FINDING 2025-002 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): SLFRP0032 Compliance Requirement: Procurement and Suspension and Debarment 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 2024-001. Condition and Context Prior to entering sub awards and covered transactions with COVID-19 - 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, 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 sub awards, the City was only required to comply with suspension and debarment requirements related to contracts. Upon inquiry of the City in order to review the procedures for verifying that an entity with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the City stated certifications are collected when covered transactions are entered into by the City in order to verify that an entity with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities. Seven covered transactions for goods or services that equaled or exceeded $25,000 that were paid from the SLFRF funds were identified. Four transactions were examined to determine whether the City verified the suspension and debarment status of the vendor prior to payment. The City had not verified the vendor's suspension and debarment status for one of the covered transactions examined prior to issuing payment. For the tested covered transactions, the City did not verify the vendor's suspension and debarment status prior to payment due to the City not having any policies or procedures in place to verify that contractors were neither suspended nor debarred or otherwise excluded or disqualified from participating in federal assistance programs or activities. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF TERRE HAUTE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 The City had not implemented an effectively designed system of internal controls for suspension and debarment. The City was not aware that this was required until the prior audit. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot ensure the vendors paid with federal funds are 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. 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 City. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City strengthen its system of internal controls to ensure that all vendors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal programs before 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 2025-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Period of Performance 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): SLFRP0032 Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Other Matters Condition and Context Under the COVID-19 - State and Local Fiscal Recover Funds (SLFRF), recipients may only use funds to cover costs incurred beginning March 3, 2021, and ending December 31, 2024. Of 73 claims selected for testing, 12 were incurred after the grant period ended. 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 35.5(a) states: "In general. A recipient may only use funds for the purposes enumerated in § 35.6 (b) through (f) to cover costs incurred during the period beginning March 3, 2021, and ending December 31, 2024, subject to the restrictions set forth in sections 602(c)(2) and 603(c)(2) of the Social Security Act, as applicable. A recipient may only use funds for the purposes enumerated in § 35.6 (g) through (h) to cover costs incurred during the period beginning December 29, 2022, and ending December 31, 2024, subject to the restrictions set forth in sections 602(c)(2), 602(c)(5)(C), 603(c)(2), and 603(c)(6)(B) of the Social Security Act, as applicable." 31 CFR 35.3 states in part: ". . . Obligation means an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3)." INDIANA STATE BOARD OF ACCOUNTS 18 CITY OF TERRE HAUTE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The grant period ended on December 31, 2024; however, the cost of 12 invoices selected for testing occurred in 2025. There was no contract or any documentation stating that the projects with the vendors started before the end of the grant period. Effect Without the proper implementation of an effectively designed system of internal controls, payment was made on claims that occurred after the period of performance. Noncompliance with the provisions of federal statues, regulations, and terms and conditions of the federal award could result in the loss of future federal funding to the City. Questioned Costs Questioned costs totaling $74,698 were identified. Recommendation We recommended that management of the City establish a system of internal controls and develop policies and procedures to ensure the SLFRF funds are used appropriately. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-004 Subject: Federal Transit Cluster - Period of Performance Federal Agency: Department of Transportation Federal Program: Federal Transit Formula Grants Assistance Listings Number: 20.507 Federal Award Numbers and Years (or Other Identifying Numbers): IN-2025-010-01, IN-2025-010-02 Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the City in order to ensure compliance with requirements related to the grant agreement and the Period of Performance compliance requirement. The City submitted four claims to a grant with an invoice dated before the grant started. These invoices were dated in 2024, but the grant did not begin until January 1, 2025. The lack of internal controls and noncompliance were systematic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 19 CITY OF TERRE HAUTE 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 200.343 states: "Costs to the recipient or subrecipient resulting from financial obligations incurred by the recipient or subrecipient during a suspension or after the termination of a Federal award are not allowable unless the Federal agency or pass-through entity expressly authorizes them in the notice of suspension or termination or subsequently. However, costs during suspension or after termination are allowable if: (a) The costs result from financial obligations which were properly incurred by the non- Federal entity before the effective date of suspension or termination, and not in anticipation of it; and (b) The costs would be allowable if the Federal award was not suspended or expired normally at the end of the period of performance in which the termination takes effect." Cause Management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Period of Performance compliance requirement. The Director of Transit did not look at invoice dates to ensure costs were incurred during the grant period, nor did they get approval from the federal awarding agency to pay outside of the grant period. Effect The failure to establish an effective internal control system enabled noncompliance to go undetected. Noncompliance with the grant agreement and the compliance requirement could have resulted in the loss of funds to the City. Questioned Costs Questioned costs totaling $12,208 were identified. Recommendation We recommended that management of the City establish a system of internal controls and develop policies and procedures to ensure the Federal Transit Cluster funds are used appropriately. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.