EIN: 356000210
UEI: REWEN6LMRM39
Audited by: Indiana State Board of Accounts
Oversight agency: 21 [Department of the Treasury]
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Data as of August 29, 2026
Management decision deadline — for entities that funded this organization
The FAC accepted this audit on July 7, 2025. Under 2 CFR 200.521(d), a pass-through entity that provided federal funds to this organization for this audit period must issue a management decision on these findings by January 7, 2026 (235 days ago).
What is a management decision? →FINDING 2024-001 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): FY2020 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" including, but are not limited to, contracts for goods or services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. 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. Due to the U.S. Department of the Treasury's determination that the revenue loss eligible use category does not give rise to subawards, the County was only required to comply with suspension and debarment requirements related to covered transactions. The County's policy related to COVID-19 - Coronavirus State and Local Fiscal Recovery Funds suspension and debarment requirements were to verify ELPS for any covered transactions expected to equal or exceed $25,000 with a vendor. Eleven vendors were identified as having transactions that equaled or exceeded $25,000. Covered transactions in the amount of $1,145,965 were made during the audit period to eleven vendors. Two vendors were selected for testing, totaling $665,395, for which the County compared the vendor's status on the ELPS; however, neither vendor was registered. The lack of effective internal controls and noncompliance 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). . . ." 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 Grant Administrator reviewed the EPLS website; however, the County was not aware that the lack of registration in ELPS of a vendor was inadequate documentation for suspension and debarment. No other procedures were in place to ensure the vendors were not suspended or debarred. 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 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 or debarred, or otherwise excluded prior to entering into contracts or subawards. Views of Responsible Officials For the views of the responsible officials, refer to the Corrective Action Plan that is part of this report.
Show full finding ▾Hide full finding ▴FINDING 2024-001 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): FY2020 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" including, but are not limited to, contracts for goods or services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. 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. Due to the U.S. Department of the Treasury's determination that the revenue loss eligible use category does not give rise to subawards, the County was only required to comply with suspension and debarment requirements related to covered transactions. The County's policy related to COVID-19 - Coronavirus State and Local Fiscal Recovery Funds suspension and debarment requirements were to verify ELPS for any covered transactions expected to equal or exceed $25,000 with a vendor. Eleven vendors were identified as having transactions that equaled or exceeded $25,000. Covered transactions in the amount of $1,145,965 were made during the audit period to eleven vendors. Two vendors were selected for testing, totaling $665,395, for which the County compared the vendor's status on the ELPS; however, neither vendor was registered. The lack of effective internal controls and noncompliance 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). . . ." 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 Grant Administrator reviewed the EPLS website; however, the County was not aware that the lack of registration in ELPS of a vendor was inadequate documentation for suspension and debarment. No other procedures were in place to ensure the vendors were not suspended or debarred. 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 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 or debarred, or otherwise excluded prior to entering into contracts or subawards. Views of Responsible Officials For the views of the responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-001 Finding Subject: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Suspension and Debarment Contact Person Responsible for Corrective Action: Debbie Bennett-Stearsman Contact Phone Number and Email Address: 812-319-9068 and dbennett-stearsman@warrickcounty.gov View of Responsible Officials: We concur with the finding. Description of Corrective Action Plan: In the future the County Administrator (who also serves as Grants Development Director) intends to abide by 2 CFR Part 200 as well as 31 CFR Part 19. The County will verify vendors and /or contractors through one of the following methods: 1) Primary Verification Method (SAM.gov): The County's primary method for verifying the Contractor's eligibility is by checking the System for Award Management (SAM.gov), which has superseded the Excluded Parties List System (EPLS). The Contractor acknowledges and agrees that the County may, at its discretion, verify the Contractor's status on SAM.gov. 2) Alternative Verification Method (Affidavit): If the Contractor is not registered on SAM.gov, or if the County, in its sole discretion, determines that a SAM.gov check is not feasible or necessary for this particular transaction, the Contractor shall sign and submit an "Affidavit of Non-Exclusion and Non-Disqualification" swearing under penalties of perjury that the Contractor and its principals are not excluded or disqualified under 31 CFR 19.300. Anticipated Completion Date: January 1, 2026.
FINDING 2024-002 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 Number and Year (or Other Identifying Number): FY2020 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The County elected to receive the standard revenue loss allowance, allowing it to claim a total COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $8,636,623 as revenue loss to use for government services. As such, all SLFRF program funds expended from January 1, 2024 to December 31, 2024, were under the revenue loss eligible use category. The U.S. Department of the Treasury (Treasury) determined that there are no subawards under this eligible use category, and that recipients' use of revenue loss funds would not give rise to subrecipient relationships as there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Treasury. The reporting periods, as well as the respective due dates, are based on the type of recipient and the recipient's population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The County submitted all the required quarterly P&E reports during the audit period, which were obtained from the Treasury's website. Although one employee prepared the P&E report and another reviewed the entries, the system of internal controls was not effective in preventing, or detecting and correcting, errors. The data submitted included amounts which were not supported by the County's records. Errors identified included the following: The 2023 Quarter 4 P&E report cumulative expenditures were understated by $192,266. The 2024 Quarter 1 P&E report cumulative expenditures were understated by $219,220. The 2024 Quarter 2 P&E report cumulative expenditures were understated by 274,020. The 2024 Quarter 3 P&E report cumulative expenditures were understated by $241,567. The 2023 Quarter 4 P&E report current period expenditures were understated by $120,974. The 2024 Quarter 1 P&E report current period expenditures were understated by $46,280. The 2024 Quarter 2 P&E report current period expenditures were understated by $76,708. The 2024 Quarter 3 P&E report current period expenditures were overstated by $51,321. The County did not adequately track obligations by quarter as required, despite the P&E report breaking down obligations for each quarter, which would have allowed for accurate quarterly tracking. Instead, the County's obligation ledger reported only the cumulative final obligations for Quarter 4 of 2024 for each vendor, resulting in the inability to verify the accuracy of the quarterly reports filed during the audit period. The lack of effective internal controls and noncompliance 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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 periodic reports providing detailed accounting of the uses of funds, . . ." Cause The Grant Administrator reported that, due to persistent error messages in the submission system, the financial figures were modified to enable successful submission. 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. 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. In addition, not meeting the SLFRF reporting requirements, by reporting erroneous data, increases the likelihood that the public and the Treasury will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the management of the County establish a system of internal controls and develop policies and procedures over the preparation and review of federal reports to ensure appropriate reviews, approval, and oversight take place. Additionally, management should develop policies and procedures to ensure that the County provides the Treasury with complete and accurate information for all reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Show full finding ▾Hide full finding ▴FINDING 2024-002 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 Number and Year (or Other Identifying Number): FY2020 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The County elected to receive the standard revenue loss allowance, allowing it to claim a total COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) allocation of $8,636,623 as revenue loss to use for government services. As such, all SLFRF program funds expended from January 1, 2024 to December 31, 2024, were under the revenue loss eligible use category. The U.S. Department of the Treasury (Treasury) determined that there are no subawards under this eligible use category, and that recipients' use of revenue loss funds would not give rise to subrecipient relationships as there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the Treasury. The reporting periods, as well as the respective due dates, are based on the type of recipient and the recipient's population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. The County submitted all the required quarterly P&E reports during the audit period, which were obtained from the Treasury's website. Although one employee prepared the P&E report and another reviewed the entries, the system of internal controls was not effective in preventing, or detecting and correcting, errors. The data submitted included amounts which were not supported by the County's records. Errors identified included the following: The 2023 Quarter 4 P&E report cumulative expenditures were understated by $192,266. The 2024 Quarter 1 P&E report cumulative expenditures were understated by $219,220. The 2024 Quarter 2 P&E report cumulative expenditures were understated by 274,020. The 2024 Quarter 3 P&E report cumulative expenditures were understated by $241,567. The 2023 Quarter 4 P&E report current period expenditures were understated by $120,974. The 2024 Quarter 1 P&E report current period expenditures were understated by $46,280. The 2024 Quarter 2 P&E report current period expenditures were understated by $76,708. The 2024 Quarter 3 P&E report current period expenditures were overstated by $51,321. The County did not adequately track obligations by quarter as required, despite the P&E report breaking down obligations for each quarter, which would have allowed for accurate quarterly tracking. Instead, the County's obligation ledger reported only the cumulative final obligations for Quarter 4 of 2024 for each vendor, resulting in the inability to verify the accuracy of the quarterly reports filed during the audit period. The lack of effective internal controls and noncompliance 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, 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 periodic reports providing detailed accounting of the uses of funds, . . ." Cause The Grant Administrator reported that, due to persistent error messages in the submission system, the financial figures were modified to enable successful submission. 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. 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. In addition, not meeting the SLFRF reporting requirements, by reporting erroneous data, increases the likelihood that the public and the Treasury will not have access to transparent and accurate information regarding expenditures of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the management of the County establish a system of internal controls and develop policies and procedures over the preparation and review of federal reports to ensure appropriate reviews, approval, and oversight take place. Additionally, management should develop policies and procedures to ensure that the County provides the Treasury with complete and accurate information for all reports. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 Finding Subject: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Reporting Contact Person Responsible for Corrective Action: Debbie Bennett-Stearsman Contact Phone Number and Email Address: 812-319-9068 and dbennett-stearsman@warrickcounty.gov View of Responsible Officials: We concur with the finding. Description of Corrective Action Plan: As explained and demonstrated by the County Administrator to the SBA at the time of audit, the online reporting system for the U.S. Treasury quarterly reports had malfunctioned and when the County Administrator attempted to put in the correct amounts, the report would be rejected. The only way to get the quarterly reports to be accepted, were by adjusting the numbers resulting in the issues pointed out by the SBOA. As the SBA is aware, the reports were on a time-sensitive deadline and had to be submitted. The County will follow up with the U.S. Treasury in the event of future problems with the online reporting system. Anticipated Completion Date: July 1, 2025
FAC accepted this audit on September 26, 2024 — management decision was due March 26, 2025.
FAC accepted this audit on July 4, 2023 — management decision was due January 4, 2024.
FAC accepted this audit on August 25, 2022 — management decision was due February 25, 2023.
FINDING 2021-001 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Allowable Costs/Cost Principles, Period of Performance Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Compliance Requirements: Allowable Costs/Cost Principles, Period of Performance Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the County to ensure compliance with requirements related to the grant agreement and the Allowable Costs/Cost Principles and the Period of Performance compliance requirements. The County, through its Economic Development Department entered into a Broadband Economic Development Agreement with Mainstream Fiber Networks, LLC (Mainstream) on October 18, 2018, to design, develop, construct, and operate a fiber based broadband network to service large portions of the County. The County's contribution to Mainstream for the broadband project was $4,925,030. On August 12, 2021, a payment in the amount of $1,325,030 was made to Mainstream from funds received from the issuance of Revenue Bonds, Series 2019 (Broadband Project). On September 3, 2021, a payment in the amount of $3,600,000 was made to Mainstream from the County's allocation of Coronavirus State and Local Fiscal Recovery Funds. The County incurred a financial obligation at the time the Broadband Economic Development Agreement was entered into on October 18, 2018; therefore, the costs of $3,600,000 spent from the COVID- 19 - Coronavirus State and Local Fiscal Recovery Funds on September 3, 2021, were for an obligation that was incurred prior to the period of performance which began on March 3, 2021. We consider $3,600,000 to be questioned costs. In addition, the County did not have written procedures for determining the allowability of costs in accordance with Subpart E of 2CFR 200. 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 35.5(a) states: "In general. A recipient may only use funds to cover costs incurred during the period beginning March 3, 2021, and ending December 31, 2024, for one or more of the purposes enumerated in sections 602(c)(1) and 603(c)(1) of the Social Security Act, as applicable, including those enumerated in ? 35.6, subject to the restrictions set forth in sections 602(c)(2) and 603(c)(2) of the Social Security Act, as applicable." 2 CFR 200.1 states in part: ". . . Financial obligations, when referencing a recipient's or subrecipient's use of funds under a Federal award, means orders placed for property and services, contracts and subawards made, and similar transactions that require payment. . . ." 31 CFR 35.3 states in part: ". . . Obligation means an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria to be allowable under Federal awards: . . . (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to ? 200.308(e)(3)." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award." Cause Management had not developed a system of internal control that would have ensured compliance with the compliance requirements listed above. Effect The failure to establish an effective system of internal control enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Allowable Costs/Cost Principles and the Period of Performance compliance requirements could have resulted in the loss of federal funds to the County. Questioned Costs Questioned costs in the amount of $3,600,000 were identified as noted in the Condition and Context. Recommendation We recommended that the County's management establish a system of internal control related to the grant agreement and the Allowable Costs/Cost Principles and the Period of Performance compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. Auditor's Response It is the County's responsibility to comply with applicable federal regulations and guidelines when accepting and managing a federal award. The County had designed and implemented a system of internal control; however, these controls were not effective in ensuring that federal funds were obligated during the period of performance. The Interim Final Rule, which was effective May 17, 2021, "adopts a definition of 'obligation' that is based on the definition used for purposes of the Uniform Guidance, which will allow for uniform administration of this requirement and is a definition with which most recipients will be familiar." Per 2 CFR 200.1, a financial obligation "when referencing a recipient's or subrecipient's use of funds under a Federal award, means orders placed for property and services, contracts and subawards made, and similar transactions that require payment." In addition, 31 CFR 35.3 defines an obligation as "an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment." The Interim Final Rule thus permits funds to be used to cover costs incurred beginning on March 3, 2021. This aligns the period for use of Fiscal Recovery Funds with the period during which these funds may not be used to offset reductions in net tax revenue. Permitting Fiscal Recovery Funds to be used to cover costs incurred beginning on this date will also mean that recipients that began incurring costs in the anticipation of enactment of the ARPA and in advance of the issuance of this rule and receipt of payment from the Fiscal Recovery Funds would be able to cover them using these payments. The County incurred a financial obligation when the agreement was entered into on October 18, 2018. The Interim Final Rule specifically precludes use of funds to cover the costs of debt incurred prior to March 3, 2021. The contracts and corresponding financing documents were completed prior to the period of performance and could not have been enacted in anticipation of the passage of the Act, as they were executed years prior to referenced legislation. We reaffirm our finding and will review the status of the finding during our next audit.
Show full finding ▾Hide full finding ▴FINDING 2021-001 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Allowable Costs/Cost Principles, Period of Performance Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Compliance Requirements: Allowable Costs/Cost Principles, Period of Performance Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the County to ensure compliance with requirements related to the grant agreement and the Allowable Costs/Cost Principles and the Period of Performance compliance requirements. The County, through its Economic Development Department entered into a Broadband Economic Development Agreement with Mainstream Fiber Networks, LLC (Mainstream) on October 18, 2018, to design, develop, construct, and operate a fiber based broadband network to service large portions of the County. The County's contribution to Mainstream for the broadband project was $4,925,030. On August 12, 2021, a payment in the amount of $1,325,030 was made to Mainstream from funds received from the issuance of Revenue Bonds, Series 2019 (Broadband Project). On September 3, 2021, a payment in the amount of $3,600,000 was made to Mainstream from the County's allocation of Coronavirus State and Local Fiscal Recovery Funds. The County incurred a financial obligation at the time the Broadband Economic Development Agreement was entered into on October 18, 2018; therefore, the costs of $3,600,000 spent from the COVID- 19 - Coronavirus State and Local Fiscal Recovery Funds on September 3, 2021, were for an obligation that was incurred prior to the period of performance which began on March 3, 2021. We consider $3,600,000 to be questioned costs. In addition, the County did not have written procedures for determining the allowability of costs in accordance with Subpart E of 2CFR 200. 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 35.5(a) states: "In general. A recipient may only use funds to cover costs incurred during the period beginning March 3, 2021, and ending December 31, 2024, for one or more of the purposes enumerated in sections 602(c)(1) and 603(c)(1) of the Social Security Act, as applicable, including those enumerated in ? 35.6, subject to the restrictions set forth in sections 602(c)(2) and 603(c)(2) of the Social Security Act, as applicable." 2 CFR 200.1 states in part: ". . . Financial obligations, when referencing a recipient's or subrecipient's use of funds under a Federal award, means orders placed for property and services, contracts and subawards made, and similar transactions that require payment. . . ." 31 CFR 35.3 states in part: ". . . Obligation means an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria to be allowable under Federal awards: . . . (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to ? 200.308(e)(3)." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award." Cause Management had not developed a system of internal control that would have ensured compliance with the compliance requirements listed above. Effect The failure to establish an effective system of internal control enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Allowable Costs/Cost Principles and the Period of Performance compliance requirements could have resulted in the loss of federal funds to the County. Questioned Costs Questioned costs in the amount of $3,600,000 were identified as noted in the Condition and Context. Recommendation We recommended that the County's management establish a system of internal control related to the grant agreement and the Allowable Costs/Cost Principles and the Period of Performance compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. Auditor's Response It is the County's responsibility to comply with applicable federal regulations and guidelines when accepting and managing a federal award. The County had designed and implemented a system of internal control; however, these controls were not effective in ensuring that federal funds were obligated during the period of performance. The Interim Final Rule, which was effective May 17, 2021, "adopts a definition of 'obligation' that is based on the definition used for purposes of the Uniform Guidance, which will allow for uniform administration of this requirement and is a definition with which most recipients will be familiar." Per 2 CFR 200.1, a financial obligation "when referencing a recipient's or subrecipient's use of funds under a Federal award, means orders placed for property and services, contracts and subawards made, and similar transactions that require payment." In addition, 31 CFR 35.3 defines an obligation as "an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment." The Interim Final Rule thus permits funds to be used to cover costs incurred beginning on March 3, 2021. This aligns the period for use of Fiscal Recovery Funds with the period during which these funds may not be used to offset reductions in net tax revenue. Permitting Fiscal Recovery Funds to be used to cover costs incurred beginning on this date will also mean that recipients that began incurring costs in the anticipation of enactment of the ARPA and in advance of the issuance of this rule and receipt of payment from the Fiscal Recovery Funds would be able to cover them using these payments. The County incurred a financial obligation when the agreement was entered into on October 18, 2018. The Interim Final Rule specifically precludes use of funds to cover the costs of debt incurred prior to March 3, 2021. The contracts and corresponding financing documents were completed prior to the period of performance and could not have been enacted in anticipation of the passage of the Act, as they were executed years prior to referenced legislation. We reaffirm our finding and will review the status of the finding during our next audit.
FINDING 2021-001 Contact Person Responsible for Corrective Action: Terry Phillippe, Board President Contact Phone Number: (812) 897-6120 Views of Responsible Official: Warrick County does not agree with and rejects the findings as set forth in the SBOA?s Section III Report. On October 18, 2018, Warrick County, through its Economic Development Department, entered into a Broadband Economic Development Agreement (the ?Agreement?) with Mainstream Fiber Networks, LLC (?Mainstream?) for the design, development, construction, and operation of a fiber based broadband network throughout Warrick County. As part of the Agreement, the County agreed to contribute $4,925,030.00 to the overall cost of the project. Importantly, however, the Agreement made it clear that such contribution ?shall not be due and payable to Mainstream until (i) Mainstream has fully completed all elements of work identified in the Project Plan?[and] (ii) all of the Backbone Fiber has been built and lit by Mainstream, [and] tested and accepted by the Economic Development Department?.? These conditions made it clear that the County had no obligation to tender any payment to Mainstream unless it satisfied very specific criteria. And only upon full certification and acceptance by the County that the project was complete would any obligation of the County be triggered. In March 2021, the County was allocated $12,236,623.00 in State and Local Fiscal Recovery Funds under the American Rescue Plan Act (?ARPA?). Due to the initially limited eligible uses of the ARPA funds, the County began to look into whether ARPA allowed for the County?s allocation of funds to be used towards its ongoing broadband project. As of March 3, 2021, the County had still not incurred any expense on the project and by the terms of the Agreement had not yet become obligated to make any payment to Mainstream. In fact, Mainstream was still constructing the fiber backbone cable in Warrick County and, under the terms of the Agreement, the County had not yet even investigated whether the installation of fiber was satisfactory, compliant, and operational ? all of which was ultimately under the final discretionary acceptance of the County. In investigating the ability of the County to apply a portion of its ARPA funds towards the broadband project, counsel for Warrick County conducted an extensive, months-long review of all available guidance from Treasury, as well as seeking independent analysis from other lobbying groups and legal counsel to County government units throughout the United States. In explaining the history of the broadband project, the terms of the Agreement, and what the County understood ARPA and Treasury guidelines to provide, each of the independent organizations from which the County sought expertise responded that they believed the use to be allowable under ARPA, and that the fact that the Agreement ? with conditional obligations of the County to be determined at a later date ? was executed in 2018 did not preclude its eligibility. Nevertheless, the County continued its effort to ensure that such an expense would be eligible, choosing not just to rely on the recommendation of other independent analysts. With respect to specific regulatory guidance, the County relied, among other things, FAQs issued by Treasury to help frame its understanding of the eligibility of the broadband project as a permitted expense. On June 8, 2021, Treasury issued a FAQ that directly pertained to the expense at issue: 4.7 Investments in Water, Sewer, and Broadband ? Recipients may use Coronavirus State and Local Fiscal Recovery Funds to make necessary investments in water, sewer, and broadband. See FAQ Section 6. Recipients may use Coronavirus State and Local Fiscal Recovery Funds to cover costs incurred for eligible projects planned or started prior to March 3, 2021, provided that the project costs covered by the Coronavirus State and Local Fiscal Recovery Funds were incurred after March 3, 2021. (emphasis added). This FAQ issued by the Treasury has never been deleted or modified by the IRS and remains posted on the IRS website to this day. The above Treasury FAQ on its face clearly serves as authoritative guidance that the County was permitted to apply a portion of its ARPA allocation towards costs associated with the broadband project that was started prior to March 3, 2021. Even with the above FAQ guidance from Treasury, the County continued to conduct further due diligence to make as reasonably certain as possible that a payment to Mainstream would constitute an eligible expense. Specifically, the County looked for direction as to what ?incurred? meant. To be sure, the Final Rule governing the use of the County?s ARPA funds has since addressed this confusion, stating ?the deadline for costs to be incurred ? which the final rule clarifies means obligated.? See Coronavirus State and Local Fiscal Recovery Funds Final Rule, pg. 355. It is important to note, however, that this clarifying statement was only made for the first time under the Final Rule, which was issued in January 2022 and with actual effective date of April 1, 2022. Finding 2021-001 places upon the County a requirement to know the content of the Final Rule issued in 2022 more than six (6) months after the funds were utilized based upon guidance then in existence. However, back in July 2021 when the County was searching for the definition of ?incurred,? there was no such clarifying language. At that time, the Treasury?s Interim Final Rule governed the County?s use of ARPA funds, which made it plainly obvious that no one, not even Treasury itself, knew what ?incurred? meant within the context of ARPA, with the Interim Final Rule positing ?the definition of `incurred? does not have a clear meaning.? See Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule, pg. 97. This is especially relevant when considering how the Interim Final Rule addressed ?obligations,? for which Treasury had no trouble or confusion in coming up with a definition (in contrast with ?incurred?). It was only in the eventual Final Rule issued in January 2022 where Treasury decided that ?incurred? and ?obligation? suddenly had the same meaning, despite taking specific linguistic efforts in the Interim Final Rule to, at a minimum, differentiate them as separate, identifiable actions. When this legal analysis was conducted and a decision was made back in 2021, the County only had the recommendations of the other resources it had sought who had concluded the expense was eligible under ARPA, and the on-point guidance from the above Treasury FAQ to assist it in making certain it was a complaint use of ARPA funds. Again, at that time the Treasury took special, calculated effort to issue a FAQ establishing that a broadband project commenced prior to March 3, 2021 would not be penalized simply because it was planned or started prior to the ?period of performance,? so long as the expense sought to be paid using ARPA funds was one that was incurred after March 3, 2021. The County?s contribution to the broadband project was not approved by the County, and therefore no obligation to contribute pursuant to the contract existed, prior to March 2, 2021. Taking all of this together, the County reached the reasonable and easily justifiable conclusion that Treasury clearly intended for ARPA funds to be available to cover costs like those incurred by the County on its broadband project which started prior to March 3, 2021 (i.e., October 18, 2018), because the project costs for which the County was allocating a portion of its ARPA funds would be in fact incurred after March 3, 2021. Given the self-admitted lack of ?clear meaning? as to what ?incurred? meant while the Interim Final Rule was still in effect, it is baffling how the County could be expected to reach any other conclusion. And so, on July 23, 2021, Mainstream completed and the County finally accepted and certified Mainstream?s construction and lighting of the backbone fiber cable under the Agreement, thereby triggering for the first time any actual obligation by the County and incurring its very first expense under the broadband project for purposes of ARPA. A portion of this payment was made on or about September 1, 2021 from the County?s allocation of ARPA funds, all pursuant to a validly executed Subaward Agreement in compliance with all federal rules and regulations associated with subawards of ARPA funds. Summary. The County conducted an exhaustive amount of due diligence to determine the eligibility of applying a portion of its ARPA funds towards a broadband infrastructure project that met, and continues to meet, the necessary criteria for such a project under ARPA. In addition to seeking counsel from outside legal resources, the County also pored over all rules and regulations issued by Treasury while forming its comprehensive legal opinion as to the viability of the payment. In addressing the ?period of performance,? the County justifiably relied on Treasury?s very own FAQs which clearly authorized the use of ARPA funds to cover costs of broadband projects which began prior to March 3, 2021, so long as the cost itself was ?incurred? after March 3, 2021. At the time, ARPA was governed by the Interim Final Rule which acknowledged that ?incurred? had no clear definition and gave no inclination that recipients should consider it to mean the same thing as ?obligated.? Rather, that clarification only came into effect on April 1, 2022 with the adoption of the Final Rule, well after the County?s payment of a portion of its ARPA funds was made to Mainstream. Instead, in July 2021 the County could only look to the Interim Final Rule, which offered no further guidance, and the aforementioned FAQ which, when read through a legal construction lens (if not a common sense one) wa
FAC accepted this audit on November 2, 2021 — management decision was due May 2, 2022.
FAC accepted this audit on June 23, 2019 — management decision was due December 23, 2019.
FAC accepted this audit on July 4, 2018 — management decision was due January 4, 2019.
FAC accepted this audit on November 21, 2017 — management decision was due May 21, 2018.
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