Finding Text
FINDING 2023-002
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery
Funds - Procurement and 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): CY-2023
Compliance Requirement: Procurement and Suspension and Debarment
Audit Finding: Material Weakness
Condition and Context
Prior to entering into subawards and covered transactions with federal award funds, recipients are
required to verify that such contractors and subrecipients 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 (EPL), collecting a certification from
that vendor, or adding a clause or condition to the covered transaction with that vendor.
Upon inquiry of the County in order to review the procedures in place for 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 there was not any procedure or internal control in place to verify that applicable
vendors were not suspended or debarred from participation in federal programs prior to entering into a
covered transaction.
The lack of internal controls was a systemic issue 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). . . ."
Cause
The County, being unaware of the compliance requirement, had not designed or implemented a
proper system of internal controls, which would include segregation of key functions. Embedded within a
properly designed and implemented internal control system should be internal controls consisting of policies
and procedures. Policies reflect the County's management statements of what should be done to effect
internal controls, and procedures should consist of actions that would implement these policies.
INDIANA STATE BOARD OF ACCOUNTS
15
MORGAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Effect
Without the proper implementation of an effectively designed system of internal controls, the
County cannot ensure the contractors paid with federal funds are eligible to participate in federal programs.
Any program funds used to pay contractors that have been suspended or debarred would be unallowable,
and the funding agency could potentially recover them.
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 all contractors that are paid $25,000 or more, all or in
part with federal funds, are not suspended or debarred from participating in federal program before entering
into any contracts.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.