FINDING 2025-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Period of Performance 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): IN0086 Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the Town to ensure compliance with requirements related to the grant agreement and the Period of Performance compliance requirement. Recipients must liquidate all obligations incurred by December 31, 2024, under the award no later than December 31, 2026, which is the end of the period of performance. As such, program obligations or costs must be incurred from the period beginning on March 3, 2021, and ending on December 31, 2024. No new obligations or costs may be incurred during the period beginning January 1, 2025, and ending on December 31, 2026. During this two-year period from January 1, 2025 through December 31, 2026, recipients are only permitted to expend funds to satisfy obligations incurred by December 31, 2024. An "obligation" includes an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. A recipient is also considered to have incurred an obligation by December 31, 2024, with respect to a requirement under federal law or regulation or a provision of the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award terms and conditions to which the recipient becomes subject as a result of receiving or expending SLFRF funds. INDIANA STATE BOARD OF ACCOUNTS 16 TOWN OF CLARKSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Subsequent to December 31, 2024, the Town entered into three contracts on March 6, March 26, and November 26, 2025, respectively. During the audit period, the Town incurred and paid expenses totaling $1,072,479 related to these agreements. We consider $1,072,479 to be questioned costs. 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 35.5(a) states: "In general. A recipient may only use funds for the purposes enumerated in § 35.6 (b) through (f) to cover costs incurred during the period beginning March 3, 2021, and ending December 31, 2024, subject to the restrictions set forth in sections 602(c)(2) and 603(c)(2) of the Social Security Act, as applicable. A recipient may only use funds for the purposes enumerated in § 35.6 (g) through (h) to cover costs incurred during the period beginning December 29, 2022, and ending December 31, 2024, subject to the restrictions set forth in sections 602(c)(2), 602(c)(5)(C), 603(c)(2), and 603(c)(6)(B) of the Social Security Act, as applicable." 2 CFR 200.1 states in part: ". . . Financial obligations, when referencing a recipient's or subrecipient's use of funds under a Federal award, means orders placed for property and services, contracts and subawards made, and similar transactions that require payment. . . ." 31 CFR 35.3 states in part: ". . . Obligation means an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment. . . ." Cause The Town's management failed to properly design and implement an internal control system that would have ensured the Period of Performance compliance requirement was adhered to during the audit period. No new obligations or costs were to be incurred during the period beginning January 1, 2025, and ending on December 31, 2026. The Town entered into three contracts, incurred and paid expenses from the program related to these contracts that were awarded subsequent to December 31, 2024. Effect The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Period of Performance compliance requirement could have resulted in the loss of federal funds to the Town. INDIANA STATE BOARD OF ACCOUNTS 17 TOWN OF CLARKSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs Questioned costs in the amount of $1,072,479 were identified as noted in the Condition and Context. Recommendation We recommended that the Town's management establish an effective system of internal controls and to ensure compliance with the grant agreement and the Period of Performance compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.