Finding Text
FINDING 2025-003 Information on the federal program: Subject: Drinking Water State Revolving Fund – Internal Controls Federal Agency: Environmental Protection Agency Federal Program: Drinking Water State Revolving Fund (DWSRF) Assistance Listing Number: 66.468 Federal Award Numbers and Years (or Other Identifying Numbers): 2025 Pass-Through Entity: Indiana Financing Authority Compliance Requirement: Procurement Audit Finding: Material Weakness 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) " 2 CFR 200.318(a) states: "The non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable Federal law and the standards identified in this part." 2 CFR 200.320 states in part: "The non-Federal Entity must use one of the following methods of procurement. . . . b. Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources " Condition: An effective internal control system was not in place at the Town to ensure compliance with requirements related to the Drinking Water State Revolving Fund and Procurement compliance requirements as part of the small purchases procurement threshold. Cause: The Town was not aware that procurement policies/practices were needed for professional services, such as hiring a project engineer. Effect: The failure to obtain multiple bids placed the Town at risk of noncompliance with the grant agreement and the procurement compliance requirements. Questioned Costs: There were no questioned costs identified. Context: One contract was subject to small purchase procurement testing for calendar year 2025. The Town disbursed $147,963 to DLZ, Inc. during 2025 for engineering services related to the new water treatment plant. Based on our testing, the Town did not obtain quotes or otherwise solicit proposals from other qualified engineering firms prior to procuring these services. Identification as a repeat finding, if applicable: No. Not a repeat finding Recommendation: We recommend the Town establish and implement procedures to ensure purchases subject to small purchase procurement requirements are made in accordance with applicable procurement policies and regulations. Such procedures should include obtaining and documenting quotes for an adequate number of qualified sources prior to selecting a vendor. The Town should also retain documentation supporting the procurement process, including quotes received, vendor selection, and the basis for the award. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.