Audit 407853

Suspension and Debarment Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number and Year: 1505-0271 2022 Pass-Through Agency: Knox County, Tennessee; City of Knoxville, Tennessee Pass-Through Number: 24.471; C-22-0147 Assistance Listing Number: 21.027 Award Period: July 1, 2023 – June 30, 2024 Type of Finding: - Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Pursuant to 2 CFR § 200.214, non-Federal entities are prohibited from entering into covered transactions with parties that are suspended or debarred. In addition, 2 CFR § 180.300 requires non-Federal entities to verify that a vendor or contractor is not suspended or debarred prior to entering into a covered transaction. Condition: CLA selected five contracts to test controls and compliance. Of the five contracts tested, we noted one instance in which the Entity did not maintain evidence that the vendor had been verified for suspension and debarment prior to entering into the transaction. Questioned costs: None Context: Evidence that internal controls are designed effectively and implemented should be appropriately documented and maintained to allow for review during the audit process. Without this evidence the auditor is unable to verify these internal controls were designed effectively and implemented. Cause: Knox CAC’s internal control procedures related to procurement compliance were not designed or operating effectively to ensure that suspension and debarment verification was documented prior to entering into covered transactions. Specifically, there was not an effective review or monitoring control in place to confirm that documentation of the verification was retained in the procurement file. Effect: Failure to document suspension and debarment verification increases the risk that the Entity could enter into a covered transaction with a vendor that is suspended or debarred, resulting in potential noncompliance with Federal requirements. Although no noncompliance was identified in this instance because the vendor was not suspended or debarred, the lack of documented verification represents a significant deficiency in internal control over compliance. Repeat Finding: This is not a repeat finding Recommendation: We recommend that management strengthen internal controls over procurement compliance to ensure suspension and debarment verification is performed and documented prior to entering into covered transactions under Federal programs. Views of responsible officials: There is no disagreement with the audit finding.

Internal Control Over General Disbursements (Repeat Finding) Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number and Year: 1505-0271 2022 Pass-Through Agency: Knox County, Tennessee; City of Knoxville, Tennessee Pass-Through Number: 24.471; C-22-0147 Assistance Listing Number: 21.027 Federal Agency: U.S. Department of Transportation Federal Program Name: Federal Transit Cluster Federal Award Identification Number and Year: TN-2020-041; TN-2020-006; TN-2021-013; TN-2021-027; TN-2022-007; TN-2023-006; TN-2023-007 Direct Award Assistance Listing Number: 20.507; 20.526 Award Period: July 1, 2023 – June 30, 2024 Type of Finding: - Material Weakness in Internal Control over Compliance Criteria or specific requirement: Uniform Guidance requires non-Federal entities to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the entity is managing the award in compliance with Federal statutes, regulations, and terms and conditions, safeguards assets, and for preventing, detecting, and correcting noncompliance. Condition: For the Coronavirus State and Local Fiscal Recovery Funds Program CLA selected 40 general disbursements to test controls and compliance and evidence that internal controls over compliance was not provided for 15 of these selections. For the Federal Transit Cluster Program CLA selected 8 general disbursements to test controls and compliance and evidence that internal controls over compliance was not provided for 6 of these selections. The transactions lacking evidence of internal controls in both programs were all associated with transportation costs charged to Knox CAC from Knox County. Based on supporting documentation provided no noncompliance was noted; however, the absence of observable internal controls resulted in a significant deficiency in internal control. Questioned costs: None noted. Context: Evidence that internal controls are designed effectively and implemented should be appropriately documented and maintained to allow for review during the audit process. Without this evidence the auditor is unable to verify these internal controls were designed effectively and implemented. Cause: Cost related to transportation charged directly to Knox CAC from the County are reviewed on a monthly basis, however, documentation of that review was not properly documented and/or retained by Knox CAC to provide as support that the control was properly designed and implemented. Effect: When internal controls are not designed and implemented effectively it could lead to noncompliance within the program which could result in loss of funding or liability to reimburse federal funds. Repeat Finding: This is a repeat of finding 2023-004 only for ALN 21.027. Recommendation: Implement a formal way to document the review and approval of transportation costs charged from Knox County to provide evidence that internal controls are effectively designed and implemented and functioning. Views of responsible officials: There is no disagreement with the audit finding.