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FINDING 2025-005 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): 2025 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 2024-004. 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.gov Exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Upon inquiry of the City, 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 City disclosed that the venders were not verified by any of the three methods. Two covered transactions, exceeding $25,000 for goods or services that were paid using COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, were identified during the audit period, and both were selected for testing. The City did not perform any procedures to verify the suspension and debarment status prior to executing the contracts. The amount paid totaled $1,211,438. 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 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: INDIANA STATE BOARD OF ACCOUNTS 25 CITY OF VINCENNES SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 City did not establish policies and procedures to ensure that appropriate suspension and debarment verification procedures were performed for vendors and subrecipients prior to entering into any contracts or subawards. 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 City. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City 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.