Finding 1076234 (2023-002)

FINDING 2023-002 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): FY 2023 Pass-Through Entity: Monroe County Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context Prior to entering into subawards and covered transactions with 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 done by checking the Excluding Parties List System (EPLS), collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. The District did not have a policy related to SLFRF suspension and debarment requirements. Three vendors were identified as having transactions that equaled or exceeded $25,000. All three vendors were selected for testing. The three vendors were reviewed, and only one of the vendors had documented audit evidence to show that the vendor was checked for suspension, debarment, or other exclusion prior to entering into the transactions. This was due to the utilization of a purchasing cooperative for this purchase. The other two vendors, with total expenditures of $66,575, did not have documented audit evidence to show that the vendors were checked for suspension, debarment, or other exclusion prior to entering into the transactions. 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: INDIANA STATE BOARD OF ACCOUNTS 15 MONROE FIRE PROTECTION DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; (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 Management of the District had not developed a system of internal controls that addressed the need to verify suspension, debarment, or other exclusions prior to entering into transactions with vendors. Effect Without the proper design and implementation of an effectively designed system of internal controls, the District cannot ensure the vendors paid with federal funds are eligible to participate in federal programs. Any program funds the District used to pay vendors that have been suspended and debarred would be unallowable. 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 funding to the District. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the District's management establish a proper system of internal controls and develop policies and procedures to ensure contractors are not suspended, debarred, or otherwise excluded prior to entering into contracts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.