Finding Text
FINDING 2024-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds: American Rescue Plan Act - 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): FY2024 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 2023-004. Condition and Context Prior to entering into subawards and covered transactions with the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF), 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 County did not have an effective internal control system in place related to the suspension and debarment requirements. A population of eight covered transactions, totaling $1,359,873, of which payments to each individual vendor equaled or exceeded $25,000 paid from SLFRF funds were identified during the audit period. Three of the transactions, totaling $811,500, were selected for testing. For each of the three transactions, the County did not verify the vendor's suspension or debarment status prior to payment due to the County not having an effective internal control system in place to verify that contractors were neither suspended or debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. INDIANA STATE BOARD OF ACCOUNTS 18 LAWRENCE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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). . . ." 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 County was unable to provide documentation to demonstrate they had effective internal controls in place to verify suspension and debarment status for covered transactions it intends to pay with federal funds. The County was unable to provide documentation to demonstrate they had properly verified that contractors were neither suspended nor debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. 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 and subrecipients to whom payments were equal to or in excess of $25,000 were not verified as to whether or not they were suspended, debarred, or otherwise excluded. Any program funds the County used to pay vendors that have been suspended or debarred would be unallowable, and the funding agency could potentially recover those funds. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 19 LAWRENCE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the County establish a proper system of internal controls and develop policies and procedures to ensure contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards that will be paid with federal grant funds. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.