Finding 1061588 (2023-002)

Material Weakness
Requirement
I
Questioned Costs
-
Year
2023
Accepted
2024-08-27
Audit: 317960
Organization: Morgan County (IN)

AI Summary

  • Core Issue: The County lacks a system to verify that contractors are not suspended or debarred before entering into federal transactions, leading to a material weakness in compliance.
  • Impacted Requirements: This finding violates 2 CFR 200.303, which mandates effective internal controls for managing federal awards.
  • Recommended Follow-Up: Establish a robust internal control system with clear policies and procedures to verify contractor eligibility for federal funds, especially for contracts over $25,000.

Finding Text

FINDING 2023-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Procurement and 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): CY-2023 Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness Condition and Context Prior to entering into subawards and covered transactions with federal award funds, 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 (EPL), collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. Upon inquiry of the County in order to review the procedures in place for verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the County disclosed that there was not any procedure or internal control in place to verify that applicable vendors were not suspended or debarred from participation in federal programs prior to entering into a covered transaction. 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). . . ." Cause The County, being unaware of the compliance requirement, had not designed or implemented a proper system of internal controls, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the County's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. INDIANA STATE BOARD OF ACCOUNTS 15 MORGAN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed system of internal controls, the County cannot ensure the contractors paid with federal funds are eligible to participate in federal programs. Any program funds used to pay contractors 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 develop policies and procedures to ensure that all contractors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from participating in federal program before entering into any contracts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Categories

Procurement, Suspension & Debarment Subrecipient Monitoring

Other Findings in this Audit

  • 485145 2023-001
    Material Weakness
  • 485146 2023-002
    Material Weakness
  • 1061587 2023-001
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
93.563 Child Support Enforcement $629,513
20.205 Highway Planning and Construction $624,663
21.027 Coronavirus State and Local Fiscal Recovery Funds $508,714
93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response $168,595
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $113,966
93.788 Opioid Str $62,711
97.042 Emergency Management Performance Grants $44,828
93.069 Public Health Emergency Preparedness $44,274
20.600 State and Community Highway Safety $42,578
16.575 Crime Victim Assistance $36,943
97.047 Pre-Disaster Mitigation $24,881
93.658 Foster Care_title IV-E $20,501
16.588 Violence Against Women Formula Grants $17,852
20.608 Minimum Penalties for Repeat Offenders for Driving While Intoxicated $10,530
16.607 Bulletproof Vest Partnership Program $4,818