Finding 1075800 (2023-003)

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): FY 2023 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. INDIANA STATE BOARD OF ACCOUNTS 17 WHITE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Prior to entering into subawards and covered transactions with COVID-19 - Coronavirus State and Local Fiscal Recovery Funds award funds, recipients are required to verify that vendors 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. The County's procedure to ensure vendors were not suspended or debarred was to add a clause to contracts for the vendor to certify they were not suspended or debarred. A population of five covered transactions was identified. Two covered transactions, totaling $1,710,669, were selected for testing. For both covered transactions tested, the contract utilized did not include a clause for suspension and debarment. No other procedures were performed for the two transactions, thus documentation to show that suspension and debarment was verified prior to entering into a covered transaction was not provided. The lack of effective 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). . . ." 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 The County's system of internal controls as established by management did not take into account situations in which the County's contract template is not utilized or a formal contract is not required. INDIANA STATE BOARD OF ACCOUNTS 18 WHITE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The County's contract template was not utilized, and, therefore, the necessary suspension and debarment clause was not included. Any program funds the County used to pay contractors that have been suspended or debarred would be unallowable and the funding agency could potentially recover funds. Furthermore, 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. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County strengthen their policies and procedures to include situations when their contract template is not utilized, or when a formal contract is not necessary so as to ensure that contractors paid $25,000 or more, all or in part with federal funds, are not suspended, debarred, or otherwise excluded prior to making payment or entering into a contract. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.