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Finding Number: 2022 001 Program: Emergency Solutions Grant Program (ESG) ALN #: 14.231 Federal Agency: Housing and Urban Development Federal Award Number: E 20 MC 25 005; E 20 MW 25 0005 Award Year: 7/1/2021 ? 6/30/2022 E 21 MC 25 0005 Suspension and Debarment Type of finding: Material Weakness Prior year finding: No Statistically valid sample: No Criteria The 2 CFR sections 180.215 and 180.220 provide the principles to be applied to ensure non federal entities are not contracting with or making subawards under covered transactions to parties that are suspended or debarred. Also, 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. According to 2 CFR 200.303, the non Federal entity must 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). Condition When establishing contracts for subrecipients under the Emergency Solutions Grant Program (ESG), the City required that standard contract language be included to address the applicable suspension and debarment requirements. During fiscal year 2022, the required contract language was not included within the subrecipient contracts executed for the ESG program. Additionally, the City did not verify that its subrecipients were not suspended or debarred through the System for Award Management (SAM). During our audit, we noted 5 of 5 subrecipients selected for testing were not checked for suspension and debarment as evidenced via review of the subrecipient contracts. During compliance testing for the subrecipients it was confirmed they were not suspended or debarred. Cause The City requires that standards contract language be included in all of their subrecipient contracts that addresses suspension and debarment requirements. The City was unaware that the required language was excluded from subrecipient contracts entered into for the ESG program as there was insufficient review of the contracts prior to execution to ensure all required elements were present. Effect Lack of formal review of subrecipient contracts and review of entities on SAM could result in the City entering into contracts with prohibited entities. Questioned Costs None Recommendation We recommend the City ensure that required language is included within all subrecipient contracts prior to execution. We also recommend that the City review that subrecipients are not included on the SAM website and retain documentation of that check and review prior to entering into contracts with subrecipients. Views of Responsible Officials and Corrective Actions The City will update the subrecipient contract template to ensure the required language is included in all newly executed contracts certifying that the agency, its officers, and employees are not suspended or debarred from doing business with the federal government. Prior to entering into contracts with subrecipients, the City will check that each subrecipient is not included on the SAM.gov Exclusion List, and will include a dated screenshot from the SAM.gov website documenting the review in each project file. Implementation Date Updates to the Emergency Solutions Grant subrecipient contracts will be implemented for all newly executed contracts for use in the FY24 ESG program year. All ESG subrecipients will be checked against the Sam.gov Exclusion List and determined to be in good standing prior to the contract being executed and this process will be documented. Responsible Officials Anthony Woods, Planner and Contract Manager; Liz Mengers Magargee, Planning and Development Manager