Finding 571746 (2024-008)

Finding Number: 2024-008 Program: Coronavirus State and Local Fiscal Recovery Funds ALN #: 21.027 Pass-through Entity: N/A- Direct Award Federal Agency: U.S. Department of Treasury Federal Award Year: July 1, 2023–June 30, 2024 Compliance Requirement: Suspension and Debarment Type of finding: Material weakness and noncompliance Criteria The 2 CFR sections 180.215 and 180.220 provide the principles to be applied to ensure nonfederal entities are not contracting with or making subawards under covered transactions to parties that are suspended or debarred. Additionally, when a nonfederal entity enters into a covered transaction with an entity at a lower tier, the nonfederal 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. According to 2 CFR 200.303, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal 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). Condition The City does not have formal policies and procedures for ensuring vendors are not suspended or debarred prior to entering into a contract. However, when establishing contracts for vendors under the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF), the City requires that standard contract language be included to address the applicable suspension and debarment requirements. Additionally, the City requires the program staff check the System of Award Management (SAM) to ensure the vendor is not suspended or debarred from working under a federal contract. If neither of the beforementioned methods are used, the City will require the vendor to submit a self-certification to ensure they are not suspended or debarred. Throughout our testing, we noted the required contract language was not included within all vendor contracts. Additionally, there was no evidence that city verified the vendor on SAM.gov, or that there was a self-certification included as part of the contracting process. Cause The City requires that standard contract language be included in all vendor contracts that addresses the suspension and debarment requirements. The City was unaware that the required language was excluded from vendor contracts entered into for the CSLFRF program. There was insufficient review of the contracts prior to execution to ensure all required elements were present. Additionally, the City did not retain any documentation that they checked SAM.gov prior to entering into a control with a vendor. Proper perspective During our audit, we noted five of nine vendors selected for testing did not contain language in the contract regarding suspension and debarment, as evidenced via review of the subrecipient contracts. Additionally, it was communicated to us that the City checked SAM.gov for each vendor’s status, however, they were not able to provide evidence that this occurred. During compliance testing, it was confirmed all subrecipients, except for two, were not suspended or debarred. The engagement team was unable to determine if Margaret Fuller Neighborhood House and Smartcat Platforms Inc. was suspended or debarred as they are not registered with SAM.gov. Possible asserted effect Lack of formal review of subrecipient contracts and review of entities on SAM.gov could result in the City entering into contracts with prohibited entities. Questions costs None noted Statistical sampling The sample was not intended to be, and was not, a statistically valid sample. Repeat finding Yes, 2023-008 Recommendation We recommend the City set formal policies and procedures around ensuring vendors are not suspended or debarred. Documented policies and procedures would ensure that required language is included within all vendor contracts prior to execution and that SAM.gov is checked and documentation is retained. Views of responsible officials and corrective actions The City has taken actions to ensure that the “Suspension and Debarment” clause or vendor selfcertification confirmation statement has been added to the FY2025 contract and grant agreements. Additionally, City staff has adopted a new sign-off process to document the City's staff review of the vendors status in “SAM.gov”.