Finding 975620 (2022-005)

FINDING 2022-005 Subject: Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED) - Suspension and Debarment Federal Agency: Department of Health and Human Services Federal Program: Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED) Assistance Listings Number: 93.104 Federal Award Number and Year (or Other Identifying Number): 1H79SM082981-01 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 Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED) funds, recipients are required to verify that 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 (e.g., grant agreement) that are expected to equal or exceed $25,000 and all subawards. The verification is to be done by checking the SAM exclusions list, collection of a certification from that person or entity, or adding a clause or condition to the covered transaction with that person or entity. INDIANA STATE BOARD OF ACCOUNTS 24 ELKHART COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon inquiring of the County to determine its policies and procedures related to suspension and debarment requirements for the Comprehensive Community Mental Health Services for Children with Serious Emotional Disturbances (SED) funds, 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 for funds passed through to a subrecipient was identified during the audit period. The amount passed through to the subrecipient was $914,863. The identified transaction was examined to determine if the County verified the suspension and debarment status of the subrecipient prior to payment. Upon review, we determined that the County entered into a memorandum of understanding (MOU) with the subrecipient on June 22, 2020. However, the County had not performed procedures to ensure the subrecipient was not suspended or debarred, or otherwise excluded or disqualified, from participation in federal assistance programs or activities at the time of the initial MOU or at any time during the audit period. 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 200.214 states: "Non-federal entities and contractors 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 debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. 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 the SAM Exclusions; 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." INDIANA STATE BOARD OF ACCOUNTS 25 ELKHART COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the County to ensure vendors were not suspended or debarred, or otherwise excluded, from participation in federal awards. 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 statements 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, a subrecipient to whom payments were made was 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.