FINDING 2023-004
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): FY2023
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Repeat Finding
This is a repeat finding from the immediately prior audit report for suspension and debarment. The
prior audit finding number was 2022-003.
Condition and Context
Procurement - Policy
The County did not have a County Council approved procurement policy that would reflect
applicable state laws and regulations, including procedures to avoid acquisition of unnecessary
or duplicative items and procedures to ensure that all solicitations incorporate a clear and
accurate description of the technical requirements for the material, product, or service to be
procured.
Procurement - Small Purchases
Federal regulations allow for informal procurement methods when the value of the procurement
for property or services does not exceed the simplified acquisition threshold, which is set at
$250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana
Code has set a more restrictive threshold of $150,000, informal procurement methods are
permitted when the value of the procurement does not exceed $150,000. This informal process
allows for methods other than the formal bid process. The informal process is divided between
two methods based on thresholds. Micro-purchases, typically for those purchases $50,000 or
under, and small purchase procedures for those purchases above the micro-purchase
threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded
without soliciting competitive price rate quotations. If small purchase procedures are used,
then price or rate quotations must be obtained from an adequate number of qualified sources.
INDIANA STATE BOARD OF ACCOUNTS
25
BOONE COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
The County had five vendors that qualified for testing under small purchase procurement
requirements (vendors paid $10,000-$150,000). Of the two chosen for testing, one was
awarded a contract without the County obtaining quotes. The contract awarded was $31,000
for engineering services related to drain construction.
The lack of effective internal controls and noncompliance was isolated to the small purchase
identified above.
Suspension and Debarment
Prior to entering into subawards and covered transactions with State and Local Fiscal Recovery
Funds (SLFRF), 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 System (EPLS), collecting a certification from that
person, or adding a clause or condition to the covered transaction with that person. Due to the
U.S. Department of the Treasury's (Treasury) determination that the revenue loss eligible use
category does not give rise to subawards, the County was only required to comply with
suspension and debarment requirements related to covered transactions.
Upon inquiry of the County, in order to review the procedures in place for verifying that an entity
with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise
excluded, the County explained they were aware of the suspension and debarment
requirements related to the SLFRF awards; however, the County did not retain documentation
of SAMs.gov checks nor was a clause always included in a contract. A population of ten
covered transactions for goods or services, totaling $2,371,047, that equaled or exceeded
$25,000 paid from SLFRF funds during the audit period was identified. A sample of three
transactions, totaling $1,473,295, was selected for testing. For each of the three transactions,
the County did not verify the vendors' suspension and debarment status prior to payment. Due
to the number and magnitude of exceptions identified, per auditor judgment, we concluded it
would not be appropriate to expand the sample size or perform any additional audit procedures.
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). . . ."
INDIANA STATE BOARD OF ACCOUNTS
26
BOONE COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200.318 states:
"(a) The non-Federal entity must have and use documented procurement procedures,
consistent with State, local, and tribal laws and regulations and the standards of this section,
for the acquisition of property or services required under a Federal award or subaward. The
non-Federal entity's documented procurement procedures must conform to the procurement
standards identified in §§ 200.317 through 200.327. . . .
(i) The non-Federal entity must maintain records sufficient to detail the history of procurement.
These records will include, but are not necessarily limited to, the following: Rationale for the
method of procurement, selection of contract type, contractor selection or rejection, and the
basis for the contract price. . . ."
2 CFR 200.320 states in part:
"The non-Federal entity must have and use documented procurement procedures, consistent
with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following
methods of procurement used for the acquisition of property or services required under a
Federal award or sub-award.
(a) Informal procurement methods. When the value of the procurement for property or
services under a Federal award does not exceed the simplified acquisition threshold (SAT),
as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal
procurement methods are not required. The non-Federal entity may use informal
procurement methods to expedite the completion of its transactions and minimize the
associated administrative burden and cost. The informal methods used for procurement
of property or services at or below the SAT include: . . .
(2) Small purchases —
(i) Small purchase procedures. The acquisition of property or services, the
aggregate dollar amount of which is higher than the micro-purchase threshold but
does not exceed the simplified acquisition threshold. If small purchase procedures
are used, price or rate quotations must be obtained from an adequate number of
qualified sources as determined appropriate by the non-Federal entity. . . ."
2 CFR 200.214 states:
"Non-federal entities are subject to the non-procurement debarment and suspension regulations
implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2
CFR part 180 restrict awards, subawards, and contracts with certain parties that are de-barred,
suspended, or otherwise excluded from or ineligible for participation in Federal assistance
programs or activities."
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:
(a) Checking the EPLS; or
(b) Collecting a certification from that person if allowed by this rule; or
INDIANA STATE BOARD OF ACCOUNTS
27
BOONE COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(c) Adding a clause or condition to the covered transaction with that person."
Part 4 of the Treasury's Compliance and Reporting Guidance states in part: ". . . recipients are
expected to have procurement policies and procedures in place that comply with the procurement standards
outlined in the Uniform Guidance . . ."
Cause
A proper system of internal controls was not designed by the management of the County. The
County was unable to provide documentation to demonstrate it checked SAM.gov to verify that contractors
and vendors were not suspended or debarred. The County was also unable to provide documentation
explaining the rationale behind decisions to offer contracts without obtaining an adequate number of bids
or quotes.
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.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
internal control system cannot be capable of effectively preventing, or detecting and correcting, material
noncompliance. As a result, one small purchase did not have an adequate number of quotes. In addition,
vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended,
debarred, or otherwise excluded.
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 County.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended the County establish documented procurement procedures consistent with state
and local laws for the acquisition of property or services required under a federal award or subaward as
outlined in the code of federal regulations. In addition, we recommended the County adhere to the
procurement policies and obtain required quotes and bids or adequately document a sole source situation.
Finally, we recommended that the County strengthen its system of internal controls to ensure that all
vendors that are paid $25,000 or more, all or in part with federal funds, are not suspended or debarred from
participating in federal programs before entering into any covered transactions.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.