Audit 320371

FINDING 2023-003 Subject: Highway Planning and Construction - Procurement Federal Agency: Department of Transportation Federal Program: Highway Planning and Construction Assistance Listings Number: 20.205 Federal Award Numbers and Years (or Other Identifying Numbers): DES # 1600727, DES # 1800976, DES # 2101753 Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness Condition and Context The City had two active projects under three DES numbers. The City awarded five contracts under these projects that were active during the audit period. To obtain the Indiana Department of Transportation's (INDOT) approval to begin contract negotiations, the City was required to provide complete and accurate procurement documentation. This documentation included preparation of the Local Public Agency (LPA) Selection Review Checklist and compilation of all items noted in the checklist that were required for the INDOT to issue an approval letter. All five contracts were selected for testing. The Employee in Responsible Charge completed the checklist and compiled all other procurement documentation for each contract with no evidence of a review, oversight, or approval process to ensure that the procurement documentation submitted to the INDOT was complete and accurate. 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 was not implemented by management of the City, which would include segregation of key functions. 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. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2023-003 Subject: Highway Planning and Construction - Procurement Federal Agency: Department of Transportation Federal Program: Highway Planning and Construction Assistance Listings Number: 20.205 Federal Award Numbers and Years (or Other Identifying Numbers): DES # 1600727, DES # 1800976, DES # 2101753 Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness Condition and Context The City had two active projects under three DES numbers. The City awarded five contracts under these projects that were active during the audit period. To obtain the Indiana Department of Transportation's (INDOT) approval to begin contract negotiations, the City was required to provide complete and accurate procurement documentation. This documentation included preparation of the Local Public Agency (LPA) Selection Review Checklist and compilation of all items noted in the checklist that were required for the INDOT to issue an approval letter. All five contracts were selected for testing. The Employee in Responsible Charge completed the checklist and compiled all other procurement documentation for each contract with no evidence of a review, oversight, or approval process to ensure that the procurement documentation submitted to the INDOT was complete and accurate. 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 was not implemented by management of the City, which would include segregation of key functions. 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. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.