Finding Text
Program: Coronavirus State and Local Fiscal Recovery Funds
ALN #: 21.027
Federal Agency: U.S. Department of Treasury
Federal Award Number: NA
Award Year: July 1, 2022–June 30, 2023
Suspension and Debarment
Type of finding: Material weakness and noncompliance
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 nonfederal entities are not contracting with or making subawards under covered transactions to parties that are suspended or debarred. Also, 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
When establishing contracts for subrecipients 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. During fiscal year 2023, the required contract language was not included within the subrecipient contracts executed for the CSLFRF program. Additionally, the City did not verify that its subrecipients were not suspended or debarred through the System for Award Management (SAM) or include self-certifications from the vendor/subrecipient during the contracting process. During our audit, we noted five of seven vendors and four of four subrecipients selected for testing were not checked for suspension and debarment as evidenced via review of the subrecipient contracts. During compliance testing, it was confirmed for all vendors and subrecipients, except for one, that they were not suspended or debarred. The engagement team was unable to determine if Neville Communities, Inc. is suspended or debarred as it is not registered with SAM.gov.
Cause
The City requires that standard contract language be included in all its 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 CSLFRF program as there was insufficient review of the contracts prior to execution to ensure all required elements were present. Additionally, the City requires that program personnel review SAM.gov to ensure the subrecipient is not suspended or debarred. There was no documentation that this review had occurred prior to entering into a contract with the subrecipient.
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 the City review that subrecipients are not suspended or debarred on the SAM website and retain documentation of this check prior to entering into contracts with subrecipients.
Views of Responsible Officials and Corrective Actions
The City will ensure that subrecipient contracts will include language about suspension and debarment. The City will also download a PDF copy of the subrecipients registration on SAM.GOV showing the subrecipient’s Exclusion Summary Status.
Implementation Date
FY25 Contracts (7/1/2024)
Responsible Officials
Michele Kincaid, Assistant Finance Director, and Sharon Pu, Grants Management