FINDING 2024-002
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): Contract #65851
Pass-Through Entity: Schneck Medical Center
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2023-001.
Condition and Context
An effective internal control system was not in place at the City to ensure compliance with requirements
related to the grant agreement and the Procurement and Suspension and Debarment compliance
requirement.
Procurement
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. Purchases from the
vendor totaled $148,800. As such, price or rate quotations from an adequate number of
qualified sources should have been obtained. However, the City did not obtain price or rate
quotations for the purchases, nor was full and open competition provided for the vendor.
Additionally, there was no documentation available to support the rationale to limit competition.
INDIANA STATE BOARD OF ACCOUNTS
15
CITY OF SEYMOUR
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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.
The City did not have policies or procedures in place for verifying that an entity with which it
planned to enter into a covered transaction was not suspended, debarred, or otherwise
excluded until November 25, 2024. One of the two vendors selected for testing, with covered
transactions totaling $148,800, was not verified to ensure that the vendor was not suspended,
debarred, or otherwise excluded.
The lack of internal controls and noncompliance were systemic issues until the City implemented
new policies and procedures in November 2024.
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 —
INDIANA STATE BOARD OF ACCOUNTS
16
CITY OF SEYMOUR
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(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. . . .
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; 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 City did not have a procurement policy in place that contained the requirements of the
procurement standards as outlined in the Code of Federal Regulations prior to entering into an agreement
with the vendor. Due to the timing of the adoption of the City's Procurement and Suspension and
Debarment Policy, which defines procedures to ensure they are properly procuring services and verifying
suspension and debarment status for covered transactions, not all of the items selected for testing were in
compliance.
Effect
Without the proper implementation of an effectively designed system of internal controls, the City
cannot ensure that goods and services are appropriately procured and that contractors paid with federal
funds are eligible to participate in federal programs. Any program funds the City used to pay contractors
that have been suspended or debarred would be unallowable, and the funding agency could potentially
recover them. 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 City.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended adhering to the newly implemented procurement policies to ensure compliance
with state and federal laws and regulations for procuring goods and services paid with federal funds. We
also recommended that management of the City adhere to its newly approved policy of internal controls to
ensure that all contractors that are expected to be 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 covered
transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.