FINDING 2023-004
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): FY23
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
INDIANA STATE BOARD OF ACCOUNTS
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DECATUR COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Condition and Context
Procurement Policy
The County did not have documented procurement procedures or policies reflecting applicable
state or federal laws and regulations for procuring goods and services paid with federal funds.
Small Purchases
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is
customarily set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold
of $150,000 or less for when small purchase procedures may be used. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
One vendor was identified that fell within the small purchase threshold, with total purchases of
$33,100. Price or rate quotations were not obtained, nor was full and open competition
provided for the vendor. Additionally, there was no documentation available to support the
rationale to limit competition.
Simplified Acquisition Threshold
When the value of the procurement for property or services exceeds the simplified acquisition
threshold (SAT), or a lower threshold established by a nonfederal entity, formal procurement
methods are required. The SAT is typically set at $250,000; however, Indiana Code 5-22-8
has a more restrictive threshold, and, therefore, the threshold the SAT is set at $150,000.
Formal procurement methods require adherence to documented procedures and formal
methods such as sealed bids or proposals.
One vendor was identified that fell within the SAT, with total purchases of $213,734. Sealed
bids or competitive proposals were not obtained, nor was a circumstance met that would have
allowed for a noncompetitive procurement for the purchases.
Suspension and Debarment
Prior to entering into subawards and covered transactions with the COVID-19 - Coronavirus
State and Local Fiscal Recovery Funds (SLFRF) 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 System
(EPLS), collecting a certification from that person, or adding a clause or condition to the
covered transaction with that person.
INDIANA STATE BOARD OF ACCOUNTS
20
DECATUR COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The County did not have any 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. A population of six covered transactions, totaling $470,435, that equaled or
exceeded $25,000 paid from SLFRF award funds was identified. Four of the six covered
transactions, totaling $312,745, were selected for testing. For each of the four transactions,
the County did not verify the vendors' suspension or debarment status prior to payment due to
the County 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.
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 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal procurement
methods to expedite the completion of its transactions and minimize the associated
administrative burden and cost. The informal methods used for procurement of property
or services at or below the SAT include: . . .
(2) Small purchases –
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold but
does not exceed the simplified acquisition threshold. If small purchase procedures
are used, price or rate quotations must be obtained from an adequate number of
qualified sources as determined appropriate by the non-Federal entity. . . .
INDIANA STATE BOARD OF ACCOUNTS 21
DECATUR COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(b) Formal Procurement Methods. When the value of the procurement for property or
services under a Federal financial assistance award exceeds the SAT, or a lower threshold
established by a non-Federal entity, formal procurement methods are required. Formal
procurement methods require following documented procedures. Formal procurement
methods also require public advertising unless a non-competitive procurement can be used
in accordance with § 200.319 or paragraph (c) of this section. The following formal
methods of procurement are used for procurement of property or services above the
simplified acquisition threshold or a value below the simplified acquisition threshold the
non-Federal entity determines to be appropriate: . . .
(1) Sealed bids. A procurement method in which bids are publicly solicited and a firm
fixed-price contract (lump sum or unit price) is awarded to the responsible bidder
whose bid, conforming with all the material terms and conditions of the invitation
for bids, is the lowest in price. The sealed bids method is the preferred method for
procuring construction, if the conditions. . . .
(2) Proposals. A procurement method in which either a fixed price or costreimbursement
type contract is awarded. Proposals are generally used when
conditions are not appropriate for the use of sealed bids. . . ."
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 over procurement and suspension and debarment was not
implemented by the management of the County to ensure that goods and services were properly procured
and that vendors to whom payment equaled or exceeded $25,000 were not suspended or debarred.
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.
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, property and services were not properly procured and vendors to whom
payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise
excluded.
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 County.
INDIANA STATE BOARD OF ACCOUNTS
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DECATUR COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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 procedures to ensure that property and services are properly procured and that contractors
are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.