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FINDING 2025-004 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): SWIF235542 Pass-Through Entity: Indiana Finance Authority Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context As part of sound management of the federal award, the Town was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The Town had not properly designed or implemented such a system that would likely be effective in preventing, or detecting and correcting, noncompliance with the procurement and suspension and debarment requirements of the federal award. As a result, we identified the following noncompliance. INDIANA STATE BOARD OF ACCOUNTS 19 TOWN OF WHEATLAND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Suspension and Debarment As part of properly managing and administering federal awards, the Town was required to verify that vendors were not excluded or disqualified from receiving federal funding prior to entering into a covered transaction. The Town disbursed the entire funding received under the federal award totaling $1,020,924 to one vendor during the audit period, which constituted a covered transaction. The Town did not have any procedures in place to perform this verification, and as a result, the Town did not verify that this vendor was not suspended or debarred, or otherwise excluded, from receiving federal funding prior to entering into the covered transaction with the vendor. 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). . . ." 2 CFR 180.300 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 SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Historically, the Town has had little experience receiving federal funding. Additionally, the Clerk-Treasurer was new to the position and was unfamiliar with the compliance requirements associated with federal awards. As a result, the Town was unaware of the Procurement and Suspension and Debarment compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 20 TOWN OF WHEATLAND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of preventing, or detecting and correcting, noncompliance. As a result, the Town did not adopt a purchasing policy and therefore did not comply with the procurement requirements of the federal award. Additionally, the Town did not verify that the one vendor with which the Town entered into a covered transaction was not excluded or disqualified from receiving federal funds, which resulted in material noncompliance with the suspension and debarment requirements of the federal award. By not performing this verification, the Town could disburse funding to a vendor that is not eligible to receive federal funding. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the Town. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Town's management establish a proper system of internal controls to pass policies and procedures for review of suspension and debarment. Once policies are in place, establish internal controls to review suspension and debarment procedures to ensure they are performed properly and in compliance with federal requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. INDIANA STATE BOARD OF ACCOUNTS 21