FINDING 2024-002 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 Numbers and Years (or Other Identifying Numbers): TRSW 2200305, CY 2024 Pass-Through Entity: Indiana Finance Authority Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Prior to entering into subawards and covered transactions with federal 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 or services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. 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 had not properly implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. Covered transactions in the amount of $1,454,478 were made during the audit period to three vendors. A total of $60,732 was paid from the CY 2024 award to one vendor, and a total of $1,393,746 was paid from the TRSW 2200305 award to two vendors. Of the three vendors paid by the County, one vendor contract included a suspension and debarment clause with total payments of $917,636 from the TRSW 2200305 award. For the other two vendors, the County did not check the EPLS nor was a certification collected from the vendors, and a clause did not exist in the agreements with the vendors. One of the vendors was paid a total of $60,732 from the CY 2024 award, and the other vendor was paid $476,110 from the TRSW 2200305 award. Although the County had a policy to include a clause in vendor contracts related to covered transactions, a clause was not included in those two contracts and no other documentation to verify the County's compliance with the suspension and debarment federal requirement was provided for audit. The lack of internal controls and noncompliance were 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). . . ." 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." 2 CFR 200.214 states: "Recipients and subrecipients are subject to the nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, as well as 2 CFR part 180. The regulations in 2 CFR part 180 restrict making Federal awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from receiving or participating in Federal awards." Cause The system of internal controls established by management of the County was not implemented as designed, and employees lacked sufficient training to carry out suspension and debarment procedures required to certify vendor status. Effect Without the proper implementation of an effectively designed system of internal controls, the system is incapable of effectively preventing, or detecting and correcting, material noncompliance. As a result, the County was not able to provide documentation that the suspension and debarment requirements were followed for two vendors to whom payment was equal to or in excess of $25,000 was paid. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management establish a system of internal controls to ensure compliance and comply with the grant agreements and the Procurement and Suspension and Debarment compliance requirement. Additionally, the County should ensure that all necessary personnel understand the requirements and County policies. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.