Audit 341155

FINDING 2022-002 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 Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): TRSW220280 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The Board did not have proper internal controls in place to ensure compliance with the Procurement and Suspension and Debarment compliance requirement. The Board received a State and Local Fiscal Recovery Funds (SLFRF) allocation of $3,227,625 from the Indiana Finance Authority through the Transportation and Storm Water (TRSW) grant which was used for construction costs. The following issues were identified: Suspension and Debarment Prior to entering into subawards and covered transactions with federal 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 a non-procurement 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. Upon inquiry of the Board to determine its policies and procedures related to suspension and debarment requirements, the Board stated procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transactions. One covered transaction for construction that equaled or exceeded $25,000 was paid from SLFRF funds during the audit period was identified. This transaction was examined to determine whether the Board verified the suspension and debarment status of the vendors prior to payment. The Board had not performed procedures for the transaction examined to ensure the vendor was not suspended or debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. INDIANA STATE BOARD OF ACCOUNTS 15 BIG CICERO CREEK JOINT DRAINAGE BOARD SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 was not designed by management of the Board. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Board's management 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 internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the single vendor to whom payments equal to or in excess of $25,000 was not verified to not be suspended, debarred, or otherwise excluded. 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 Board. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 16 BIG CICERO CREEK JOINT DRAINAGE BOARD SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the Board establish a proper system of internal controls and develop policies and procedures to ensure contractors are not suspended, debarred, or otherwise excluded from participation in federal awards 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 2022-002 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 Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): TRSW220280 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The Board did not have proper internal controls in place to ensure compliance with the Procurement and Suspension and Debarment compliance requirement. The Board received a State and Local Fiscal Recovery Funds (SLFRF) allocation of $3,227,625 from the Indiana Finance Authority through the Transportation and Storm Water (TRSW) grant which was used for construction costs. The following issues were identified: Suspension and Debarment Prior to entering into subawards and covered transactions with federal 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 a non-procurement 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. Upon inquiry of the Board to determine its policies and procedures related to suspension and debarment requirements, the Board stated procedures had not been performed to ensure vendors were not suspended or debarred prior to entering into covered transactions. One covered transaction for construction that equaled or exceeded $25,000 was paid from SLFRF funds during the audit period was identified. This transaction was examined to determine whether the Board verified the suspension and debarment status of the vendors prior to payment. The Board had not performed procedures for the transaction examined to ensure the vendor was not suspended or debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities for suspension or debarment. INDIANA STATE BOARD OF ACCOUNTS 15 BIG CICERO CREEK JOINT DRAINAGE BOARD SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 was not designed by management of the Board. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Board's management 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 internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the single vendor to whom payments equal to or in excess of $25,000 was not verified to not be suspended, debarred, or otherwise excluded. 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 Board. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 16 BIG CICERO CREEK JOINT DRAINAGE BOARD SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the Board establish a proper system of internal controls and develop policies and procedures to ensure contractors are not suspended, debarred, or otherwise excluded from participation in federal awards 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.