FINDING 2022-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): IN0263 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Upon inquiry with the Clerk-Treasurer in order to review the policies and procedures in place related to suspension and debarment requirements, the Clerk-Treasurer noted that the City itself did not have any procedures, but instead relied on the North Central Indiana Regional Planning Council to ensure a potential vendor was not suspended or debarred. There was one covered transaction, a Build-Operate-Transfer (BOT) agreement, entered into during the audit period which was expected to equal or exceed $25,000 and was paid for from State and Local Fiscal Recovery Funds. The covered transaction in the amount of $1,626,043 was made to the identified vendor for construction on the police station. Upon review of the agreement and other documentation it was determined a clause did not exist in the agreement, that ELPS was not checked, nor was a certification collected from the vendor; therefore, no documentation to verify the City's compliance with the suspension and debarment requirements was provided for audit. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) 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). . . ." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." Cause The system of internal controls as established by management of the City was not properly implemented to ensure that the policies and procedures in place related to suspension and debarment resulted in adequate supporting documentation being retained for audit. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, no documentation was retained of the status of the vendor to whom payment equal to or in excess of $25,000 was paid. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: COVID-19-Coronavirus State and Local Fiscal Recovery Funds - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19-Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): IN0263 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, Reporting Audit Finding: Material Weakness Condition and Context Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance The City entered into a Build-Operate-Transfer (BOT) agreement to build the Logansport Police Station Building. As part of the BOT agreement, a participation and purchase agreement was signed between the developer and the bank. The participation and purchase agreement stated the developer was to submit a reimbursement request directly to the bank. The bank would then disburse the proceeds. For eight of ten disbursements tested, totaling $1,626,043, the expenditure was not approved at the City level prior to payment to ensure the expenditure was for an allowable activity, was properly documented, and was within the period of performance. Reporting Recipients are required to submit quarterly or annual Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of less than $10 million in State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The City submitted the P&E report by April 30, 2022, as required; however, the City could not provide documentation that the report prepared by the Grant Administrator was reviewed by the Clerk-Treasurer as per their procedures to prevent, or detect and correct, errors prior to submission. The lack of internal controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) 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). . . ." Cause A proper system of internal controls, which would include segregation of key functions, over SLFRF expenditures was not designed by management of the City to ensure expenses were allowed, properly documented, and paid within the specified time period. In addition, a proper system of internal controls over the P&E report was not designed by management of the City to ensure the City provided the Treasury with complete and accurate information related to the SLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place prior to payment of expenses and submission of reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): IN0263 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include but are not limited to contracts for goods and services awarded under a non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Upon inquiry with the Clerk-Treasurer in order to review the policies and procedures in place related to suspension and debarment requirements, the Clerk-Treasurer noted that the City itself did not have any procedures, but instead relied on the North Central Indiana Regional Planning Council to ensure a potential vendor was not suspended or debarred. There was one covered transaction, a Build-Operate-Transfer (BOT) agreement, entered into during the audit period which was expected to equal or exceed $25,000 and was paid for from State and Local Fiscal Recovery Funds. The covered transaction in the amount of $1,626,043 was made to the identified vendor for construction on the police station. Upon review of the agreement and other documentation it was determined a clause did not exist in the agreement, that ELPS was not checked, nor was a certification collected from the vendor; therefore, no documentation to verify the City's compliance with the suspension and debarment requirements was provided for audit. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) 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). . . ." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." Cause The system of internal controls as established by management of the City was not properly implemented to ensure that the policies and procedures in place related to suspension and debarment resulted in adequate supporting documentation being retained for audit. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, no documentation was retained of the status of the vendor to whom payment equal to or in excess of $25,000 was paid. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2022-004 Subject: COVID-19-Coronavirus State and Local Fiscal Recovery Funds - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19-Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): IN0263 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, Reporting Audit Finding: Material Weakness Condition and Context Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance The City entered into a Build-Operate-Transfer (BOT) agreement to build the Logansport Police Station Building. As part of the BOT agreement, a participation and purchase agreement was signed between the developer and the bank. The participation and purchase agreement stated the developer was to submit a reimbursement request directly to the bank. The bank would then disburse the proceeds. For eight of ten disbursements tested, totaling $1,626,043, the expenditure was not approved at the City level prior to payment to ensure the expenditure was for an allowable activity, was properly documented, and was within the period of performance. Reporting Recipients are required to submit quarterly or annual Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The City was classified as a metropolitan city with a population below 250,000 residents that received an allocation of less than $10 million in State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. The City submitted the P&E report by April 30, 2022, as required; however, the City could not provide documentation that the report prepared by the Grant Administrator was reviewed by the Clerk-Treasurer as per their procedures to prevent, or detect and correct, errors prior to submission. The lack of internal controls was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) 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). . . ." Cause A proper system of internal controls, which would include segregation of key functions, over SLFRF expenditures was not designed by management of the City to ensure expenses were allowed, properly documented, and paid within the specified time period. In addition, a proper system of internal controls over the P&E report was not designed by management of the City to ensure the City provided the Treasury with complete and accurate information related to the SLFRF awards. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls and procedures should consist of actions that would implement these policies. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place prior to payment of expenses and submission of reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.