FINDING 2023-003
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): TRSW220818
Pass-Through Entity: Indiana Finance Authority
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement - Policy
The Town did not have an approved procurement policy that reflected applicable state laws
and regulations, including procedures to avoid acquisition of unnecessary or duplicative items
and procedures, to ensure that all solicitations incorporate a clear and accurate description of
the technical requirements for the material, product, or service to be procured.
The Town is required to have and use documented procurement procedures, which are
consistent with state, local, and tribal laws and regulations and the standards of this section,
for the acquisition of property or services required under a federal award or subaward.
Suspension and Debarment
The Town received $1,578,280 in State Water Infrastructure Fund distributions, which were
funded with State and Local Fiscal Recovery Funds (SLFRF) dollars and were subject to the
suspension and debarment requirements.
Prior to entering into subawards and covered transactions with SLFRF award funds, recipients are
required to verify that such contracts and subrecipients are not suspended, debarred, or otherwise
excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded
under procurement and nonprocurement transactions (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 (EPLS),
collecting a certification from that person, or adding a clause or condition to the covered transaction with
that person.
Upon inquiry of the Town to determine its policies and procedures related to suspension and
debarment requirements, the Town stated that it did not have policies or procedures in place for verifying
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. Six covered
transactions, totaling $1,578,280, to one vendor for goods or services that equaled or exceeded $25,000
that were paid from SLFRF funds were identified. Each transaction was examined to determine whether
the Town verified the suspension and debarment status prior to payment. The Town had not verified the
vendor's suspension and debarment status for any of the covered transactions prior to issuing payment.
The lack of internal controls and noncompliance were systematic issues throughout the audit
period.
INDIANA STATE BOARD OF ACCOUNTS
18
TOWN OF DALEVILLE
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 200.318(a) states:
"The non-Federal entity must have and use documented procurement procedures, consistent
with State, local, and tribal laws and regulations and the standards of this section, for the
acquisition of property or services required under a Federal award or subaward. The non-
Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327."
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
A proper system of internal controls was not designed by the management of the Town. Embedded
within a properly designed and implemented internal control system should be internal controls consisting
of policies and procedures. Policies reflect the Town's management statements of what should be done to
effect internal controls, and procedures should consist of actions that would implement these policies. The
Town had not received federal funds for several years. The Clerk-Treasurer was not knowledgeable on
the compliance requirements of the federal award. Although the Town contracted with outside engineers
to manage the compliance requirement, there was no documentation that they included a suspension or
debarment clause.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified
to be not suspended, debarred, or otherwise excluded.
INDIANA STATE BOARD OF ACCOUNTS 19
TOWN OF DALEVILLE
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Any program funds the Town used to pay vendors that have been suspended or debarred would
be unallowable, and the funding agency could potentially recover them. Additionally, 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 adopt a procurement policy that is reflective of state laws and
regulations. We also recommended that the Town 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.