City of AtticaLocal Government

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): 2024 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 13 CITY OF ATTICA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Nonfederal entities and contractors are subject to nonprocurement debarment and suspension regulations. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or are ineligible for participation in federal assistance programs or activities. 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" include, 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 City was only required to comply with suspension and debarment requirements related to covered transactions. The City had not designed or implemented adequate policies and procedures to ensure that applicable vendors and contractors (vendors) who received federal funds in excess of $25,000 were not suspended or debarred from participating in federal award programs. Covered transactions in the amount of $661,128 were made during the audit period to four vendors. There was no evidence of a verification that any of these vendors were not suspended or debarred. 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 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." 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: INDIANA STATE BOARD OF ACCOUNTS 14 CITY OF ATTICA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 City did not have policies and procedures in place to verify that vendors were not suspended or debarred prior to entering into any covered transactions. The Clerk-Treasurer indicated that the City relied on its engineering firm to verify suspension and debarment status of vendors; however, documentation of verification was not provided to or verified by the City. Effect The lack of an effective internal control system enabled material noncompliance to occur and remain undetected. Noncompliance could have led to contracting with vendors who were suspended or debarred from receiving federal grant funds. Additionally, noncompliance with the grant agreement and the compliance requirement could have resulted in the loss of future federal funds to the City. Questioned Costs There were no questioned costs identified. Recommendation We recommended the City's management strengthen its system of internal controls and adopt required procurement policies, which would include procedures for verifying vendors' suspension and debarment status prior to entering into the transaction and/or contract if the single or aggregate transactions are expected to exceed $25,000 per fiscal year. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.