FINDING 2024-003 Subject: Highway Planning and Construction - Procurement Federal Agency: Department of Transportation Federal Program: Highway Planning and Construction Assistance Listings Number: 20.205 Federal Award Number and Year (or Other Identifying Number): DES 2300096 Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The County had not properly designed or implemented a system of internal controls that would be effective in preventing, or detecting and correcting, noncompliance to ensure that the Local Public Agency (LPA) followed all federal requirements related to engineering and design services. In addition, the County did not have documented procurement procedures or policies used to procure engineering and design services. For consultant contracting (engineering and design related services), the LPA was to create and send a Request for Proposal (RFP) to the Indiana Department of Transportation (INDOT), who would review and advertise them. Consultants could then respond to those RFPs by completing and submitting a Letter of Interest (LOI). After all LOIs were received and ranked, the County was to report the number of LOIs received on the LPA Selection Review Checklist. The County did not maintain the LOIs as reported to the INDOT on the LPA Selection Review Checklist. As a result, the number of LOIs documented on the checklist provided to the INDOT could not be verified or audited. In addition, we were unable to ensure the minimum number of LOIs were received to meet the procurement competition standards. The lack of internal controls and noncompliance was isolated to DES 2300096. The lack of written procedures or policies was a systemic issue throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 18 CRAWFORD COUNTY 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). . . ." 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. . . . (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 contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320(b) states in part: "Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance awards 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: . . . (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. They are awarded in accordance with the following requirements: (i) Requests for proposals must be publicized and identify all evaluation factors and their relative importance. Proposals must be solicited from an adequate number of qualified offerors. Any response to publicized requests for proposals must be considered to the maximum extent practical; (ii) The non-Federal entity must have a written method for conducting technical evaluations of the proposals received and making selections; INDIANA STATE BOARD OF ACCOUNTS 19 CRAWFORD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (iii) Contracts must be awarded to the responsible offeror whose proposal is most advantageous to the non-Federal entity, with price and other factors considered; and (iv) The non-Federal entity may use competitive proposal procedures for qualifications based procurement of architectural/engineering (A/E) professional services whereby offeror's qualifications are evaluated and the most qualified offeror is selected, subject to negotiation of fair and reasonable compensation. The method, where price is not used as a selection factor, can only be used in procurement of A/E professional services. It cannot be used to purchase other types of services though A/E firms that are a potential source to perform the proposed effort. Cause Management did not develop effective internal controls to maintain records sufficient to detail the history of a procurement as required by retaining the LOIs. The County was unaware that it needed to maintain documented procurement procedures or policies. Effect The failure to establish and maintain an effective internal control system for procurement placed the County at risk of noncompliance with the federal requirements. 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. Due to the lack of retention of the LOIs, compliance with the procurement process could not be determined. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County establish and implement written policies and procedures for the procurement of engineering and design services. We further recommended that the County ensure it retains all LOIs and other procurement documentation to ensure compliance with federal regulations. 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 - 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 2024 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 20 CRAWFORD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Prior to entering into subawards and covered transactions with COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds, recipients were required to verify that such contractors and subrecipients were not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods or services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. 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. The County's policy related to SLFRF suspension and debarment requirements were to verify EPLS for any covered transactions expected to equal or exceed $25,000 with a vendor. Five vendors were identified as having transactions that equaled or exceeded $25,000. Covered transactions in the amount of $361,833 were made during the audit period to five vendors. All vendors were selected for testing for which the County did not verify the vendor's status on the EPLS. The lack of effective 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). . . ." 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 Auditor was unable to provide documentation to demonstrate the County had properly verified that contractors were neither suspended nor debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. INDIANA STATE BOARD OF ACCOUNTS 21 CRAWFORD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed system of internal controls, the County could not ensure the vendors paid with federal funds 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County establish a proper system of internal controls and procedures to ensure contractors and subrecipients, as appropriate, are not suspended or debarred, or otherwise excluded prior to entering into 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 2024-005 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 2024 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The County elected to receive the standard revenue loss allowance, allowing it to claim a total COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $2,054,458 as revenue loss to use for government services. As such, all SLFRF program funds expended from January 1, 2024 to December 31, 2024, were 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. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Treasury. The reporting periods, as well as the respective due dates, are based on the type of recipient and the recipient's 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 County was classified as a metropolitan county with a population below 250,000 residents that received an allocation of less than $10 million in SLFRF. As such, the initial P&E report, covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year and must be submitted to the Treasury by April 30 each year. INDIANA STATE BOARD OF ACCOUNTS 22 CRAWFORD COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County submitted the P&E report by April 30, 2024, as required during the audit period. Although one employee prepared the P&E report and another reviewed the entries, the system of internal controls was not effective in preventing, detecting, or correcting errors. The data submitted included amounts which were not supported by the County's records. For the 2024 annual P&E report, current and cumulative obligations and expenditures were each overstated by $311,286. The County did not accurately report the breakdown of obligations by project in its P&E report. While project-specific financial data was available in the County's internal ledger, it was not transferred or summarized in a way that met the annual reporting requirements. The lack of effective 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 Management's actions contributed to the noncompliance. The financial figures were modified to bypass submission system error messages, a process not supported by the County's records. Additionally, management misinterpreted reporting requirements, incorrectly assuming a project-level breakdown was not necessary for revenue replacement funds. INDIANA STATE BOARD OF ACCOUNTS 23 CRAWFORD COUNTY 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 such, the County did not report current and cumulative obligations and expenditures properly when filing the P&E report for the period April 1, 2023 to March 31, 2024. 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 by reporting erroneous data increases the likelihood that the public and the Treasury 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 the management of the County 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 take place. Additionally, management should develop policies and procedures to ensure that the County 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.