Audit 314696

FINDING 2023-002 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): NEUIN0279 Pass-Through Entity: Indiana Finance Authority 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 State and Local Fiscal Recovery Funds (SLFRF) 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 done by checking the Excluded Parties List System (EPLS), collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The City's policies related to SLFRF suspension and debarment requirements included a search of Sam.gov to check the suspension, debarment, or other exclusion of vendors. However, the City's procedures did not include retaining evidence of these searches. Four vendors were identified as having transactions that equaled or exceeded $25,000. All four vendors were selected for testing. The four vendors, with total expenditures of $2,168,780, were reviewed. For all four vendors, the City did not have documented audit evidence to show that the vendors were checked for suspension, debarment, or other exclusion prior to entering into the transactions. The lack of internal controls and noncompliance were systemic issues 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). . . ." 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 do business is not excluded or disqualified. You do this by: (1) Checking the EPLS, or (2) Collecting a certification from that person if allowed by this rule, or (3) Adding a clause or condition to the covered transaction with that person." Cause The City was unable to provide documentation to demonstrate they checked Sam.gov to verify the contractors were not suspended or debarred. The lack of documentation was a direct result of its policy not addressing the how or the need to retain evidence of the Sam.gov search. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot ensure the vendors paid with federal funds are eligible to participate in federal programs. Any program funds the City used to pay vendors that have been suspended or debarred would be unallowable. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future funding to the City. INDIANA STATE BOARD OF ACCOUNTS 17 CITY OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a proper system of internal controls and develop policies and procedures to ensure contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2023-002 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): NEUIN0279 Pass-Through Entity: Indiana Finance Authority 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 State and Local Fiscal Recovery Funds (SLFRF) 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 done by checking the Excluded Parties List System (EPLS), collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The City's policies related to SLFRF suspension and debarment requirements included a search of Sam.gov to check the suspension, debarment, or other exclusion of vendors. However, the City's procedures did not include retaining evidence of these searches. Four vendors were identified as having transactions that equaled or exceeded $25,000. All four vendors were selected for testing. The four vendors, with total expenditures of $2,168,780, were reviewed. For all four vendors, the City did not have documented audit evidence to show that the vendors were checked for suspension, debarment, or other exclusion prior to entering into the transactions. The lack of internal controls and noncompliance were systemic issues 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). . . ." 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 do business is not excluded or disqualified. You do this by: (1) Checking the EPLS, or (2) Collecting a certification from that person if allowed by this rule, or (3) Adding a clause or condition to the covered transaction with that person." Cause The City was unable to provide documentation to demonstrate they checked Sam.gov to verify the contractors were not suspended or debarred. The lack of documentation was a direct result of its policy not addressing the how or the need to retain evidence of the Sam.gov search. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot ensure the vendors paid with federal funds are eligible to participate in federal programs. Any program funds the City used to pay vendors that have been suspended or debarred would be unallowable. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future funding to the City. INDIANA STATE BOARD OF ACCOUNTS 17 CITY OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a proper system of internal controls and develop policies and procedures to ensure contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.