Finding 943399 (2021-005)

Material Weakness
Requirement
I
Questioned Costs
-
Year
2021
Accepted
2024-02-13

AI Summary

  • Core Issue: The District lacked proper controls to verify if vendors were suspended or debarred before entering into covered transactions.
  • Impacted Requirements: Non-Federal entities must check SAM exclusions or obtain certifications for transactions over $25,000 to ensure compliance with 2 CFR 180.305 and 31 CFR Part 19.
  • Recommended Follow-Up: Implement verification processes for all vendors before contracting, including checking SAM exclusions and collecting necessary certifications.

Finding Text

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 District did not have the proper internal controls in place to verify that all entities, with whom the District had entered into covered transactions, had not been suspended or debarred. During testing of Procurement, Suspension, and Debarment for the Child Nutrition Cluster, we noted one instance in which a vendor was paid more than $25,000 and there was no evidence that the District 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 only covered transaction in the Child Nutrition Cluster during Fiscal Year 2021. 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 District 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.

Categories

Procurement, Suspension & Debarment Subrecipient Monitoring

Other Findings in this Audit

  • 366956 2021-005
    Material Weakness
  • 366957 2021-005
    Material Weakness
  • 366958 2021-005
    Material Weakness
  • 366959 2021-005
    Material Weakness
  • 366960 2021-005
    Material Weakness
  • 943398 2021-005
    Material Weakness
  • 943400 2021-005
    Material Weakness
  • 943401 2021-005
    Material Weakness
  • 943402 2021-005
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
84.010 Title I Grants to Local Educational Agencies $126,378
84.425 Education Stabilization Fund $72,448
21.019 Coronavirus Relief Fund $63,829
10.555 National School Lunch Program $13,591
84.367 Improving Teacher Quality State Grants $7,778
84.424 Student Support and Academic Enrichment Program $5,529
10.553 School Breakfast Program $1,636
84.027 Special Education_grants to States $1,474