FINDING 2023-002
Subject: Internal Controls over COVID-19 - Coronavirus State and Local
Fiscal Recovery Funds: American Rescue Plan Grant
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 Requirements: Activities Allowed or Unallowed, Allowable Costs/
Cost Principles, Period of Performance, Reporting
Audit Finding: Material Weakness
INDIANA STATE BOARD OF ACCOUNTS 15
LAWRENCE COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Condition and Context
Prior to receipt of direct Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds,
all eligible entities were required to execute a Financial Assistance Agreement (Agreement), which included
the Award Terms and Conditions that recipients must comply with in carrying out the objectives of their
award. Per the Agreement, the County was responsible for the effective administration of the federal award,
as well as the application of sound management practices and administration of federal funds in a manner
consistent with program objectives and terms and conditions of the award.
Activities Allowed or Unallowed, Allowable Costs/Cost Principles, and Period of Performance
Recipients may use SLFRF award funds for any eligible expenses subject to the restrictions
set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the
American Rescue Plan Act of 2021 and amended by the Consolidated Appropriations Act of
2023. The SLFRF program provides substantial flexibility for each recipient to meet local needs
within seven separate eligible use categories. Recipients may use SLFRF award funds to:
Respond to the COVID-19 public health emergency and its negative economic impacts;
Respond to workers performing essential work during the COVID-19 public health emergency
by providing premium pay to eligible workers of eligible employers that have eligible
workers who are performing essential work;
Provide government services, to the extent COVID-19 caused a reduction in revenues
collected in the most recent full fiscal year of the recipient;
Make necessary investments in water, sewer, or broadband infrastructure;
Provide emergency relief from natural disasters or their negative economic impacts;
Fund eligible Surface Transportation projects; and
Fund Title I projects that are eligible activities under the Community Development Block
Grant and Indiana Community Development Block Grant programs.
Pursuant to the Agreement, the period of performance for the award began on the date the funds
were disbursed to the County and ends on December 31, 2026. Recipients may only use funds to cover
costs incurred during the period that began on June 7, 2021, and ends on December 31, 2024, for the first
four eligible uses, and from December 29, 2022 to December 31, 2024, for the remaining three eligible
uses. Recipients must liquidate all obligations incurred by December 31, 2024, under the award no later
than September 30, 2026, for Surface Transportation and Title I projects and December 31, 2026, for all
other projects.
As part of sound management of the federal award, the County was responsible for implementing
a system of internal controls that would ensure compliance with the applicable requirements. The County
had not properly designed or implemented such a system. There was no evidence of segregation of duties,
such as an oversight, review, or approval process, that would have ensured that expenditures of award
funds were made only for activities and costs that were allowable under the federal award and federal
regulations and that expenditures were made only for costs incurred within the period of performance.
INDIANA STATE BOARD OF ACCOUNTS
16
LAWRENCE COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Reporting
Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports
to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the
respective due dates, are based upon type of recipient and its population, as well as recipient's
allocation amount. Information to be reported includes projects funded, expenditures, and
contracts for the appropriate reporting period.
The County was classified as a county with a population below 250,000 residents that received
an allocation of less than $10 million in SLFRF award funds. As such, the initial P&E report,
covering the period from March 3, 2021 to March 31, 2022, was required to be submitted to the
Treasury by April 30, 2022. The subsequent annual reports are to cover one calendar year
and must be submitted to the Treasury by April 30 each year.
The County submitted the annual P&E report during the audit period; however, the County
Auditor prepared and submitted the report without a review or oversight process in place to
ensure that the reports were accurate.
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
A proper system of internal controls was not designed by management of the County. 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.
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.
INDIANA STATE BOARD OF ACCOUNTS 17
LAWRENCE COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Recommendation
We recommended that management of the County design and implement a proper system of
internal controls, including policies and procedures that would provide segregation of duties to ensure
appropriate reviews, approvals, and oversight of federal expenditures and reports are taking place.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.