TOWN OF FOUNTAIN CITY

FINDING 2023-005 Subject: Coronavirus State and Local Fiscal Recovery Funds - Procurement and Suspension and Debarment Federal Agency: U.S. Department of Treasury Assistance Listing Number: 21.027 Federal Award Number: WW21368901 and FY 2021 Pass-Through Entity: Indiana Finance Authority for WW21368901 and FY 2021 grant was direct Compliance Requirements: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Internal Controls Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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 section 200.303 states in part: "The non-Federal entity must use one of the following methods of procurement… (b) Simplified acquisition thresholds. The non-Federal entity is responsible for determining an appropriate simplified acquisition threshold based on internal controls, an evaluation of risk and its documented procurement procedures which must not exceed the threshold established in the FAR. When applicable, a lower simplified acquisition threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations. Condition: An effective internal control system was not in place at the Town in order to ensure compliance with requirements related to the grant agreement and the simplified acquisitions procurement method of the Procurement and Suspension and Debarment compliance requirement. Cause: Management had not established a system of internal control that would have ensured proper procurement procedures are followed. Context: For one procurement, we noted that the Town had one procured contract for $576,092 that met the simplified acquisition threshold and one contract for $35,880 that met the small purchase method threshold. The Town performed adequate procurement steps for the contract that met the simplified acquisition threshold but did not for the contract that met the small purchase method threshold. For the contract that fell under the small purchase method, management had support for one quote and noted that a second quote was obtained verbally. Management’s procurement policy states that three quotes must be obtained, and the contract must be awarded to the lowest bid. Management did not document the basis for purchasing from the vendor that was utilized. Additionally, for the contract that met the simplified acquisition threshold, management did not provide support indicating that the Town verified the vendor was not suspended or debarred. The Town verified that the vendor selected for the small purchase method was not suspended or debarred. Effect: The failure to establish an effective internal control system enabled noncompliance with the grant agreement and the simplified acquisition procurement method of the Procurement and Suspension and Debarment compliance requirement. Identification as a repeat finding, if applicable: No Recommendation: We recommended that the Town’s management establish controls related to the grant agreement and the simplified acquisition purchase procurement method of the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2023-006 Subject: Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: U.S. Department of Treasury Assistance Listing Number: 21.027 Federal Award Number: FY 2021 Pass-Through Entity: N/A Compliance Requirements: Reporting Audit Findings: Significant Deficiency, Internal Controls Criteria: 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 Financial reporting . . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." Condition: The Town did not have a documented review control in place to ensure the annual report was reviewed by someone other than the preparer. Cause: There were not sufficient internal controls in place to ensure the accuracy of the annual report. Context: There was no documented review by someone other than the preparer of the annual report to ensure the information submitted was complete and accurate. Per discussion with management, verbal review occurred but there is no documentation to support that review occurred. Effect: The failure to establish an effective internal control system placed the Town at risk of noncompliance with the grant agreement and the Reporting compliance requirements. Identification as a repeat finding, if applicable: No Recommendation: We recommend someone other than the preparer of the report perform a documented review prior to submission to validate the accuracy and completeness of the data submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.