Hendricks CountyLocal Government

FINDING 2024-003 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 Listings Number: 21.027 Federal Award Numbers and Years (or Other Identifying Numbers): CONTRACT# 64280, FY2024 Pass-Through Entity: Indiana Department of Health Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context Prior to entering into subawards and covered transactions with the COVID-19 - State and Local Fiscal Recovery 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. The County did not perform procedures to ensure that the vendors were not suspended or debarred or otherwise excluded or disqualified from participation in federal assistance programs or activities at any time during the audit period for two of the four covered transactions tested. The lack of internal controls and noncompliance were isolated to two County departments. 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 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." INDIANA STATE BOARD OF ACCOUNTS 18 HENDRICKS 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 The County believed the procedures they were following were sufficient to cover Procurement and Suspension and Debarment compliance requirements. Effect Without the proper implementation of an effectively designed system of internal controls, the County could not ensure the vendors paid with federal funds were 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. 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 the County strengthen its 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.

FINDING 2024-004 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Numbers and Years (or Other Identifying Numbers): CONTRACT# 64280, FY2024 Pass-Through Entity: Indiana Department of Health Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 19 HENDRICKS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, and the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The County was classified as a metropolitan county with a population below 250,000 residents that received an allocation of more than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds funding. As such, the initial P&E report, covering three calendar quarters from March 3, 2021 to December 31, 2021, was required to be submitted to the Treasury by January 31, 2022. The subsequent quarterly reports are to cover one calendar quarter and must be submitted to the Treasury by the last day of the month following the end of the period covered. The County submitted the P&E report, as required, and had a system of internal controls in place whereby one employee prepared and submitted the P&E reports and another employee reviewed the reports; however, it was not sufficient to prevent, or detect and correct, errors. The data submitted included amounts that were not supported by the County's records and amounts that should not have been included. Errors identified included the following: Quarter 1 P&E report - January 1, 2024 to March 31, 2024  The current Period Obligations were understated by $1,440. Quarter 2 P&E report - April 1, 2024 to June 30, 2024  The current Period Obligations were understated by $29,020. Quarter 3 P&E report - July 1, 2024 to September 30, 2024  The current Period Obligations were understated by $30,197.  The total Cumulative Obligations were understated by $299,096.  The total Cumulative Expenditures were understated by $16,370. 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 20 HENDRICKS COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds, page 13, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states in part: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary or her delegate, as applicable, periodic reports providing detailed accounting of the uses of funds . . ." Cause The County's system of internal controls, including policies and procedures, was insufficient to prevent or detect errors on the P&E report prior to submission. Internal controls were in place but were not effective. 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 such, the County did not accurately report current period obligations and cumulative obligations when filing the P&E report. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management implement a proper system of internal controls, including policies and procedures, to ensure that the County provided the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Criteria: 2 CFR 200.303 includes requirements related to internal controls for federal award programs, including that the County must, among other things, ?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)?. Condition and Context: We noted the County submitted a report required under the Coronavirus State and Local Fiscal Recovery Funds which had no review of the report for accuracy of the information or inclusion of the appropriate key line items. Cause and Effect: We noted lack of internal controls surrounding the reporting process resulted in noncompliance. Key line items were misstated and the errors were identified subsequent to the initial submission. There were no questioned costs related to this issue. Recommendation: We recommend the County implement procedures to ensure reports are being reviewed by an individual or third-party familiar with the program prior to submission. Views of Responsible Officials and Planned Corrective Actions: They County agrees with the recommendation and plans to implement the recommendation during 2023.

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