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FINDING 2023-004 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): FY2023 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context An internal control system, which would include segregation of duties, was not implemented at the County to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Prior to entering into subawards and covered transactions with COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF), recipients were required to verify that contractors and subrecipients were 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 and all subawards. The verification could be done by checking the SAM exclusions list, collection of a certification from that person or entity, or adding a clause or condition to the covered transaction with that person or entity. INDIANA STATE BOARD OF ACCOUNTS 19 VIGO COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The County did not have policies and procedures in place to ensure vendors were not suspended or debarred prior to entering into covered transactions. There were three vendors with whom the County entered into covered transactions during the audit period. No procedures were performed to ensure the vendors were not suspended or debarred or otherwise excluded or disqualified from participation in federal assistance programs or activities. Transactions for these three vendors during the audit period totaled $141,131. 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 Management of the County had not developed a system of internal controls to ensure that policies and procedures were in place and followed, related to suspension and debarment, as they were unaware of the requirements. Effect Without proper implementation of an effectively designed system of internal controls, the County was unable to verify whether contractors and subrecipients were not suspended, debarred, or excluded. 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 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 County. INDIANA STATE BOARD OF ACCOUNTS 20 VIGO 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 system of internal controls to ensure that verifications are performed to determine whether each contractor had been suspended or debarred from participating in federal contracts prior to making payment. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.