Vendor Verification and SAM.gov Compliance: Essential Guide for Federal Grant Managers

Federal grant recipients must verify that vendors aren't suspended, debarred, or excluded before awarding contracts—yet vendor verification failures account for approximately 26% of all Single Audit findings, making this the most common compliance issue. This requirement protects federal funds from supporting individuals or entities that have demonstrated fraud, misconduct, or lack of present responsibility. Understanding and implementing proper vendor verification procedures is non-negotiable for organizations expending federal awards under 2 CFR 200 Uniform Guidance.

Why Vendor Verification Matters Now More Than Ever

The stakes increased significantly on October 1, 2024, when major revisions to 2 CFR 200 took effect. The Single Audit threshold rose from $750,000 to $1,000,000 in federal expenditures, and board members were explicitly added to conflict of interest provisions. These changes apply to all federal awards made on or after October 1, 2024. Meanwhile, a 2024 GAO report (GAO-24-106173) found that $1.17 trillion of $6.97 trillion in federal expenditures from 2017-2021 were linked to findings that were both severe and persistent—with 213 findings from 2015 or earlier still unresolved in 2021. Federal agencies often fail to ensure corrective action before awarding additional grants, making it essential that grant managers get verification right from the start.

The consequences of inadequate vendor verification are severe and immediate. Federal agencies can disallow all costs paid to excluded vendors, requiring full repayment. Organizations face material weaknesses in Single Audits, special conditions on awards, enhanced federal oversight, high-risk designation, and potential suspension or debarment of the recipient itself. In one FEMA case, an applicant improperly awarded an $805,630 noncompetitive contract, resulting in complete deobligation of those funds despite protests that urgency required using an existing contractor.

The Regulatory Framework: How 2 CFR 180 and 2 CFR 200 Work Together

2 CFR Part 200.214 creates the bridge between government-wide suspension and debarment requirements and grant recipient obligations. This section states: "Recipients and subrecipients are subject to the nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180." This regulatory architecture means that OMB's government-wide guidelines (2 CFR 180) flow directly to every grant recipient through the Uniform Guidance.

The verification requirement applies to all procurement transactions over $25,000 and all subawards regardless of dollar amount. Grant recipients must verify vendor status using one of three methods specified in 2 CFR 180.300: checking the System for Award Management (SAM.gov) exclusions database, collecting written certifications from vendors, or adding certification language to contracts. While all three methods are technically acceptable, SAM.gov verification provides the strongest evidence and is the standard practice for demonstrating compliance.

Understanding the terminology is critical. Exclusion serves as the umbrella term encompassing all forms of ineligibility. Suspension is a temporary exclusion imposed immediately when there's an indictment or adequate evidence of wrongdoing, pending completion of investigation and any judicial proceedings. Suspensions typically last 12 months but can extend to 18 months with written justification. Debarment is the final exclusion for a specified period (generally three years) based on convictions, civil judgments, or preponderance of evidence. Debarment only takes effect after the respondent has an opportunity to contest the action. Both suspension and debarment have government-wide reciprocal effect—one agency's exclusion applies to all federal agencies and both procurement (contracts) and nonprocurement (grants, loans) programs.

Understanding What SAM.gov Is and How to Use It Properly

SAM.gov is the official, free U.S. Government system operated by the General Services Administration that consolidated several legacy systems including the Excluded Parties List System (EPLS), which migrated to SAM in July 2012. The system serves as the central hub for entity registration, the exclusions database listing individuals and entities barred from receiving federal contracts or financial assistance, and responsibility/qualification data.

The Step-by-Step Search Process

1. Visit www.sam.gov—no registration is required to view exclusion data
2. Click "Search" from the main navigation and select "Exclusions" under the domain filters
3. Enter the vendor's legal name, Unique Entity Identifier (UEI), or DUNS number in the search bar
4. The results will clearly show "Has Active Exclusion?" with either "Yes" or "No"
   • A green "Entity" box indicates the vendor is not excluded and may proceed
   • A purple "Exclusion" box with "Active" status means the vendor is currently excluded and you must not award federal funds
5. Save the PDF of search results using SAM.gov's export feature, which includes an official date stamp
6. This documentation must be filed in your procurement records before contract execution

Interpreting Results

Careful attention to the status field and exclusion details is required:

• Active status: The entity is currently excluded from federal awards—you cannot proceed under any circumstances without an agency head exception, which is extremely rare and requires compelling written justification
• Inactive status: The exclusion has expired or been terminated, and the entity may now be eligible. However, review the exclusion dates carefully to determine if the exclusion was active during any period when you paid the vendor

Check the exclusion type:

• "Ineligible (Proceedings Completed)" indicates final determination
• "Preliminarily Ineligible (Proceedings Pending)" means temporary exclusion during investigation
• "Prohibition/Restriction" requires reading specific limitations
• "Voluntary Exclusion" means the entity agreed to exclusion under settlement terms

Critical Search Practices

• Use multiple search methods: SAM.gov may not have UEI or CAGE codes for all firm exclusion records, so always perform an additional name search if no results found using identifiers
• Search variations of names: Include nicknames, abbreviations, and doing-business-as names
• Timing of verification: Perform searches before entering into agreements, immediately prior to award, and for contracts, also after bid opening or proposal receipt
• Documentation must prove: Verification occurred before contract execution, purchase order issuance, initial payment, or work commencement

Implementing a Compliant Vendor Verification Process from Start to Finish

Phase 1: Before Any Transaction Occurs

1. Collect vendor information: Full legal name as registered with the IRS, Unique Entity ID or DUNS number, Tax Identification Number, business address, and description of goods or services
2. Perform SAM.gov exclusion check: Follow the search procedures described above
3. For healthcare-related grants: Also check the HHS Office of Inspector General List of Excluded Individuals and Entities (LEIE) at oig.hhs.gov/exclusions, searching not just the entity but also owners, principals, and key personnel
4. Check state exclusion lists: If applicable to your grant requirements
5. Compile documentation: Screenshots or PDFs of each search, date and initial a verification checklist, obtain supervisor or grants manager approval
6. Only after receiving clearance: Issue a purchase order or execute a contract

Documentation Requirements

Each procurement file over $25,000 must contain:

• Date verification was performed
• Name of the person conducting verification
• Vendor identifying information
• Actual screenshot or PDF from SAM.gov showing "Entity" (not excluded) status
• OIG LEIE and state exclusion list results if applicable
• Signature or approval of an authorized official

Beyond verification documentation, maintain the complete procurement transaction record:

• Rationale for vendor selection
• Basis for contract price
• Evidence of competition (quotes, bids, RFPs)
• Sole source justification if applicable
• Conflict of interest disclosures
• Invoices and payment records
• Grant account coding

Responsible Contractor Determination

Under 2 CFR 200.318(h), verification is just the start. You must award contracts only to responsible contractors possessing the ability to perform successfully. Consider and document:

• Contractor integrity
• Public policy compliance
• Past performance record
• Financial resources
• Technical resources

For procurements exceeding the simplified acquisition threshold of $250,000, you must also perform cost or price analysis documenting independent estimates and comparing proposed prices with previous procurements, catalog prices, or other sources.

Ongoing Monitoring

Establish a risk-based verification schedule:

• One-time purchases under $25,000: Verify at time of purchase only
• Ongoing vendors and contracts: Reverify quarterly or semi-annually
• All subawards: Verify at award and annually throughout the performance period
• Contracts exceeding $250,000: Verify quarterly
• Healthcare providers: Verify monthly due to OIG requirements

Maintain a monitoring system:

• Calendar of reverification dates
• Automated reports of all vendors paid with federal funds
• Batch check all active vendors against SAM.gov
• Document each verification cycle
• Flag any newly excluded parties immediately for remediation

What Happens When You Discover an Excluded Vendor

Immediate Response

1. Stop all activity immediately: No new purchase orders, no pending payments, no continued work
2. Document the finding: Screenshots showing vendor name, exclusion status and classification, excluding agency and dates, reason for exclusion
3. Notify leadership: Supervisor and grants manager immediately
4. Pull all transactions: Determine total amounts paid, grants affected by CFDA number, date range of transactions, whether exclusion was active during payment period

Financial Remediation

Journal Entry Method (universities and state agencies):

• Initiate entries to move expenses off the federal grant
• Reclassify costs to unrestricted or institutional funds
• Document reason as "cost disallowance - excluded vendor"

Direct Return Method:

• Calculate total disallowed costs
• Return funds directly to federal agency with interest if required
• Document return in financial reports
• Adjust grant budgets accordingly

Critical Rule: All costs paid to excluded vendors during an active exclusion period are unallowable and federal funds must be returned.

System and Process Updates

• Flag vendor in financial system with "FEDERALLY EXCLUDED" designation
• Implement payment blocks for federal accounts
• Set alerts for any future transactions
• Document thoroughly in vendor master file

If services are still needed:

• Initiate emergency procurement with verified replacement vendor
• Document urgent need justification
• Expedite competitive processes where possible
• Maintain documentation of disruption and transition costs

Root Cause Analysis

Investigate how the exclusion was missed:

• Was initial verification conducted?
• Was reverification schedule followed?
• Were procedures documented?
• Were staff properly trained?

Identify control gaps and document improvements:

• Enhanced verification frequency
• Automated monitoring systems
• Additional training
• Policy revisions
• System enhancements

Preparing for Single Audit Scrutiny

What Auditors Examine

Under 2 CFR 200.501(h), auditors systematically review vendor verification. They select a sample of procurement transactions from major programs and trace each through the complete procurement lifecycle, verifying:

• Documentation completeness and timing
• Compliance with written policies
• Application of professional judgment to materiality

The Five Most Common Findings

1. Missing or inadequate SAM.gov verification documentation: No evidence that checks were performed before contract award. Can result in disallowance of all costs paid to unverified vendors.
2. Untimely SAM.gov verification: Checks performed after contract award or payment. Creates risk of awarding funds to suspended or debarred entities and constitutes a significant deficiency.
3. Lack of written procurement procedures: No documented verification requirements. Represents a material weakness in internal control under 2 CFR 200.318(a).
4. Insufficient documentation of procurement file: Missing quotes, bids, or selection justification. Leads auditors to question whether procurement was truly competitive.
5. Inappropriate use of sole source procurement: No proper justification under one of the five specific circumstances in 2 CFR 200.320(c). Results in questioned costs and potential disallowance.

Complete Documentation Expectations

Pre-Award Documentation:

• Needs assessment
• Budget authorization
• Competitive solicitation documents
• Received bids or proposals (all of them, not just the winner)
• Bid evaluation matrices with scoring
• Selection justification memos
• SAM.gov verification dated before contract award
• Cost or price analysis documentation
• Independent cost estimates

Contract Documentation:

• Fully executed contract with all required federal clauses from Appendix II to Part 200
• Suspension and debarment certification
• Buy America provisions if infrastructure-related
• Davis-Bacon prevailing wage requirements if construction
• Eight other mandatory provisions

Post-Award Documentation:

• Purchase orders
• Invoices with supporting documentation
• Goods received confirmations
• Payment records
• Performance evaluations
• Properly approved change orders
• Final closeout documentation

Preparing for Audit Questions

When auditors ask: "How do you verify vendors aren't suspended or debarred?"

Effective answer:

• "We have a documented procedure requiring SAM.gov verification before contract award for all procurements over $25,000 and all subawards"
• "Our Grants Manager conducts the search"
• "We print verification reports with date stamps"
• "We file documentation in procurement files before contract execution"
• "We reverify annually for multi-year contracts"

When asked to show SAM.gov verification for a specific vendor:

Provide the printed report immediately, pointing out that the verification date preceded the contract signature date.

Never say:

• "I checked but didn't print it"
• "I know I checked but can't find documentation"

These responses result in audit findings.

Building Sustainable Compliance Through Internal Controls

Strong Control Environment

Under 2 CFR 200.303, establish:

• Written vendor verification policy approved by senior management
• Clear assignment of roles and responsibilities
• Segregation of duties ensuring the verifier is not the purchaser or approver
• Integration with GAO Green Book or COSO Internal Control Framework

Preventive Controls

System Integration:

• Flags excluded vendors in your financial or ERP system
• Blocks payments to flagged vendors
• Requires verification clearance before purchase order issuance
• Generates automated alerts for reverification due dates

Approval Hierarchies:

• Dual approval for federal purchases over $10,000
• Grants manager approval before vendor setup
• Additional review for sole source exception approvals

Conflict of Interest Controls:

• Annual disclosure forms for all procurement staff
• Written policies covering employees and their families
• Documented recusal processes for conflicted individuals

Detective Controls

Regular Reviews:

• Semi-annual reconciliations of all vendors paid with federal funds
• Quarterly spot-checks of verification documentation
• Annual internal audits of procurement compliance

Reporting:

• Monthly reports of vendors lacking verification documentation
• Quarterly aging reports of pending reverifications
• Immediate alerts for newly identified exclusions

Continuous Monitoring:

• Dashboards tracking verification completion rates
• Real-time system flags for missing verifications
• Automated workflows for reverification cycles

Training Requirements

Role-Specific Training

All Grant-Funded Staff (30 minutes annually):

• What suspension and debarment are
• Why the federal government excludes parties
• Organizational verification requirements
• When to contact the grants office
• Consequences of non-compliance

Procurement and Accounts Payable Staff (2 hours initial + annual refreshers):

• Federal regulatory framework
• Hands-on SAM.gov navigation practice
• OIG LEIE database use
• Documentation requirements
• Risk-based frequency schedules
• Remediation procedures
• Practice exercises with live searches

Grants Managers and Principal Investigators (4 hours initial comprehensive):

• All procurement staff content plus:
• Subrecipient versus vendor determination
• Enhanced monitoring for subawards
• Internal control design
• Single Audit considerations
• Policy development
• Detailed case studies

Leadership (1 hour annual executive briefing):

• Compliance risks and consequences
• Organizational control framework
• Resource requirements
• Oversight responsibilities
• Recent enforcement actions

Training Documentation

Maintain records for three years after employee departure:

• Training curriculum and materials
• Attendance rosters with signatures
• Test or quiz results
• Certificates of completion
• Annual training calendars
• Competency assessments

Record Retention

Regulatory Requirements

2 CFR 200.334 establishes a standard retention period of three years from the date of submission of the final financial report, with critical exceptions:

• Until all litigation, claims, or audit findings are resolved
• When federal agencies request extension in writing
• Three years after final disposition of property and equipment
• Three years from the end of the fiscal year in which program income was earned

Best Practice: Six-Year Retention

Strategic reasons for extended retention:

• Covers federal three-year requirement
• Accommodates state requirements (often 5-7 years)
• Provides cushion for extended requirements from litigation or audits
• Aligns with standard business practice for financial records

Electronic Storage

Acceptable under 2 CFR 200.336 provided:

• Records are machine-readable
• Secure access controls are implemented
• Regular backups are maintained
• Audit trails of access and changes are preserved

Your 30-Day Implementation Roadmap

Week 1: Assessment

• Review current vendor verification practices against this guide
• Identify gaps in procedures
• Inventory all federal grants and active vendors
• Assess staff training needs
• Document your findings
• Pull sample of recent procurements over $25,000
• Check for SAM.gov verification documentation with dates before award

Week 2: Policy Development

• Draft or update vendor verification policy
• Include: purpose, scope, authority, definitions, procedures, roles, frequency, remediation, training, recordkeeping
• Customize verification checklist template
• Obtain board or executive leadership approval

Week 3: System Infrastructure

• Create vendor verification file structure
• Set up tracking spreadsheets or databases
• Configure automated alerts for reverification deadlines
• Flag any excluded vendors in financial system with payment blocks

Week 4: Launch Implementation

• Conduct initial staff training
• Distribute quick reference guides and job aids
• Announce new or updated policy
• Begin systematic verification of all active vendors paid with federal funds
• Prioritize vendors with highest dollar amounts or major programs

Conclusion

The cost of prevention—strong internal controls, comprehensive training, systematic documentation, and ongoing monitoring—is always less than the cost of correction through questioned costs, audit finding remediation, federal fund repayment, and potential suspension or debarment of your own organization.

Federal grant managers who implement robust vendor verification procedures protect not only federal funds but also their organization's reputation, funding eligibility, and mission-critical programs.

With vendor verification failures representing the single most common Single Audit finding, this is the compliance area where investment in prevention delivers the highest return.