Finding Text
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): FY2020 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the prior audit report. The prior audit finding number was 2024-001. INDIANA STATE BOARD OF ACCOUNTS 14 WARRICK COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that vendors or subrecipients are not suspended, debarred, or otherwise excluded from receiving federal funds. "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 can be done by checking SAM Exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Upon inquiry of the County, in order to review the procedures in place verifying that a vendor with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded, the County disclosed that the County Administrator reviews the SAM website to ensure that a vendor does not have any exceptions. The Administrator then prints a copy of the SAM website search, signs and dates the page, and includes it in the vendors' file for the County Commissioners' potential review. However, the County lacked effective monitoring internal controls, and there was no evidence that an independent secondary review or approval of these verifications was actually performed prior to executing the contracts. A total of 15 covered transactions exceeding $25,000 for goods or services that were paid using COVID-19 - Coronavirus State and Local Fiscal Recovery Funds award were identified during the audit period, and 4 were selected for testing. The County searched the federal database; however, the searches generated a "No matches found" result because the vendors did not maintain an active registration profile in the system. The County did not perform secondary follow-up procedures or obtain alternative compliance documentation to verify the suspension and debarment status prior to executing the contracts. The amount paid to all 4 vendors selected for testing was $254,641. 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." INDIANA STATE BOARD OF ACCOUNTS 15 WARRICK COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The County Administrator performed the initial search on the SAM website; however, management was not aware that a "No matches found" search screen caused by a vendor's lack of an active registration profile did not constitute a valid suspension and debarment verification. Additionally, the County's review process was not operating effectively to independently verify documentation prior to contract execution. The County lacked adequate monitoring internal controls to ensure that secondary verification methods, such as collecting a direct vendor certification or adding a compliance clause to the contract, were executed when a vendor could not be located in the federal database. Effect The lack of an effective internal control system enabled material noncompliance to occur and remain undetected. Noncompliance with the Procurement and Suspension and Debarment compliance requirement could lead to contracting with vendors who are suspended or debarred from receiving federal grant funding. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funding to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County establish a proper system of internal controls and develop policies and procedures to ensure that appropriate suspension and debarment verification procedures are performed for vendors and subrecipients prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.