Finding Text
FINDING 2024-003 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 2024 Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Significant Deficiency Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. Condition and Context An internal control system, which would include segregation of duties, was not in place at the County in order to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. The County elected to receive the standard revenue loss allowance, allowing the County to claim its total COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $9,273,712 as revenue loss to use for government services. The U.S. Department of the Treasury (Treasury) determined that there are no subawards under this eligible use category and that recipients' use of revenue loss funds would not give rise to subrecipient relationships given that there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. INDIANA STATE BOARD OF ACCOUNTS 18 NOBLE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Prior to entering into subawards and covered transactions with 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, collecting a certification from that person or entity, or adding a clause or condition to the covered transaction with that person or entity. Due to the Treasury's determination that the revenue loss eligible use category does not give rise to subawards, the County was only required to comply with suspension and debarment requirements related to covered transactions. We selected three covered transactions for testing. The County had procedures in place to verify that persons and entities related to each of the covered transactions were not suspended, debarred, or otherwise excluded; however, there was no review or approval process documented for us to verify that an internal control system was designed and operating properly. The lack of internal controls was systemic 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). . . ." Cause After the prior audit, the County established procedures to include a suspension and debarment clause in agreements and contracts, or the SAM Coordinator would check for exclusions using the SAM.gov website. Internal control procedures were implemented for a second person to review the documentation; however, the suspension and debarment documentation was not provided to the second person for review. Effect Without the proper implementation of an effectively designed system of internal controls, the County could not ensure the persons and entities paid with federal funds were eligible to participate in federal programs. Any program funds the County would have used to pay contractors that had been suspended or debarred would have been unallowable, and the funding agency could have potentially recovered them. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 19 NOBLE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the County strengthen its system of internal controls to ensure that all vendors with covered transactions that are $25,000 or more, paid for completely or in part with federal funds, are not suspended, debarred, or otherwise excluded from participating in federal programs prior to entering into any contracts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.