FINDING 2023-003
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Suspension and Debarment
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): FY 21
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-002.
Condition and Context
The City received a State and Local Fiscal Recovery Funds (SLFRF) allocation of $11,167,161.
During the audit period, the City expended funds under the revenue loss category and the infrastructure
investment category.
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 adding a clause or condition to the covered transaction with that person. Due to the
U.S. Department of 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
17
CITY OF LAWRENCE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The City did not have a formal written policy covering the suspension and debarment requirements.
A population of three covered transactions for goods or services that equaled or exceeded $25,000 paid
from SLFRF funds during the audit period were identified. All three vendors with covered transactions were
selected for testing. The contract for one of the vendors, who received payments from the City during 2023
totaling $435,290, included a suspension and debarment clause in the contract. For the remaining two
vendors, who received payments from the City during 2023 totaling $536,500 and $134,979, evidence was
not provided that the City verified the vendors' suspension and debarment status prior to entering into the
covered transactions. The City did not provide a formal policy or have procedures in place to verify that
contractors engaged in covered transactions are neither suspended nor debarred or otherwise excluded or
disqualified from participating in federal assistance programs or activities.
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:
(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 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 of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies. At the time the
City entered into the contracts tested, the City was unaware of the requirements for verifying whether or
not vendors were suspended or debarred.
INDIANA STATE BOARD OF ACCOUNTS
18
CITY OF LAWRENCE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded. Payments to vendors that are suspended or
debarred would be unallowable and could be recovered by the awarding agency.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the City.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City 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 into any 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 2023-004
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 21
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-003.
Condition and Context
Recipients are required to submit quarterly or annually 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.
Recipients are required to submit quarterly or annually P&E reports to the 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.
INDIANA STATE BOARD OF ACCOUNTS
19
CITY OF LAWRENCE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The City was classified as a metropolitan City with a population below 250,000 residents that
received an allocation of more than $10 million in State and Local Fiscal Recovery Funds. As such, the
City was required to submit four quarterly P&E reports during the audit period.
The reports to be submitted during 2023 were for quarters ending December 31, 2022, March 31,
2023, June 30, 2023, and August 31, 2023.
The City did not provide audit evidence that the P&E report for the quarter ended December 31,
2022, was prepared and submitted. Additionally, a single employee prepared and submitted the remaining
three P&E reports without evidence of oversight and review.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was related to the P&E report for the quarter ended December 31, 2022.
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 35.4(c) states in part: "Reporting and requests for other information. During the period of
performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the
uses of funds, . . ."
Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page
10, states in part:
". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and
compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be
reported on a cash or accrual basis, as long as the methodology is disclosed and consistently
applied. Reporting must be consistent with the definition of expenditures pursuant to
2 CFR 200.1. Your organization should appropriately maintain accounting records for
compiling and reporting accurate, compliant financial data, in accordance with appropriate
accounting standards and principles. . . ."
Cause
A proper system of internal controls was not designed 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 of what should be done to effect internal controls, and procedures should consist of actions
that would implement these policies. The City was not aware the P&E report for the quarter ending
December 31, 2022, had not been filed.
INDIANA STATE BOARD OF ACCOUNTS
20
CITY OF LAWRENCE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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. As a result, a quarterly report was not filed with the Treasury.
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 of federal reports are taking place. We also recommended that all
quarterly reports be filed timely with the awarding agency.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
INDIANA STATE BOARD OF ACCOUNTS
21
FINDING 2023-003
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Suspension and Debarment
Federal Agency: Department of the Treasury
Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): FY 21
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-002.
Condition and Context
The City received a State and Local Fiscal Recovery Funds (SLFRF) allocation of $11,167,161.
During the audit period, the City expended funds under the revenue loss category and the infrastructure
investment category.
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 adding a clause or condition to the covered transaction with that person. Due to the
U.S. Department of 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
17
CITY OF LAWRENCE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The City did not have a formal written policy covering the suspension and debarment requirements.
A population of three covered transactions for goods or services that equaled or exceeded $25,000 paid
from SLFRF funds during the audit period were identified. All three vendors with covered transactions were
selected for testing. The contract for one of the vendors, who received payments from the City during 2023
totaling $435,290, included a suspension and debarment clause in the contract. For the remaining two
vendors, who received payments from the City during 2023 totaling $536,500 and $134,979, evidence was
not provided that the City verified the vendors' suspension and debarment status prior to entering into the
covered transactions. The City did not provide a formal policy or have procedures in place to verify that
contractors engaged in covered transactions are neither suspended nor debarred or otherwise excluded or
disqualified from participating in federal assistance programs or activities.
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:
(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 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 of what should be done to effect internal
controls, and procedures should consist of actions that would implement these policies. At the time the
City entered into the contracts tested, the City was unaware of the requirements for verifying whether or
not vendors were suspended or debarred.
INDIANA STATE BOARD OF ACCOUNTS
18
CITY OF LAWRENCE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded. Payments to vendors that are suspended or
debarred would be unallowable and could be recovered by the awarding agency.
Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of
the federal award could result in the loss of future federal funding to the City.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that management of the City 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 into any 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 2023-004
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 21
Compliance Requirement: Reporting
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-003.
Condition and Context
Recipients are required to submit quarterly or annually 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.
Recipients are required to submit quarterly or annually P&E reports to the 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.
INDIANA STATE BOARD OF ACCOUNTS
19
CITY OF LAWRENCE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The City was classified as a metropolitan City with a population below 250,000 residents that
received an allocation of more than $10 million in State and Local Fiscal Recovery Funds. As such, the
City was required to submit four quarterly P&E reports during the audit period.
The reports to be submitted during 2023 were for quarters ending December 31, 2022, March 31,
2023, June 30, 2023, and August 31, 2023.
The City did not provide audit evidence that the P&E report for the quarter ended December 31,
2022, was prepared and submitted. Additionally, a single employee prepared and submitted the remaining
three P&E reports without evidence of oversight and review.
The lack of internal controls was a systemic issue throughout the audit period. The noncompliance
was related to the P&E report for the quarter ended December 31, 2022.
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 35.4(c) states in part: "Reporting and requests for other information. During the period of
performance, recipients shall provide to the Secretary periodic reports providing detailed accounting of the
uses of funds, . . ."
Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page
10, states in part:
". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and
compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be
reported on a cash or accrual basis, as long as the methodology is disclosed and consistently
applied. Reporting must be consistent with the definition of expenditures pursuant to
2 CFR 200.1. Your organization should appropriately maintain accounting records for
compiling and reporting accurate, compliant financial data, in accordance with appropriate
accounting standards and principles. . . ."
Cause
A proper system of internal controls was not designed 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 of what should be done to effect internal controls, and procedures should consist of actions
that would implement these policies. The City was not aware the P&E report for the quarter ending
December 31, 2022, had not been filed.
INDIANA STATE BOARD OF ACCOUNTS
20
CITY OF LAWRENCE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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. As a result, a quarterly report was not filed with the Treasury.
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 of federal reports are taking place. We also recommended that all
quarterly reports be filed timely with the awarding agency.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
INDIANA STATE BOARD OF ACCOUNTS
21