FINDING 2023-003
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Activities Allowed
or Unallowed, Allowable Costs/Cost Principles, Period of Performance
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): FY 2023
Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost
Principles, Period of Performance
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Recipients may use COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF)
funds for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social
Security Act as added by section 9901 of the American Rescue Plan Act of 2021 and amended by the
Consolidated Appropriations Act of 2023. The SLFRF program provides substantial flexibility for each
recipient to meet local needs within seven separate eligible use categories. Recipients may use SLFRF
funds to:
Respond to the COVID-19 public health emergency and its negative economic impacts;
Respond to workers performing essential work during the COVID-19 public health
emergency by providing premium pay to eligible workers of eligible employers that have
eligible workers who are performing essential work;
Provide government services, to the extent COVID-19 caused a reduction in revenues
collected in the most recent full fiscal year of the recipient;
Make necessary investments in water, sewer, or broadband infrastructure;
Provide emergency relief from natural disasters or their negative economic impacts;
Fund eligible Surface Transportation projects; and
Fund Title I projects that are eligible activities under the Community Development Block
Grant and Indiana Community Development Block Grant programs.
As part of sound management of the federal award, the City was responsible for implementing a
system of internal controls that would ensure compliance with the applicable requirements. The City did
not properly design or implement such a system.
The City elected to receive the standard revenue loss allowance, allowing it to claim its total SLFRF
allocation of $2,290,914 as revenue loss to use for government services. The allocated funds may only be
used to cover costs incurred from the period beginning on March 3, 2021, and ending on December 31,
2024. Obligations for costs incurred are required to be liquidated no later than December 31, 2026 (the
end of the period of performance). During the audit period, the City completed three separate transfers of
SLFRF funds from the ARPA Coronavirus Local Fiscal fund to the Comm Crossing Grant Fund and Water
Utility-Operating funds, totaling $976,431 and $494,159, respectively. The transfers allowed for federal
grant funds to be commingled with other grant and operating funds.
Subsequently, expenditures were disbursed from the Comm Crossing Grant Fund and Water
Utility-Operating funds. However, since the transfer of SLFRF funds into the Comm Crossing Grant Fund
and Water Utility-Operating funds commingled receipts, and the City did not ensure there was an
appropriate system of internal controls in place to account for the federal expenditures separately from
other grant and operating expenditures, we were unable to determine a complete population of federal
expenditures. Without a complete population of expenditures, we were unable to determine the City's
compliance with the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Period
of Performance compliance requirements. As such, the $976,431 and $494,159 transferred from the ARPA
Coronavirus Local Fiscal fund are considered questioned costs.
The lack of internal controls and appropriate documentation to test the compliance requirements
was isolated to the situation described above.
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). . . ."
2 CFR 200.300(b) states in part: "The non-Federal entity is responsible for complying with all
requirements of the Federal award. . . ."
2 CFR 200.302 states in part:
"(a) Each state must expend and account for the Federal award in accordance with state laws
and procedures for expending and accounting for the state's own funds. In addition, the state's
and the other non-Federal entity's financial management systems, including records documenting
compliance with Federal statutes, regulations, and the terms and conditions of the
Federal award, must be sufficient to permit the preparation of reports required by general and
program-specific terms and conditions; and the tracing of funds to a level of expenditures
adequate to establish that such funds have been used according to the Federal statutes,
regulations, and the terms and conditions of the Federal award. . . .
(b) The financial management system of each non-Federal entity must provide for the following
. . .
(1) Identification, in its accounts, of all Federal awards received and expended and the
Federal programs under which they were received. Federal program and Federal
award identification must include, as applicable, the Assistance Listings title and
number, Federal award identification number and year, name of the Federal agency,
and name of the pass-through entity, if any.
(2) Accurate, current, and complete disclosure of the financial results of each Federal
award or program in accordance with the reporting requirements set forth in §§ 200.328
and 200.329. . . .
(3) Records that identify adequately the source and application of funds for federallyfunded
activities. These records must contain information pertaining to Federal
awards, authorizations, financial obligations, unobligated balances, assets, expenditures,
income and interest and be supported by source documentation.
(4) Effective control over, and accountability for, all funds, property, and other assets. . . ."
Cause
Due to the lack of internal controls, the City was unable to differentiate expenditures made from
federal and nonfederal funds once it commingled other grant, operating, and federal grant awards into a
single fund within its ledger without consideration of the need to separately identify and account for federal
expenditures.
Effect
Without the proper implementation of an effectively designed system of internal controls, the Town
cannot identify the expenditures paid with federal grant funds. As such the Town cannot ensure nor can
we determine that expenditures of the grant were not unallowable and fell within the period of performance.
Questioned Costs
We identified $1,470,590 in known questioned costs as noted above in the Condition and Context.
Recommendation
We recommended that management of the City establish a system of internal controls to ensure
that grant award funds are accounted for and tracked in a designated grant fund. All activity of the grant
should be in this fund with supporting documentation for each transaction.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
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): FY 2023
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
The City elected to receive the standard revenue loss allowance, allowing the City to claim its total
COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $2,290,914 as
revenue loss to use for government services. As such, all SLFRF program funds were expended under the
revenue loss eligible use category. The U. S. Department of the Treasury (Treasury) determined that there
are no subawards under this eligible use category and that recipients' use of revenue loss funds would not
give rise to subrecipient relationships given that there is no federal program or purpose to carry out in the
case of the revenue loss portion of the award.
Prior to entering into subawards and covered transactions with 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 nonprocurement 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 entity, or adding a clause or condition to the covered transaction with that person or
entity. Due to the Treasury's determination that the revenue loss eligible use category does not give rise
to subawards, the City was only required to comply with suspension and debarment requirements related
to covered transactions.
Four covered transactions for goods or services that equaled or exceeded $25,000 that were paid
from SLFRF funds during the audit period were selected for testing. Supporting documentation for each
transaction was examined to determine whether the City verified the suspension and debarment status of
the vendors prior to payment. The examined supporting documentation did not include evidence the City
verified the suspension and debarment status of any of the four vendors that were paid federal funds. Upon
inquiry, it was identified that the City had not established policies and procedures related to suspension and
debarment requirements. As such, the City did not verify the vendors were neither suspended nor debarred
or otherwise excluded or disqualified from participating in federal assistance programs or activities prior to
payment.
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 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
A proper system of internal controls which would include a review of suspension and debarment
identification process documentation was not designed by management of the City. 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 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,
and the funding agency could potentially recover them.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City establish and implement a system of internal
controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not
suspended, debarred, or otherwise excluded from participating in federal programs prior to entering into
any covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
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): SWIF223990
Pass-Through Entity: Indiana Finance Authority
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
Prior to entering into subawards and covered transactions with the COVID-19 - Coronavirus State
and Local Fiscal Recovery Funds (SLFRF), 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 nonprocurement 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 entity, or adding a clause
or condition to the covered transaction with that person or entity.
All covered transactions involving one vendor for goods or services that equaled or exceeded
$25,000 that were paid from SLFRF funds related to the State Water Infrastructure Fund (SWIF) grant funds
during the audit period were selected for testing. Supporting documentation for the transactions were
examined to determine whether the City verified the suspension and debarment status of the vendor prior
to payment. The examined supporting documentation did not include evidence the City verified the
suspension and debarment status of the vendor paid federal funds. Upon inquiry, it was identified that the
City had not established policies and procedures related to suspension and debarment requirements. As
such, the City did not verify the vendor was neither suspended nor debarred or otherwise excluded or
disqualified from participating in federal assistance programs or activities prior to payment.
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 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
A proper system of internal controls which would include a review of suspension and debarment
identification process documentation was not designed by management of the City. 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 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,
and the funding agency could potentially recover them.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City establish and implement a system of internal
controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not
suspended, debarred, or otherwise excluded from participating in federal programs prior to entering into
any covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - 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): FY 2023
Compliance Requirement: Reporting
Audit Finding: Material Weakness
Condition and Context
Recipients are required to submit an initial interim report and quarterly or annually submit 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 city with a population below 250,000 residents that was allocated less
than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds. As such, an annual
P&E report, covering one calendar year from April 1, 2022 to March 31, 2023, was prepared and submitted
by the Deputy Clerk-Treasurer to the Treasury by April 30, 2023. However, the City did not provide
evidence the completed and filed report was reviewed by another individual to ensure the accuracy of the
information provided.
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 was not
designed by management of the City. 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 to ensure the required reports are completed and filed.
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: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Activities Allowed
or Unallowed, Allowable Costs/Cost Principles, Period of Performance
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): FY 2023
Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost
Principles, Period of Performance
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Recipients may use COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF)
funds for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social
Security Act as added by section 9901 of the American Rescue Plan Act of 2021 and amended by the
Consolidated Appropriations Act of 2023. The SLFRF program provides substantial flexibility for each
recipient to meet local needs within seven separate eligible use categories. Recipients may use SLFRF
funds to:
Respond to the COVID-19 public health emergency and its negative economic impacts;
Respond to workers performing essential work during the COVID-19 public health
emergency by providing premium pay to eligible workers of eligible employers that have
eligible workers who are performing essential work;
Provide government services, to the extent COVID-19 caused a reduction in revenues
collected in the most recent full fiscal year of the recipient;
Make necessary investments in water, sewer, or broadband infrastructure;
Provide emergency relief from natural disasters or their negative economic impacts;
Fund eligible Surface Transportation projects; and
Fund Title I projects that are eligible activities under the Community Development Block
Grant and Indiana Community Development Block Grant programs.
As part of sound management of the federal award, the City was responsible for implementing a
system of internal controls that would ensure compliance with the applicable requirements. The City did
not properly design or implement such a system.
The City elected to receive the standard revenue loss allowance, allowing it to claim its total SLFRF
allocation of $2,290,914 as revenue loss to use for government services. The allocated funds may only be
used to cover costs incurred from the period beginning on March 3, 2021, and ending on December 31,
2024. Obligations for costs incurred are required to be liquidated no later than December 31, 2026 (the
end of the period of performance). During the audit period, the City completed three separate transfers of
SLFRF funds from the ARPA Coronavirus Local Fiscal fund to the Comm Crossing Grant Fund and Water
Utility-Operating funds, totaling $976,431 and $494,159, respectively. The transfers allowed for federal
grant funds to be commingled with other grant and operating funds.
Subsequently, expenditures were disbursed from the Comm Crossing Grant Fund and Water
Utility-Operating funds. However, since the transfer of SLFRF funds into the Comm Crossing Grant Fund
and Water Utility-Operating funds commingled receipts, and the City did not ensure there was an
appropriate system of internal controls in place to account for the federal expenditures separately from
other grant and operating expenditures, we were unable to determine a complete population of federal
expenditures. Without a complete population of expenditures, we were unable to determine the City's
compliance with the Activities Allowed or Unallowed, the Allowable Costs/Cost Principles, and the Period
of Performance compliance requirements. As such, the $976,431 and $494,159 transferred from the ARPA
Coronavirus Local Fiscal fund are considered questioned costs.
The lack of internal controls and appropriate documentation to test the compliance requirements
was isolated to the situation described above.
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). . . ."
2 CFR 200.300(b) states in part: "The non-Federal entity is responsible for complying with all
requirements of the Federal award. . . ."
2 CFR 200.302 states in part:
"(a) Each state must expend and account for the Federal award in accordance with state laws
and procedures for expending and accounting for the state's own funds. In addition, the state's
and the other non-Federal entity's financial management systems, including records documenting
compliance with Federal statutes, regulations, and the terms and conditions of the
Federal award, must be sufficient to permit the preparation of reports required by general and
program-specific terms and conditions; and the tracing of funds to a level of expenditures
adequate to establish that such funds have been used according to the Federal statutes,
regulations, and the terms and conditions of the Federal award. . . .
(b) The financial management system of each non-Federal entity must provide for the following
. . .
(1) Identification, in its accounts, of all Federal awards received and expended and the
Federal programs under which they were received. Federal program and Federal
award identification must include, as applicable, the Assistance Listings title and
number, Federal award identification number and year, name of the Federal agency,
and name of the pass-through entity, if any.
(2) Accurate, current, and complete disclosure of the financial results of each Federal
award or program in accordance with the reporting requirements set forth in §§ 200.328
and 200.329. . . .
(3) Records that identify adequately the source and application of funds for federallyfunded
activities. These records must contain information pertaining to Federal
awards, authorizations, financial obligations, unobligated balances, assets, expenditures,
income and interest and be supported by source documentation.
(4) Effective control over, and accountability for, all funds, property, and other assets. . . ."
Cause
Due to the lack of internal controls, the City was unable to differentiate expenditures made from
federal and nonfederal funds once it commingled other grant, operating, and federal grant awards into a
single fund within its ledger without consideration of the need to separately identify and account for federal
expenditures.
Effect
Without the proper implementation of an effectively designed system of internal controls, the Town
cannot identify the expenditures paid with federal grant funds. As such the Town cannot ensure nor can
we determine that expenditures of the grant were not unallowable and fell within the period of performance.
Questioned Costs
We identified $1,470,590 in known questioned costs as noted above in the Condition and Context.
Recommendation
We recommended that management of the City establish a system of internal controls to ensure
that grant award funds are accounted for and tracked in a designated grant fund. All activity of the grant
should be in this fund with supporting documentation for each transaction.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004
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): FY 2023
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
The City elected to receive the standard revenue loss allowance, allowing the City to claim its total
COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $2,290,914 as
revenue loss to use for government services. As such, all SLFRF program funds were expended under the
revenue loss eligible use category. The U. S. Department of the Treasury (Treasury) determined that there
are no subawards under this eligible use category and that recipients' use of revenue loss funds would not
give rise to subrecipient relationships given that there is no federal program or purpose to carry out in the
case of the revenue loss portion of the award.
Prior to entering into subawards and covered transactions with 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 nonprocurement 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 entity, or adding a clause or condition to the covered transaction with that person or
entity. Due to the Treasury's determination that the revenue loss eligible use category does not give rise
to subawards, the City was only required to comply with suspension and debarment requirements related
to covered transactions.
Four covered transactions for goods or services that equaled or exceeded $25,000 that were paid
from SLFRF funds during the audit period were selected for testing. Supporting documentation for each
transaction was examined to determine whether the City verified the suspension and debarment status of
the vendors prior to payment. The examined supporting documentation did not include evidence the City
verified the suspension and debarment status of any of the four vendors that were paid federal funds. Upon
inquiry, it was identified that the City had not established policies and procedures related to suspension and
debarment requirements. As such, the City did not verify the vendors were neither suspended nor debarred
or otherwise excluded or disqualified from participating in federal assistance programs or activities prior to
payment.
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 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
A proper system of internal controls which would include a review of suspension and debarment
identification process documentation was not designed by management of the City. 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 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,
and the funding agency could potentially recover them.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City establish and implement a system of internal
controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not
suspended, debarred, or otherwise excluded from participating in federal programs prior to entering into
any covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-005
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): SWIF223990
Pass-Through Entity: Indiana Finance Authority
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Condition and Context
Prior to entering into subawards and covered transactions with the COVID-19 - Coronavirus State
and Local Fiscal Recovery Funds (SLFRF), 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 nonprocurement 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 entity, or adding a clause
or condition to the covered transaction with that person or entity.
All covered transactions involving one vendor for goods or services that equaled or exceeded
$25,000 that were paid from SLFRF funds related to the State Water Infrastructure Fund (SWIF) grant funds
during the audit period were selected for testing. Supporting documentation for the transactions were
examined to determine whether the City verified the suspension and debarment status of the vendor prior
to payment. The examined supporting documentation did not include evidence the City verified the
suspension and debarment status of the vendor paid federal funds. Upon inquiry, it was identified that the
City had not established policies and procedures related to suspension and debarment requirements. As
such, the City did not verify the vendor was neither suspended nor debarred or otherwise excluded or
disqualified from participating in federal assistance programs or activities prior to payment.
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 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
A proper system of internal controls which would include a review of suspension and debarment
identification process documentation was not designed by management of the City. 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 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,
and the funding agency could potentially recover them.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City establish and implement a system of internal
controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not
suspended, debarred, or otherwise excluded from participating in federal programs prior to entering into
any covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - 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): FY 2023
Compliance Requirement: Reporting
Audit Finding: Material Weakness
Condition and Context
Recipients are required to submit an initial interim report and quarterly or annually submit 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 city with a population below 250,000 residents that was allocated less
than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds. As such, an annual
P&E report, covering one calendar year from April 1, 2022 to March 31, 2023, was prepared and submitted
by the Deputy Clerk-Treasurer to the Treasury by April 30, 2023. However, the City did not provide
evidence the completed and filed report was reviewed by another individual to ensure the accuracy of the
information provided.
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 was not
designed by management of the City. 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 to ensure the required reports are completed and filed.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.