Finding Text
FINDING 2025-003 Subject: National Infrastructure Investments - Suspension and Debarment Federal Agency: Department of Transportation Federal Program: National Infrastructure Investments Assistance Listings Number: 20.933 Federal Award Number and Year (or Other Identifying Number): 69A36525420080RASIN Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context As part of sound management of the federal award, the Authority was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The Authority had not properly designed or implemented such a system that would likely be effective in preventing, or detecting and correcting, noncompliance with the suspension and debarment requirements of the federal award. Prior to entering into subawards and covered transactions with the National Infrastructure Investments award funds, recipients are required to verify that such beneficiaries 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 (EPLS), collecting certification from that person, or adding a clause or condition to the covered transaction with that person. INDIANA STATE BOARD OF ACCOUNTS 17 PERRY COUNTY PORT AUTHORITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The Authority designed procedures to verify that vendors were not suspended or debarred or otherwise excluded from receiving federal awards prior to entering into a covered transaction by including a clause in the contracts signed with each vendor. We identified four vendors during the audit period with which the Authority entered into a covered transaction and selected all four vendors for testing. For three of these vendors, the signed contract included the required clause. The fourth contract, however, did not include the required clause, nor did the Authority perform other procedures to verify the vendor's status prior to entering into the covered transaction. The Authority disbursed grant funds totaling $70,600 to this vendor. The lack of internal controls and noncompliance were isolated to one of the four vendors with which the Authority entered into a covered transaction during 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 The Authority lacked adequate internal controls to verify that contracts incorporated the required suspension and debarment certification and related federal compliance clause prior to awarding the contract. INDIANA STATE BOARD OF ACCOUNTS 18 PERRY COUNTY PORT AUTHORITY 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. The Authority did not follow its stated procedures for verifying that a vendor is not excluded or disqualified from receiving federal funds and did not include a clause in the contract with a vendor with which the Authority entered into a covered transaction, placing the Authority in noncompliance with the suspension and debarment requirement of the federal award. By not performing this verification, the Authority 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 Authority. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Authority enhance its system of internal controls to ensure compliance with the suspension and debarment requirements of the federal award and follow its stated procedures, or perform alternative procedures, for verifying that a vendor is not excluded or disqualified from receiving federal funding for all vendors with which the Authority plans to enter into a covered transaction. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.