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): FY2022 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2024-002. Condition and Context Recipients of the COVID-19 - State and Local Fiscal Recovery Funds are required to verify before entering into subawards and covered transactions that 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, such as a grant agreement, when the value is expected to equal or exceed $25,000. Verification may be performed by checking the Excluded Parties List System, obtaining a certification from the entity, or including an appropriate clause or condition in the transaction. The County did not have procedures in place to verify that entities were not suspended, debarred, or otherwise excluded from participation in federal assistance programs. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 16 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.214 states: "Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities." 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." Part 4 of the Treasury's Compliance and Reporting Guidance states in part: ". . . recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance . . ." Cause Management did not design an adequate system of internal controls. The County was unable to provide documentation demonstrating the verification that contractors and vendors were not suspended or debarred. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system could not effectively prevent, or detect and correct, material noncompliance. As a result, vendors receiving payments equal to or exceeding $25,000 were not verified to ensure they were not suspended, debarred, or otherwise excluded. Noncompliance with federal statutes, regulations, and terms and conditions of federal awards could result in the loss of future federal funding to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County strengthen its internal control system to ensure that all vendors receiving payments of $25,000 or more, in whole or in part with federal funds, are verified as 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 - 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): FY2022 Compliance Requirement: Reporting Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2024-003. Condition and Context The County had not properly designed or implemented a system of internal controls, including appropriate segregation of duties, that would be effective in preventing, or detecting and correcting, noncompliance. A single employee prepared and submitted reports without any documented review or oversight process in place to prevent, or detect and correct, errors. 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). . . ." Cause The County did not have an effective system of internal controls in place over the Project and Expenditure reports and was unable to provide documentation showing that a proper review of the reports was completed prior to submission. Effect Without the proper implementation of an effectively designed system of internal controls, the County cannot ensure that submitted reports accurately reflect the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds activity. This 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. INDIANA STATE BOARD OF ACCOUNTS 18 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation Management should develop and implement proper procedures and internal controls, including review and oversight of the reports, prior to its submission to the U.S. Department of the Treasury. 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 - 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): FY2022 Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Other Matters Condition and Context The County had not properly designed or implemented a system of internal controls to ensure that transactions made with the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds occurred within the appropriate period of performance. The lack of effective internal controls resulted in items incurred after the period of performance in 4 of the 27 items tested. Further review indicated that the County used the 2025 appropriations as the obligation for some program expenditures. 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). . . ." 2 CFR 200.1 states in part: ". . . Financial obligations, when referencing a recipient's or subrecipient's use of funds under a Federal award, means orders placed for property and services, contracts and subawards made, and similar transactions that require payment. . . . INDIANA STATE BOARD OF ACCOUNTS 19 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Period of performance means the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions, or budget periods. Identification of the period of performance in the Federal award per § 200.211(b)(5) does not commit the awarding agency to fund the award beyond the currently approved budget period. . . . Unliquidated financial obligations means, for financial reports prepared on a cash basis, financial obligations incurred by the non-Federal entity that have not been paid (liquidated). . . ." Cause The County had a system of internal controls; however, the internal controls were not in place and operating effectively. Effect The failure to establish an effective system of internal controls enabled costs to be incurred under the federal program after the period of performance had ended. Questioned Costs We identified $25,837 in known questioned costs. Recommendation Management should develop and implement proper procedures and internal controls, including review and oversight of reports prior to their submission to the Department of the Treasury. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-005 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Allowable Costs/Cost Principles 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): FY2022 Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Significant Deficiency, Other Matters Condition and Context Prior to receipt of the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF), all eligible entities were required to execute a Financial Assistance Agreement (Agreement), which included the award terms and conditions that recipients must comply within carrying out the objectives of its award. Per the Agreement, the County was responsible for the effective administration of the federal award, as well as the application of sound management practices and administration of the federal funds in a manner consistent with the program objectives and the terms and conditions of the award. INDIANA STATE BOARD OF ACCOUNTS 20 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recipients may use the SLFRF funds for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act, as added by section 9901 of the American Rescue Plan Act of 2021. The SLFRF program provides substantial flexibility for each recipient to meet local needs within four separate eligible use categories. Recipients may use the SLFRF funds to: Respond to the COVID-19 public health emergency and its negative economic impacts; Respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of eligible employers that have eligible workers who are performing essential work; Provide government services, to the extent COVID-19 caused a reduction in revenues collected in the most recent full fiscal year of the recipient; and Make necessary investments in water, sewer, or broadband infrastructure. During the audit, it was identified that the County charged various drug court expenditures to the SLFRF award throughout the audit period. While certain drug court expenditures were used to provide government services, detailed testing determined that the SLFRF funds were applied to costs that are not allowable under state guidance governing the drug court program. These expenditures do not meet the federal eligibility or cost-allowability requirements established for the SLFRF funds, and, therefore, constitute unallowable charges to the grant. The County had a system of internal controls over the compliance requirement; however, they were not properly implemented to prevent noncompliance. 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 200.400 states in part: "The application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. . . ." INDIANA STATE BOARD OF ACCOUNTS 21 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. . . ." 2 CFR 200.404 states in part: "A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the recipient's or subrecipient's operation or the proper and efficient performance of the Federal award; . . . (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost." Indiana Code 12-23-14-6 states in part: "(a) A program may provide for eligible individuals a range of necessary intervention services, including the following: (1) Screening for eligibility and other appropriate services. (2) Clinical assessment. (3) Education. (4) Referral. (5) Service coordination and case management. (b) A program that is eligible under section 7 of this chapter may also provide a range of necessary treatment and rehabilitation services, including the following: (1) Emergency services. (2) Detoxification. (3) Counseling. (4) Rehabilitative care. INDIANA STATE BOARD OF ACCOUNTS 22 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The County improperly charged the SLFRF funds to unallowable drug court costs. This occurred because the County did not have sufficient internal controls or review procedures in place to ensure that expenditures charged to the SLFRF award met federal and state allowability requirements. The approval process did not include adequate verification of eligibility, and staff responsible for coding and approving transactions did not consistently apply federal cost principles when determining whether drug court expenditures were appropriate for the SLFRF funding. As a result, unallowable costs were charged to the grant, leading to noncompliance with federal guidance and an internal control deficiency within the County's grant management processes. Effect Due to a misunderstanding of the SLFRF requirements, the County inadvertently allocated federal grant funds to an unallowable expenditure. Questioned Costs We identified $25,837 in known questioned costs. Recommendation We recommended that management of the County design and implement a proper system of internal controls including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place prior to payment of funds from the SLFRF award. We could also recommend county officials review and become familiar with the grant requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.