FINDING 2023-003
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Allowable Costs/Cost Principles
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): YR 2023
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The County elected to receive the standard revenue loss allowance, allowing it to claim its total
COVID-19 - Coronavirus State and Local Fiscal Recovery Fund (SLFRF) allocation of $4,014,711 as
revenue loss to use for government services. As such, all SLFRF program funds to date 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 as there is no federal program or purpose to carry out in
the case of the revenue loss portion of the award.
INDIANA STATE BOARD OF ACCOUNTS
17
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
On May 11, 2021, the Board of County Commissioners passed Ordinance 2021-07 that created a
new fund and adopted the American Rescue Plan (ARP). The Ordinance included the procedures for
spending the ARP funding which included the following:
The Board of County Commissioners will establish the plan, conditions, and rules upon
which the funds are to be requested and used.
Funds shall be appropriated by the County's fiscal body before use.
All expenditure of funds shall be approved by the Board of County Commissioners with any
and all claims to be paid from the County's ARP fund.
The County Council approved appropriations for all eleven expenditures from the ARP fund in 2023.
All eleven expenditures were tested for compliance with the Allowable Costs/Cost Principles compliance
requirement. Two of the eleven expenditures, totaling $44,500, did not have adequate supporting
documentation to determine the allowability of the cost.
In addition, the County did not have written procedures for determining the allowability of costs in
accordance with subpart E of 2 CFR 200.
The lack of effective 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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles. . . .
(g) Be adequately documented. . . ."
2 CFR 200.302(b)states:
"The financial management system of each non-Federal entity must provide for the following
. . .
(7) Written procedures for determining the allowability of costs in accordance with subpart
E of this part and the terms and conditions of the Federal award."
INDIANA STATE BOARD OF ACCOUNTS 18
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
The lack of internal controls allowed for the County to charge questionable expenditures to the
SLFRF program that could be requested to be returned by the Treasury. The County also did not adopt
the required written procedures for determining allowability of costs for federal awards.
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, costs that were not adequately documented were paid for with federal funds.
Questioned Costs
Known questioned costs of $44,500 were identified as detailed in the Condition and Context.
Recommendation
We recommend the County's management establish a proper system of internal controls and
develop policies and procedures to ensure costs are allowable for SLFRF award funds.
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 - Procurement and Suspension and Debarment
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): SWIF221677
Pass-Through Entity: Indiana Finance Authority
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement - Policy
The County had not established a purchasing policy that would reflect applicable state laws
and regulations, including procedures to avoid the acquisition of unnecessary or duplicative
items; procedures to ensure that all solicitations incorporate a clear and accurate description
of the technical requirements for the material, product, or service to be procured; and did not
maintain written standards of conduct covering conflicts of interest and governing actions of its
employees engaged in the selection, award, and administration of contracts.
INDIANA STATE BOARD OF ACCOUNTS
19
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Procurement and Suspension and Debarment
The County entered into an interlocal agreement with the City to procure services for a Sewer
Lift Station Improvement/Line Extension to the New County Jail project. Per the agreement,
the City would be responsible for all the procurement and suspension and debarment
processes involved in the project, and the County would be responsible for the compliance with
all grant funding for the project.
On September 23, 2021, the County received notification that it was eligible to receive
$1,900,000 from the Indiana Finance Authority (IFA) for a SWIF grant from SLFRF funds with
the intention of using the funding for the Sewer project shared by the County and City. The
notification stated that co-funding would be provided by the County and that the County could
enter into the SWIF grant agreement with the IFA once the funding was secure. On February
24, 2022, the City's Common Council approved a bid with B & T Drainage for the project. On
March 6, 2022, the County Council approved a $2,330,000 appropriation from its SLFRF funds
for co-financing of the project and, on the same day, signed a grant agreement with the IFA for
the SWIF grant funded with SLFRF funds totaling $2,300,000. The project was completed as
of December 31, 2023.
The County did not provide any of the following documentation requested to verify compliance
with the procurement and suspension and debarment requirements for the SWIF funds spent
on the project:
Copy of the original contract for $3,965,507.
Copy of any change orders.
Copy of the Board minutes where the bid was awarded by the Common Council.
Copy of the original bids made on the project.
Copy of documentation that vendor was not suspended or debarred.
The lack of internal controls and lack of appropriate supporting documentation was isolated to
the project noted 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). . . ."
INDIANA STATE BOARD OF ACCOUNTS
20
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200.318 states in part:
"(a) The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for
the acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327. . . .
(c)
(1) The non-Federal entity must maintain written standards of conduct covering conflicts
of interest and governing the actions of its employees engaged in the selection, award
and administration of contracts. . . .
(i) The non-Federal entity must maintain records sufficient to detail the history of procurement.
These records will include, but are not necessarily limited to, the following: Rationale for the
method of procurement, selection of the contract type, contractor selection of rejection, and the
basis for the contract price. . . ."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award. . . .
(b) Formal procurement methods. When the value of the procurement for property or
services under a Federal financial assistance award exceeds the SAT, or a lower threshold
established by a non-Federal entity, formal procurement methods are required. Formal
procurement methods require following documented procedures. Formal procurement
methods also require public advertising unless a non-competitive procurement can be used
in accordance with § 200.319 or paragraph (c) of this section. The following formal
methods of procurement are used for procurement of property or services above the
simplified acquisition threshold or a value below the simplified acquisition threshold the
non-Federal entity determines to be appropriate:
(1) Sealed bids. A procurement method in which bids are publicly solicited and a firm
fixed-price contract (lump sum or unit price) is awarded to the responsible bidder
whose bid, conforming with all the material terms and conditions of the invitation
for bids, is the lowest in price. The sealed bids method is the preferred method for
procuring construction, if the conditions.
(i) In order for sealed bidding to be feasible, the following conditions should be
present:
(A) A complete, adequate, and realistic specification or purchase description
is available;
(B) Two or more responsible bidders are willing and able to compete
effectively for the business; and
(C) The procurement lends itself to a firm fixed price contract and the selection
of the successful bidder can be made principally on the basis of price.
INDIANA STATE BOARD OF ACCOUNTS 21
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(ii) If sealed bids are used, the following requirements apply:
(A) Bids must be solicited from an adequate number of qualified sources,
providing them sufficient response time prior to the date set for opening
the bids, for local, and tribal governments, the invitation for bids must be
publicly advertised;
(B) The invitation for bids, which will include any specifications and pertinent
attachments, must define the items or services in order for the bidder to
properly respond;
(C) All bids will be opened at the time and place prescribed in the invitation for
bids, and for local and tribal governments, the bids must be opened
publicly;
(D) A firm fixed price contract award will be made in writing to the lowest
responsive and responsible bidder. Where specified in bidding documents,
factors such as discounts, transportation cost, and life cycle costs
must be considered in determining which bid is lowest. Payment discounts
will only be used to determine the low bid when prior experience indicates
that such discounts are usually taken advantage of; and
(E) Any or all bids may be rejected if there is a sound documented reason.
. . ."
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 County participated in a joint project with the City in which the City handled the procurement
process. As the County was ultimately responsible for compliance, copies of the quotes or bids obtained
by the City should have been obtained by the County; however, this documentation was not obtained or
provided for audit. In addition, documentation to demonstrate the City checked the vendor was not
suspended or debarred prior to entering into the contract should have been obtained by County.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
County cannot ensure that the services obtained provided full and open competition or the basis of the
price. In addition, the County cannot ensure the vendors paid were eligible to participate in federal
programs. Any program funds the County used to pay vendors that have been suspended or debarred
would be unallowable, and the funding agency could potentially recover them.
INDIANA STATE BOARD OF ACCOUNTS 22
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Noncompliance with the provisions of federal regulations and the terms and conditions of the
federal award could result in the loss of future federal funding to the County.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended the County establish documented procurement procedures consistent with state
and local laws for the acquisition of property or services required under a federal award or subaward as
outlined in the code of federal regulations. We also recommended the County adhere to the procurement
and suspension and debarment requirements and obtain required bids and verify that all vendors that are
paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in
federal programs before entering into any covered transactions. Finally, we recommended the County
obtain and retain appropriate documentation for all expenses paid with SLFRF funds.
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 - Procurement and Suspension and Debarment
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): YR 2023
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The County elected to receive the standard revenue loss allowance, allowing it to claim its total
COVID-19 - Coronavirus State and Local Recovery Funds (SLFRF) allocation of $4,014,711 as revenue
loss to use for government services. As such, all SLFRF program funds to date 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 as 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 contracts and subrecipients are not suspended, debarred, or otherwise
excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded
under procurement and nonprocurement transactions (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. Due to the Treasury's determination that the revenue loss eligible use category does not give
rise to subawards, the County was only required to comply with suspension and debarment requirements
related to covered transactions.
INDIANA STATE BOARD OF ACCOUNTS
23
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Upon inquiry of the County to determine its policies and procedures related to suspension and
debarment requirements, the County stated that they did not have policies or procedures in place for
verifying that an entity with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded or disqualified from participating in federal assistance programs or activities.
Covered transactions paid to seven different vendors, totaling $403,071, for goods or services that equaled
or exceeded $25,000 that were paid from ARP funds were identified and tested. After examination, the
County had not verified the vendor's suspension and debarment status for any of the seven vendors prior
to issuing 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
The County had not established a system of internal controls for suspension and debarment. The
County did not verify any covered transactions identified in testing that they were not suspended or
debarred prior to entering into the covered transaction.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
County cannot ensure the vendors paid with federal funds are eligible to participate in federal programs.
Any program funds the County used to pay vendors that have been suspended or debarred would be
unallowable, and the funding agency could potentially recover them. Furthermore, noncompliance with the
provisions of federal statutes, regulations, and the terms and conditions or the federal award could result
in the loss of future federal funding to the County.
INDIANA STATE BOARD OF ACCOUNTS
24
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the County establish a proper system of internal controls
and develop policies and procedures to ensure contractors, as appropriate, are not suspended, debarred,
or otherwise excluded prior to entering into any contracts with those vendors.
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 - Allowable Costs/Cost Principles
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): YR 2023
Compliance Requirements: Allowable Costs/Cost Principles
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The County elected to receive the standard revenue loss allowance, allowing it to claim its total
COVID-19 - Coronavirus State and Local Fiscal Recovery Fund (SLFRF) allocation of $4,014,711 as
revenue loss to use for government services. As such, all SLFRF program funds to date 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 as there is no federal program or purpose to carry out in
the case of the revenue loss portion of the award.
INDIANA STATE BOARD OF ACCOUNTS
17
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
On May 11, 2021, the Board of County Commissioners passed Ordinance 2021-07 that created a
new fund and adopted the American Rescue Plan (ARP). The Ordinance included the procedures for
spending the ARP funding which included the following:
The Board of County Commissioners will establish the plan, conditions, and rules upon
which the funds are to be requested and used.
Funds shall be appropriated by the County's fiscal body before use.
All expenditure of funds shall be approved by the Board of County Commissioners with any
and all claims to be paid from the County's ARP fund.
The County Council approved appropriations for all eleven expenditures from the ARP fund in 2023.
All eleven expenditures were tested for compliance with the Allowable Costs/Cost Principles compliance
requirement. Two of the eleven expenditures, totaling $44,500, did not have adequate supporting
documentation to determine the allowability of the cost.
In addition, the County did not have written procedures for determining the allowability of costs in
accordance with subpart E of 2 CFR 200.
The lack of effective 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). . . ."
2 CFR 200.403 states in part:
"Except where otherwise authorized by statute, costs must meet the following general criteria
in order to be allowable under Federal awards:
(a) Be necessary and reasonable for the performance of the Federal award and be
allocable thereto under these principles. . . .
(g) Be adequately documented. . . ."
2 CFR 200.302(b)states:
"The financial management system of each non-Federal entity must provide for the following
. . .
(7) Written procedures for determining the allowability of costs in accordance with subpart
E of this part and the terms and conditions of the Federal award."
INDIANA STATE BOARD OF ACCOUNTS 18
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Cause
The lack of internal controls allowed for the County to charge questionable expenditures to the
SLFRF program that could be requested to be returned by the Treasury. The County also did not adopt
the required written procedures for determining allowability of costs for federal awards.
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, costs that were not adequately documented were paid for with federal funds.
Questioned Costs
Known questioned costs of $44,500 were identified as detailed in the Condition and Context.
Recommendation
We recommend the County's management establish a proper system of internal controls and
develop policies and procedures to ensure costs are allowable for SLFRF award funds.
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 - Procurement and Suspension and Debarment
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): SWIF221677
Pass-Through Entity: Indiana Finance Authority
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement - Policy
The County had not established a purchasing policy that would reflect applicable state laws
and regulations, including procedures to avoid the acquisition of unnecessary or duplicative
items; procedures to ensure that all solicitations incorporate a clear and accurate description
of the technical requirements for the material, product, or service to be procured; and did not
maintain written standards of conduct covering conflicts of interest and governing actions of its
employees engaged in the selection, award, and administration of contracts.
INDIANA STATE BOARD OF ACCOUNTS
19
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Procurement and Suspension and Debarment
The County entered into an interlocal agreement with the City to procure services for a Sewer
Lift Station Improvement/Line Extension to the New County Jail project. Per the agreement,
the City would be responsible for all the procurement and suspension and debarment
processes involved in the project, and the County would be responsible for the compliance with
all grant funding for the project.
On September 23, 2021, the County received notification that it was eligible to receive
$1,900,000 from the Indiana Finance Authority (IFA) for a SWIF grant from SLFRF funds with
the intention of using the funding for the Sewer project shared by the County and City. The
notification stated that co-funding would be provided by the County and that the County could
enter into the SWIF grant agreement with the IFA once the funding was secure. On February
24, 2022, the City's Common Council approved a bid with B & T Drainage for the project. On
March 6, 2022, the County Council approved a $2,330,000 appropriation from its SLFRF funds
for co-financing of the project and, on the same day, signed a grant agreement with the IFA for
the SWIF grant funded with SLFRF funds totaling $2,300,000. The project was completed as
of December 31, 2023.
The County did not provide any of the following documentation requested to verify compliance
with the procurement and suspension and debarment requirements for the SWIF funds spent
on the project:
Copy of the original contract for $3,965,507.
Copy of any change orders.
Copy of the Board minutes where the bid was awarded by the Common Council.
Copy of the original bids made on the project.
Copy of documentation that vendor was not suspended or debarred.
The lack of internal controls and lack of appropriate supporting documentation was isolated to
the project noted 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). . . ."
INDIANA STATE BOARD OF ACCOUNTS
20
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200.318 states in part:
"(a) The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for
the acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327. . . .
(c)
(1) The non-Federal entity must maintain written standards of conduct covering conflicts
of interest and governing the actions of its employees engaged in the selection, award
and administration of contracts. . . .
(i) The non-Federal entity must maintain records sufficient to detail the history of procurement.
These records will include, but are not necessarily limited to, the following: Rationale for the
method of procurement, selection of the contract type, contractor selection of rejection, and the
basis for the contract price. . . ."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award. . . .
(b) Formal procurement methods. When the value of the procurement for property or
services under a Federal financial assistance award exceeds the SAT, or a lower threshold
established by a non-Federal entity, formal procurement methods are required. Formal
procurement methods require following documented procedures. Formal procurement
methods also require public advertising unless a non-competitive procurement can be used
in accordance with § 200.319 or paragraph (c) of this section. The following formal
methods of procurement are used for procurement of property or services above the
simplified acquisition threshold or a value below the simplified acquisition threshold the
non-Federal entity determines to be appropriate:
(1) Sealed bids. A procurement method in which bids are publicly solicited and a firm
fixed-price contract (lump sum or unit price) is awarded to the responsible bidder
whose bid, conforming with all the material terms and conditions of the invitation
for bids, is the lowest in price. The sealed bids method is the preferred method for
procuring construction, if the conditions.
(i) In order for sealed bidding to be feasible, the following conditions should be
present:
(A) A complete, adequate, and realistic specification or purchase description
is available;
(B) Two or more responsible bidders are willing and able to compete
effectively for the business; and
(C) The procurement lends itself to a firm fixed price contract and the selection
of the successful bidder can be made principally on the basis of price.
INDIANA STATE BOARD OF ACCOUNTS 21
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(ii) If sealed bids are used, the following requirements apply:
(A) Bids must be solicited from an adequate number of qualified sources,
providing them sufficient response time prior to the date set for opening
the bids, for local, and tribal governments, the invitation for bids must be
publicly advertised;
(B) The invitation for bids, which will include any specifications and pertinent
attachments, must define the items or services in order for the bidder to
properly respond;
(C) All bids will be opened at the time and place prescribed in the invitation for
bids, and for local and tribal governments, the bids must be opened
publicly;
(D) A firm fixed price contract award will be made in writing to the lowest
responsive and responsible bidder. Where specified in bidding documents,
factors such as discounts, transportation cost, and life cycle costs
must be considered in determining which bid is lowest. Payment discounts
will only be used to determine the low bid when prior experience indicates
that such discounts are usually taken advantage of; and
(E) Any or all bids may be rejected if there is a sound documented reason.
. . ."
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 County participated in a joint project with the City in which the City handled the procurement
process. As the County was ultimately responsible for compliance, copies of the quotes or bids obtained
by the City should have been obtained by the County; however, this documentation was not obtained or
provided for audit. In addition, documentation to demonstrate the City checked the vendor was not
suspended or debarred prior to entering into the contract should have been obtained by County.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
County cannot ensure that the services obtained provided full and open competition or the basis of the
price. In addition, the County cannot ensure the vendors paid were eligible to participate in federal
programs. Any program funds the County used to pay vendors that have been suspended or debarred
would be unallowable, and the funding agency could potentially recover them.
INDIANA STATE BOARD OF ACCOUNTS 22
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Noncompliance with the provisions of federal regulations and the terms and conditions of the
federal award could result in the loss of future federal funding to the County.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended the County establish documented procurement procedures consistent with state
and local laws for the acquisition of property or services required under a federal award or subaward as
outlined in the code of federal regulations. We also recommended the County adhere to the procurement
and suspension and debarment requirements and obtain required bids and verify that all vendors that are
paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in
federal programs before entering into any covered transactions. Finally, we recommended the County
obtain and retain appropriate documentation for all expenses paid with SLFRF funds.
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 - Procurement and Suspension and Debarment
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): YR 2023
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The County elected to receive the standard revenue loss allowance, allowing it to claim its total
COVID-19 - Coronavirus State and Local Recovery Funds (SLFRF) allocation of $4,014,711 as revenue
loss to use for government services. As such, all SLFRF program funds to date 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 as 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 contracts and subrecipients are not suspended, debarred, or otherwise
excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded
under procurement and nonprocurement transactions (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. Due to the Treasury's determination that the revenue loss eligible use category does not give
rise to subawards, the County was only required to comply with suspension and debarment requirements
related to covered transactions.
INDIANA STATE BOARD OF ACCOUNTS
23
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Upon inquiry of the County to determine its policies and procedures related to suspension and
debarment requirements, the County stated that they did not have policies or procedures in place for
verifying that an entity with which it plans to enter into a covered transaction is not suspended, debarred,
or otherwise excluded or disqualified from participating in federal assistance programs or activities.
Covered transactions paid to seven different vendors, totaling $403,071, for goods or services that equaled
or exceeded $25,000 that were paid from ARP funds were identified and tested. After examination, the
County had not verified the vendor's suspension and debarment status for any of the seven vendors prior
to issuing 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
The County had not established a system of internal controls for suspension and debarment. The
County did not verify any covered transactions identified in testing that they were not suspended or
debarred prior to entering into the covered transaction.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
County cannot ensure the vendors paid with federal funds are eligible to participate in federal programs.
Any program funds the County used to pay vendors that have been suspended or debarred would be
unallowable, and the funding agency could potentially recover them. Furthermore, noncompliance with the
provisions of federal statutes, regulations, and the terms and conditions or the federal award could result
in the loss of future federal funding to the County.
INDIANA STATE BOARD OF ACCOUNTS
24
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the County establish a proper system of internal controls
and develop policies and procedures to ensure contractors, as appropriate, are not suspended, debarred,
or otherwise excluded prior to entering into any contracts with those vendors.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.