FINDING 2025-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Internal Controls Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Numbers and Years (or Other Identifying Numbers): YR 2025, SWIF 235542 Pass-Through Entity: Indiana Finance Authority Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, Reporting Audit Finding: Material Weakness Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity will be achieved. With respect to federal awards, nonfederal entities, such as the Town, are required to establish and maintain internal control over federal awards that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and terms and conditions of federal awards. INDIANA STATE BOARD OF ACCOUNTS 17 TOWN OF WHEATLAND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) During the audit period, the Town disbursed the remainder of the Town's funding received under the federal program as an advance grant directly from the U.S. Department of the Treasury totaling $13,697 as part of the American Rescue Plan Act (ARPA). The Town was also the recipient of a State Water Infrastructure Fund award under the federal program, which was a reimbursable grant passed through the Indiana Finance Authority (IFA). Reimbursements received under this grant during the audit period totaled $1,020,924. The Town had not implemented a proper system of internal controls over multiple compliance requirements for both sources of funding as detailed below. ARPA Direct Award - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance The Town paid four claims from the ARPA funds during the audit period, which were prepared by the Clerk-Treasurer or the Deputy Clerk-Treasurer. There was no evidence of an oversight, review, or approval process by a second person who was knowledgeable of the requirements to ensure that the disbursements were for activities or costs that were allowable under the federal award or that the disbursements were for expenses incurred within the period of performance. State Water Infrastructure Fund Award - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, and Reporting The Deputy Clerk-Treasurer was solely responsible for submitting the reimbursement requests to the IFA. There was no evidence of an oversight, review, or approval process by a second person who was knowledgeable of the requirements to ensure that the disbursements for which reimbursement was requested were for activities or costs that were allowable under the federal award, that the disbursements were for expenses incurred within the period of performance, or that the requests were accurately prepared and in compliance with the reporting requirements of the federal award. The lack of internal controls 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 18 TOWN OF WHEATLAND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause Due to the limited number of Town employees and the Clerk-Treasurer holding a separate full-time position, there was often only one individual involved with various aspects of the federal program with limited opportunity for proper segregation of duties. Historically, the Town has had little experience receiving federal funding. Additionally, the Clerk-Treasurer was new to the position and was unfamiliar with requirements related to establishing and maintaining a proper system of internal controls over the Town's federal awards. Effect Without internal controls that are adequately designed and implemented, the Town's internal control system cannot be effective and renders the Town incapable of preventing, or detecting and correcting, noncompliance with the requirements of the federal award. The lack of proper internal controls could allow material noncompliance to remain undetected, which could result in the Town preparing inaccurate reports or disbursing funds that were not for activities and costs that were allowable or that were for expenses that were incurred outside the period of performance. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Town's management establish a proper system of internal controls to ensure compliance with the terms and conditions of the federal award. 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: 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): SWIF235542 Pass-Through Entity: Indiana Finance Authority Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context As part of sound management of the federal award, the Town was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The Town had not properly designed or implemented such a system that would likely be effective in preventing, or detecting and correcting, noncompliance with the procurement and suspension and debarment requirements of the federal award. As a result, we identified the following noncompliance. INDIANA STATE BOARD OF ACCOUNTS 19 TOWN OF WHEATLAND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Suspension and Debarment As part of properly managing and administering federal awards, the Town was required to verify that vendors were not excluded or disqualified from receiving federal funding prior to entering into a covered transaction. The Town disbursed the entire funding received under the federal award totaling $1,020,924 to one vendor during the audit period, which constituted a covered transaction. The Town did not have any procedures in place to perform this verification, and as a result, the Town did not verify that this vendor was not suspended or debarred, or otherwise excluded, from receiving federal funding prior to entering into the covered transaction with the vendor. 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). . . ." 2 CFR 180.300 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 SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Historically, the Town has had little experience receiving federal funding. Additionally, the Clerk-Treasurer was new to the position and was unfamiliar with the compliance requirements associated with federal awards. As a result, the Town was unaware of the Procurement and Suspension and Debarment compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 20 TOWN OF WHEATLAND 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 preventing, or detecting and correcting, noncompliance. As a result, the Town did not adopt a purchasing policy and therefore did not comply with the procurement requirements of the federal award. Additionally, the Town did not verify that the one vendor with which the Town entered into a covered transaction was not excluded or disqualified from receiving federal funds, which resulted in material noncompliance with the suspension and debarment requirements of the federal award. By not performing this verification, the Town could disburse funding to a vendor that is not eligible to receive federal funding. 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 Town. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Town's management establish a proper system of internal controls to pass policies and procedures for review of suspension and debarment. Once policies are in place, establish internal controls to review suspension and debarment procedures to ensure they are performed properly and in compliance with federal requirements. 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 21