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 Fiscal Recovery Funds
Assistance Listing Number: 21.027
Federal Award Number and Year (or Other Identifying Number): FY 2023
Compliance Requirement: Procurement and Suspension and Debarment
Audit Findings: Material Weakness, Modified Opinion
Condition and Context
The County received a total COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
(SLFRF) allocation of $73,674,384 and chose to calculate its own revenue loss allowance, which totaled
$35,932,557, to use for government services. Some SLFRF program funds expended in 2023 were
expended under the revenue loss eligible use category. Additional program funds expended in 2023 were
expended under the other eligible use categories.
Procurement
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 $10,000 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.
For funds expended under the revenue loss eligible use category, the above listed procurement
requirements do not apply.
During the audit period, the County had four vendors with purchases over the $10,000 micropurchase
threshold which were expended under an eligible use category other than revenue
loss and, as such, were considered small purchase procurements. The County did not provide
competitive price quotations for the small purchase procurements for three of the four vendors,
which totaled $257,038.
Suspension and Debarment
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, collecting a certification from that person, or adding a clause or condition
to the covered transaction with that person.
During the engagement, an employee of the Board of County Commissioners stated that
verification was completed by checking the Excluded Parties List System when covered
transactions were entered into by the County to verify 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. Six covered transactions,
totaling $3,952,203, were paid from SLFRF funds to six different vendors for goods or services
that equaled or exceeded $25,000 during the audit period. Three of the six covered
transactions were selected for testing. For all three transactions tested, documentation was
not provided that the vendor's suspension and debarment status was verified.
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). . . ."
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."
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. . . .
Cause
The County was unable to provide documentation to demonstrate it had properly procured services.
In addition, the County was unable to provide documentation to demonstrate it had checked the Excluded
Parties List System, per the County's procedures, to ensure vendors were not suspended or debarred prior
to entering into covered transactions that exceeded $25,000.
Effect
Without the proper implementation of an effectively designed system of internal controls, the
County cannot demonstrate it obtained an adequate number of price or rate quotations prior to selecting a
vendor. Therefore, the County could have overpaid for the services obtained. Furthermore, without the
proper implementation of an effectively designed system of internal controls, the County cannot ensure the
vendors paid with federal funds are 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.
Questioned Costs
There were no questioned costs identified.
Recommendation
We recommended that the Board of County Commissioners strengthen the County's system of
internal controls to ensure that an adequate number of price or rate quotations are obtained for small
purchase procurements. Additionally, we recommended policies and procedures be strengthened to
ensure appropriate supporting documentation for federal programs is retained. Lastly, we recommended
that the Board of County Commissioners strengthen the County's 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.