department of Treasury grants an exception and prohibits participants from entering into any transaction with a disqualified person unless the participant has obtained an exception under the disqualifying statute, Executive order, or regulation.
31 CFR § 19.200 identifies “covered transactions” as nonprocurement or procurement transactions at the primary tier, between a Federal agency and a person; or at a lower tier, between a participant in a covered transaction and another person. 31 CFR § 19.220(b)(1) specifically provides that a contract for goods or services is a covered transaction if the contract is awarded by a participant in a nonprocurement transaction covered under § 19.210, and the amount of the contract is expected to equal or exceed $25,000. Under 31 CFR § 19.210, all nonprocurement transactions, as defined in § 19.970, are covered transactions unless listed in § 19.215.
31 CFR § 19.300 provides that when entering into a covered transaction with another person at the next lower tier, the participant must verify that the person at the lower tier is not excluded or disqualified. This may be done by checking the EPLS (Excluded Parties List System), collecting a certification from that person if allowed by this rule, or adding a clause or condition to the covered transaction with that person.
The County did not have the proper internal controls in place to verify that all entities, with whom the County had entered into covered transactions, had not been suspended or debarred. During testing of non-payroll expenditures for the Coronavirus State and Local Fiscal Recovery Funds, we noted three instances in which the program had a payment or contract to a vendor of more than $25,000 and 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 prior to payment issuance. Due to the deficient internal control structure, the required verifications were not completed for the three covered transaction in the Coronavirus State and Local Fiscal Recovery Funds until November, 2023, which was after the vendor payments were issued.
Failing to have adequate 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.