FINDING 2023-001
Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - 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 Numbers): SLFRP0752,
TRSW222154-MACE STORMWATER
Pass-Through Entity: Indiana Finance Authority
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
INDIANA STATE BOARD OF ACCOUNTS
13
MONTGOMERY COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
Repeat Finding
This is a repeat finding from the immediately prior audit report. The prior audit finding number was
2022-004.
Condition and Context
The County elected to receive the standard revenue loss allowance, allowing the County to claim
its total COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $7,446,707
as revenue loss to use for government services. As such, all SLFRF program funds were expended under
the revenue loss eligible use category. The U.S Department of the Treasury (Treasury) determined that
there are no subawards under this eligible use category, and that recipients' use of revenue loss funds
would not give rise to subrecipient relationships given that there is no federal program or purpose to carry
out in the case of the revenue loss portion of the award.
Prior to entering into subawards and covered transactions with 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. Due to the
Treasury's 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 divulged that they established Ordinance 2023-11 dated August 14, 2023, indicating that all
public works contracts were to include a suspension and debarment clause and were aware of the
suspension and debarment requirements related to the SLFRF awards. There was only one covered
transaction for goods or services that equaled or exceeded $25,000 paid from SLFRF funds during the
audit period in the amount of $679,002. The County did not verify the vendors' suspension and debarment
status prior to payment due to the County not having policies or procedures in place prior to entering into
the contract with the vendor to verify that contractor was neither suspended nor debarred, or otherwise
excluded or disqualified from participating in federal assistance programs or activities. The County reported
that verification of suspension and debarment was attempted on the Sam.Gov website, but no results were
returned.
The lack of internal controls and noncompliance were systematic 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 14
MONTGOMERY COUNTY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
(Continued)
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 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
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 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 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.
Views of Responsible Officials
For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.