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FINDING 2025-002 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 Number and Year (or Other Identifying Number): FY25 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 2024-003. Condition and Context Suspension and Debarment 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, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. During the audit period, the County disbursed SLFRF funds to four separate contractors, totaling $472,440, that equaled or exceeded $25,000. However, no suspension and debarment verification procedures were carried out for these transactions. The County's policy only requires such verification for contracts awarded through sealed bidding. INDIANA STATE BOARD OF ACCOUNTS 15 DECATUR 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 intend to 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 worked on designing and implementing policies and procedures to verify that beneficiaries were not suspended or debarred, or otherwise excluded from participating in federal programs, but the procedures were not completed until 2025. The procedures were not in place for the covered transactions entered into prior to 2025. For covered transactions entered into in 2025, the County did not follow its procedures to verify that contractors were not suspended or debarred, or otherwise excluded from participating in federal programs, due to an oversight in adapting County procurement policies to federal grant compliance. Effect Without the proper design or implementation of internal controls, the County could not ensure that contractors paid with federal funds are eligible to participate in federal programs. 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 the funds. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 16 DECATUR COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the County establish a proper system of internal controls to ensure that the current policy in place is properly implemented for all contractors that are paid $25,000 or more, all or in part with federal funds, to ensure they are not suspended, debarred, or otherwise excluded from participating in federal programs. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.