FINDING 2023-005
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): FY 2022
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. The prior audit finding number was
2022-004.
Condition and Context
An effective internal control system was not in place at the County to ensure compliance with the
requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance
requirement.
Procurement - Policy
The County had not established a purchasing policy that would reflect applicable state laws
and regulations, including procedures to avoid acquisition of unnecessary or duplicative items;
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; and did not maintain
written standards of conduct covering conflicts of interest and governing actions of its
employees engaged in the selection, award, and administration of contracts.
Suspension and Debarment
Prior to entering into subawards and covered transactions with State and Local Fiscal Recovery
Funds (SLFRF) 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 System (EPLS),
collecting a certification from that person or adding a clause or condition to the covered
transaction with that person.
The County did not have internal controls in place to ensure compliance with the suspension
and debarment compliance requirement. Upon inquiry of the County's policies and procedures
related to suspension and debarment requirements, the County stated that they did not have
policies or 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 or disqualified from
participating in federal assistance programs or activities.
INDIANA STATE BOARD OF ACCOUNTS
21
SHELBY COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Two covered transactions for goods or services that equaled or exceeded $25,000 that were
paid from SLFRF funds during the audit period were identified. Each transaction was examined
to determine whether the County verified the suspension and debarment status of either vendor
prior to payment. The two covered transactions, totaling $223,499, did not include the
appropriate provisions in the contracts nor did the County require a certification or check the
EPLS to ensure the entity was not suspended or debarred prior to making payment.
The lack of internal controls and noncompliance were systemic issues throughout the audit period
for the FY 2022 grant.
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 200.318(a) states:
"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."
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
debarred, 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
(c) Adding a clause or condition to the covered transaction with that person."
INDIANA STATE BOARD OF ACCOUNTS
22
SHELBY COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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 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, vendors and subrecipients to whom payments equal to or in excess of $25,000
were not verified to be not suspended, debarred, or otherwise excluded. Any program funds the County
used to pay vendors 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 contractors and subrecipients, as appropriate, are not
suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Additionally,
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.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.