Union CountyLocal Government

FINDING 2024-002 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - 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 Number and Year (or Other Identifying Number): FY2024 Compliance Requirement: Procurement and Suspension and Debarment Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-002. Condition and Context Prior to entering into subawards and covered transactions with COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (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 (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. A population of two covered transactions was identified, and both were selected for testing. The County had procedures in place to verify that the persons and entities related to each of the covered transactions were not suspended, debarred, or otherwise excluded; however, there was no review or approval process documented for us to verify that an internal control system was designed and operating properly. The lack of internal controls was a systemic issue 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). . . ." Cause Before the prior audit, the County had not designed or implemented policies and procedures to verify that contractors were not suspended or debarred or otherwise excluded from participating in federal programs. While these procedures were subsequently implemented, the individual who implemented the procedures was not aware of the requirement to document a review or approval process. Effect Without a proper system of internal controls in place, material noncompliance could have gone undetected. Material noncompliance with this requirement could have resulted in funds being disbursed to vendors who were suspended or debarred from receiving federal funds. Any program funds the County used to pay contractors that have been suspended or debarred would be unallowable and questioned costs, and the funding agency could potentially recover the funds. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the County establish a proper system of internal controls to ensure that the current procedures in place are properly implemented for all persons and entities that are paid $25,000 or more, all or in part with federal funds, to ensure they are not suspended, debarred, or otherwise excluded from participating in federal programs. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - 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 Number and Year (or Other Identifying Numbers): FY 2023 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 16 UNION COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Prior to entering into subawards and covered transactions with State and Local Fiscal Recovery Funds (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 (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. The County did not have any policies or procedures in place for verifying that an entity with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded. A population of two covered transactions, totaling $799,902, that equaled or exceeded $25,000 paid from SLFRF funds were identified. Both covered transactions were selected for testing. For each of the transactions, the County did not verify the vendor's suspension or debarment status prior to payment due to the County not having any policies or procedures in place to verify that contractors were neither suspended nor debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. 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." Cause The County had not designed or implemented policies and procedures to verity that contractors were not suspended or debarred, or otherwise excluded from participating in federal programs prior to entering into covered transactions using SLFRF funds. INDIANA STATE BOARD OF ACCOUNTS 17 UNION COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed system of internal controls, the County could not ensure contractors. The County could not ensure that contractors paid with federal funds are eligible to participate in federal programs. Any program funds the County used to pay contractors that have been suspended or debarred would be unallowable, and the funding agency could potentially recover the funds. 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 that are paid $25,000 or more, all or in part with federal funds, are not suspended, debarred, or otherwise excluded prior to entering into any contracts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report

FINDING 2020-003 Subject: Formula Grants for Rural Areas and Tribal Transit Program - Subrecipient Monitoring Federal Agency: Department of Transportation Federal Program: Formula Grants for Rural Areas and Tribal Transit Program CFDA Number: 20.509 Federal Award Numbers and Years (or Other Identifying Numbers): IN-2019-020-00, IN-1189-2020-1 Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Subrecipient Monitoring Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the County related to the grant agreement and the Subrecipient Monitoring compliance requirement. The County passed federal financial assistance on to a subrecipient who provided transit services. The County had not developed or implemented an internal control system to ensure compliance with subrecipient monitoring requirements. The County did not comply with requirements ensuring that its subrecipients complied with all federal requirements of the program. The County required the subrecipient to submit claims for reimbursement of costs incurred and paid by the subrecipient; however, the claims had no supporting documents attached. Documentation such as vendor invoices, canceled checks, financial reports, audit reports, receipts, and management representations were not required by or provided to the County by the subrecipient. 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). . . ." 17 2 CFR 200.328(a) states: "Monitoring by the non-Federal entity. The non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. See also ? 200.331 Requirements for pass-through entities." 2 CFR 200.331(d) states in part: "Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means. . . ." Cause The County's management had not developed a system of internal controls that would have ensured compliance with the Subrecipient Monitoring compliance requirements. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement or the subrecipient monitoring requirements could have resulted in the loss of federal funds to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management establish an effective internal control system to ensure compliance and comply with the grant agreement and the Subrecipient Monitoring compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.