Finding Text
FINDING 2022-003 Subject: Formula Grants for Rural Areas and Tribal Transit Program - Suspension and Debarment Federal Agency: Department of Transportation Federal Program: Formula Grants for Rural Areas and Tribal Transit Program Assistance Listings Number: 20.509 Federal Award Number and Year (or Other Identifying Number): PO 0018811055 Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Prior to entering into subawards and covered transactions with federal 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 non-procurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAM exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. The County's policy related to suspension and debarment requirements included the County Auditor reviewing the SAMs website for exclusions, sharing the results with a County Commissioner for review, and both the County Auditor and the County Commissioner signing a document certifying that a diligent inquiry had been performed. The County entered into one covered transaction during the audit period totaling $1,211,454. The covered transaction was a subrecipient grant agreement with the Cass County Council on Aging (CCCOA) in which the County was the Grantee and CCCOA was the Operator. Per inquiry with the County Auditor, the County could not provide evidence of the performance of its procedures for 2022 to ensure that the CCCOA was not suspended, debarred, or otherwise excluded from or ineligible for participation in federal assistance programs or activities as no documentation was dated. As such, we could not determine if the County complied with the suspension and debarment requirements. 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 180.300 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 SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The system of internal controls as established by management of the County was not properly implemented to ensure that the policies and procedures in place related to suspension and debarment resulted in adequate supporting documentation being retained for audit. 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, no documentation was retained of the status of the vendor to whom payment equal to or in excess of $25,000 was paid. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.