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External auditor flags procurement control weakness on federal grants; staff to require earlier sam.gov checks
Summary
Baker Tilly reported a significant deficiency in the city's internal controls over procurement for federally funded programs after sampling contracts tied to ARPA and the Recreational Trails program. Staff told council it will require earlier vendor debarment checks and attach screenshots to council memos to document compliance.
Kevin Muller Lally, director with audit firm Baker Tilly, told the Idaho Falls City Council that the city's FY2025 financial statement audit is on schedule but includes one notable finding: gaps in procurement controls for federal award programs.
Muller Lally said auditors tested seven contracts across two federal programs and found that three contracts did not include the required contract language stating vendors are not suspended or debarred, and that staff had not documented sam.gov searches in five instances. He classified the issue as a significant deficiency in internal control and said the city subsequently verified none of the sampled vendors were on the federal suspended and debarred list.
The finding applies to the single‑audit scope for programs that exceed $1 million in federal funding, the auditor said; the two programs named in the presentation were ARPA funds and the Recreational Trails program. "When you contract with a vendor for more than $25,000, there should be some specific language in that contract about the vendor not being suspended or debarred by the federal government," Muller Lally told council.
City finance staff described procedural steps they will take to close the gap. Municipal staff proposed adding a verification trigger in the council‑memo workflow so that any contract using federal funds (or over $25,000) includes a documented sam.gov check attached to the file. "Don't just go out and check. You need to do a screenshot and attach that to the file," staff advised, saying that a screenshot would create demonstrable proof in the procurement record.
Council members pressed for clarity about how this happened after earlier findings. One councilor noted similar recommendations in prior audits and asked whether the lapse reflected a process break or reversion to old habits. Council member Francis said, "I just didn't want council to be surprised in April," underscoring the desire for the corrective steps to be visible in the package before the final audit report is presented.
City staff and the auditor said the timing issue is largely procedural: some departments submit procurement requisitions and contracts through internal systems in ways that can delay procurement's opportunity to perform a debarment check earlier in the workflow. The recommended fix is to flag council memos that cite federal funding so procurement and finance can confirm and attach the sam.gov search as part of the public record.
The auditor emphasized that the issue is an internal‑control deficiency, not a compliance failure: after auditors ran the checks, none of the sampled vendors appeared on the federal exclusion list. Council asked staff to incorporate the verification step into current workflows and to surface the control changes in upcoming council packets so the final audit presentation is not a surprise.
Next steps: staff will revise procurement and council‑memo procedures to require sam.gov documentation for federal contracts above the $25,000 threshold and include the evidence in the public record ahead of the final audit presentation.
