FINDING 2024-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds: American Rescue Plan Act - 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): FY2024 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 2023-004. 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 adding a clause or condition to the covered transaction with that person. The County did not have an effective internal control system in place related to the suspension and debarment requirements. A population of eight covered transactions, totaling $1,359,873, of which payments to each individual vendor equaled or exceeded $25,000 paid from SLFRF funds were identified during the audit period. Three of the transactions, totaling $811,500, were selected for testing. For each of the three transactions, the County did not verify the vendor's suspension or debarment status prior to payment due to the County not having an effective internal control system in place to verify that contractors were neither suspended or debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. INDIANA STATE BOARD OF ACCOUNTS 18 LAWRENCE COUNTY 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 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 was unable to provide documentation to demonstrate they had effective internal controls in place to verify suspension and debarment status for covered transactions it intends to pay with federal funds. The County was unable to provide documentation to demonstrate they had properly verified that contractors were neither suspended nor debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. 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 and subrecipients to whom payments were equal to or in excess of $25,000 were not verified as to whether or not they were suspended, debarred, or otherwise excluded. 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 those funds. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 19 LAWRENCE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the County 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 that will be paid with federal grant funds. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Lead Reduction Grant - 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): FY23-24 Pass-Through Entity: Indiana Department of Health Compliance Requirement: Reporting Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. Condition and Context For the Lead Reduction Grant, recipients were required to submit quarterly reports through the end of the grant period. Although the required reports were submitted timely as required, there were no internal controls in place that would likely be effective in preventing, or detecting and correcting, noncompliance related to the report. One employee prepared and submitted the reports without any evidence of an oversight or review process. The lack of internal controls was a systemic issue that continued 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 LAWRENCE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed and implemented by management of the County, 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. The County had not developed any policies and procedures requiring a secondary review of reports for accuracy prior to submission. Effect Without the proper implementation of an effectively designed system of internal controls over reporting, the County cannot ensure that the reports submitted are materially accurate and that any potential errors would be identified and corrected in a timely manner. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls, including policies and procedures, to ensure that effective internal controls are implemented over all grant compliance requirements for reporting related to the Lead Reduction Grant. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-004 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - American Rescue Plan Act - 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): FY2024 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-002. Condition and Context Recipients are required to submit quarterly or annual 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. INDIANA STATE BOARD OF ACCOUNTS 21 LAWRENCE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County was classified as a county with a population below 250,000 residents that received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF). As such, the P&E report covering the period from April 1, 2023 to March 31, 2024, was required to be submitted to the Treasury by April 30, 2024. The P&E report was submitted April 30, 2024, as required; however, the information submitted did not match the County's ledgers for Total Expenditures and Total Cumulative Expenditures. Total Period Expenditures was reported as $2,720,340, as was Total Cumulative Expenditures. The ledger amount was $2,631,190, resulting in expenditures being overstated by $89,150. In addition, supporting documentation was not provided to support the amounts reported as Total Period Obligations and Cumulative Period Obligations, resulting in the inability to verify the accuracy of the information reported. There were no internal controls in place to prevent, or detect and correct, noncompliance related to the P&E report. Even though a County Commissioner reviewed and approved the report submission, as indicated by his signature, this review was not effective. The lack of internal controls and noncompliance 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). . . ." Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds, page 13, 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. . . ." 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, . . ." Cause The County's system of internal controls was not effective in detecting the errors noted in the Condition and Context above and did not allow for the appropriate supporting documentation to be retained for review. INDIANA STATE BOARD OF ACCOUNTS 22 LAWRENCE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed 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 such, the County did not report current period obligations, current period expenditures, and cumulative expenditures properly when filing the P&E reports during the audit period. 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 County. In addition, not meeting the SLFRF reporting requirements increases the likelihood that the public will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County design and implement a proper system of internal controls, including policies and procedures to ensure that effective internal controls are implemented over all grant compliance requirements for reporting and allow for the retention of all required supporting documentation. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.