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): OMB Approval #1505-0271
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Other Matters
INDIANA STATE BOARD OF ACCOUNTS
21
FULTON COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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.
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 non-federal 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.
The County had one vendor that was identified as being less than the simplified acquisition
threshold of $150,000 but exceeding the $50,000 micro-purchase threshold. The one vendor
was selected for testing. For the one vendor, the County did not obtain price or rate quotes
nor was there documentation detailing the history of procurement, which must include the
reason for the procurement method used.
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.
Upon inquiring of the County to determine its policies and procedures related to suspension
and debarment requirements, the County stated procedures were not in place to ensure
vendors were not suspended or debarred prior to entering into covered transactions.
One covered transaction paid with SLFRF grant funds was identified during the audit period.
The covered transaction totaled $66,000 with $46,752 paid in the audit period. The identified
transaction was examined to determine if the County verified the suspension and debarment
status of the vendor prior to payment. Upon review, the County had not performed procedures
to ensure the vendor was not suspended or debarred, or otherwise excluded or disqualified,
from participation in federal assistance programs or activities at any time during the audit
period.
INDIANA STATE BOARD OF ACCOUNTS 22
FULTON COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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). . . ."
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 . . .
(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."
INDIANA STATE BOARD OF ACCOUNTS
23
FULTON COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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
(c) Adding a clause or condition to the covered transaction with that person."
Part 4 of the Treasury's Compliance and Reporting Guidance states: ". . . recipients are expected
to have procurement policies and procedures in place that comply with the procurement standards outlined
in the Uniform Guidance . . ."
Cause
The County participated in a joint project with the City of Rochester (City) in which the City handled
the procurement process. However, the County did not request copies of the quotes or bids obtained by
the city, nor did the County document a sole source vendor situation. In addition, the County was unable
to provide documentation to demonstrate they checked the vendor was not suspended or debarred prior to
entering into the contract.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
County cannot ensure that 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.
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.
INDIANA STATE BOARD OF ACCOUNTS
24
FULTON COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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.