FINDING 2024-001 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): CY 2024 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 13 CITY OF BUTLER SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 and all subawards. The verification is to be done by checking the System for Award Management (SAM) 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. Two covered transactions paid from SLFRF award funds during the audit period were identified and tested. One of the covered transactions, totaling $288,887, did not include the appropriate provisions in the contract, nor did the City require a certification or check the SAM EPLS to ensure the entity was not suspended or debarred prior to making 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 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 Management of the City did not have a formalized suspension and debarment policy to ensure procedures related to suspension and debarment requirements were in place and followed. INDIANA STATE BOARD OF ACCOUNTS 14 CITY OF BUTLER SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed system of internal controls, the City could not ensure the vendors paid with federal funds were 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 the management of the City develop written policies and procedures to ensure its compliance with requirements related to suspension and debarment. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 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): CY 2024 Compliance Requirement: Reporting Audit Finding: Material Weakness Repeat Finding This is a similar finding from the immediately prior audit report. The prior audit finding number was 2023-001. Condition and Context Recipients are required to quarterly or annually submit Project and Expenditure reports (P&E) 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 metropolitan city with a population below 250,000 residents that received an allocation of less the $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the initial P&E report covering April 1, 2023 to March 31, 2024, was required to be submitted to the Treasury by April 30, 2024. The City submitted the annual P&E report during the audit period. However, there were no documented internal controls in place that would likely be effective in preventing, or detecting and correcting, noncompliance related to the reporting requirements. The report was prepared and submitted by one employee without an oversight, review, or approval process to ensure accuracy and completeness. The lack of internal controls was a systemic issue throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 15 CITY OF BUTLER SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause A proper system of internal controls was not designed and implemented by management of the City to ensure that P&E reports were prepared by one individual and reviewed by another individual before submission to the Treasury. Effect Without the proper implementation of an effectively designed system of internal controls, errors could occur and remain undetected. As such, the City cannot ensure that the reports submitted are materially accurate and correct. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City establish a system of internal controls and develop policies and procedures over the preparation and review of federal reports to ensure appropriate reviews, approval, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that the City provides the Treasury with complete and accurate information for all reports. 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 16