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 Recovery Funds
Assistance Listings Number: 21.027
Federal Award Number and Year (or Other Identifying Number): SWIF221677
Pass-Through Entity: Indiana Finance Authority
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
Procurement - Policy
The County had not established a purchasing policy that would reflect applicable state laws
and regulations, including procedures to avoid the 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.
INDIANA STATE BOARD OF ACCOUNTS
19
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Procurement and Suspension and Debarment
The County entered into an interlocal agreement with the City to procure services for a Sewer
Lift Station Improvement/Line Extension to the New County Jail project. Per the agreement,
the City would be responsible for all the procurement and suspension and debarment
processes involved in the project, and the County would be responsible for the compliance with
all grant funding for the project.
On September 23, 2021, the County received notification that it was eligible to receive
$1,900,000 from the Indiana Finance Authority (IFA) for a SWIF grant from SLFRF funds with
the intention of using the funding for the Sewer project shared by the County and City. The
notification stated that co-funding would be provided by the County and that the County could
enter into the SWIF grant agreement with the IFA once the funding was secure. On February
24, 2022, the City's Common Council approved a bid with B & T Drainage for the project. On
March 6, 2022, the County Council approved a $2,330,000 appropriation from its SLFRF funds
for co-financing of the project and, on the same day, signed a grant agreement with the IFA for
the SWIF grant funded with SLFRF funds totaling $2,300,000. The project was completed as
of December 31, 2023.
The County did not provide any of the following documentation requested to verify compliance
with the procurement and suspension and debarment requirements for the SWIF funds spent
on the project:
Copy of the original contract for $3,965,507.
Copy of any change orders.
Copy of the Board minutes where the bid was awarded by the Common Council.
Copy of the original bids made on the project.
Copy of documentation that vendor was not suspended or debarred.
The lack of internal controls and lack of appropriate supporting documentation was isolated to
the project noted above.
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
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SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
2 CFR 200.318 states in part:
"(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. . . .
(c)
(1) The non-Federal entity must maintain written standards of conduct covering conflicts
of interest and governing the actions of its employees engaged in the selection, award
and administration of contracts. . . .
(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 the contract type, contractor selection of 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. . . .
(b) Formal procurement methods. When the value of the procurement for property or
services under a Federal financial assistance award exceeds the SAT, or a lower threshold
established by a non-Federal entity, formal procurement methods are required. Formal
procurement methods require following documented procedures. Formal procurement
methods also require public advertising unless a non-competitive procurement can be used
in accordance with § 200.319 or paragraph (c) of this section. The following formal
methods of procurement are used for procurement of property or services above the
simplified acquisition threshold or a value below the simplified acquisition threshold the
non-Federal entity determines to be appropriate:
(1) Sealed bids. A procurement method in which bids are publicly solicited and a firm
fixed-price contract (lump sum or unit price) is awarded to the responsible bidder
whose bid, conforming with all the material terms and conditions of the invitation
for bids, is the lowest in price. The sealed bids method is the preferred method for
procuring construction, if the conditions.
(i) In order for sealed bidding to be feasible, the following conditions should be
present:
(A) A complete, adequate, and realistic specification or purchase description
is available;
(B) Two or more responsible bidders are willing and able to compete
effectively for the business; and
(C) The procurement lends itself to a firm fixed price contract and the selection
of the successful bidder can be made principally on the basis of price.
INDIANA STATE BOARD OF ACCOUNTS 21
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
(ii) If sealed bids are used, the following requirements apply:
(A) Bids must be solicited from an adequate number of qualified sources,
providing them sufficient response time prior to the date set for opening
the bids, for local, and tribal governments, the invitation for bids must be
publicly advertised;
(B) The invitation for bids, which will include any specifications and pertinent
attachments, must define the items or services in order for the bidder to
properly respond;
(C) All bids will be opened at the time and place prescribed in the invitation for
bids, and for local and tribal governments, the bids must be opened
publicly;
(D) A firm fixed price contract award will be made in writing to the lowest
responsive and responsible bidder. Where specified in bidding documents,
factors such as discounts, transportation cost, and life cycle costs
must be considered in determining which bid is lowest. Payment discounts
will only be used to determine the low bid when prior experience indicates
that such discounts are usually taken advantage of; and
(E) Any or all bids may be rejected if there is a sound documented reason.
. . ."
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."
Cause
The County participated in a joint project with the City in which the City handled the procurement
process. As the County was ultimately responsible for compliance, copies of the quotes or bids obtained
by the City should have been obtained by the County; however, this documentation was not obtained or
provided for audit. In addition, documentation to demonstrate the City checked the vendor was not
suspended or debarred prior to entering into the contract should have been obtained by County.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
County cannot ensure that the services obtained provided full and open competition or the basis of the
price. In addition, the County cannot ensure the vendors paid were eligible to participate in federal
programs. 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.
INDIANA STATE BOARD OF ACCOUNTS 22
SULLIVAN COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Noncompliance with the provisions of federal 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. We also recommended the County adhere to the procurement
and suspension and debarment requirements and obtain required bids and verify 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. Finally, we recommended the County
obtain and retain appropriate documentation for all expenses paid with SLFRF funds.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.