City of HuntingtonLocal Government

FINDING 2025-002 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): 1505-0271 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 the 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. The City did not have policies or procedures in place to address the SLFRF suspension and debarment requirements. During the audit period, the City entered into one covered transaction totaling $860,000, which met the $25,000 threshold for verification. However, the City did not verify the vendor's suspension or debarment status prior to payment because no process existed to ensure contractors were not suspended, 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). . . ." 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 16 CITY OF HUNTINGTON 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 intend to 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 City was not aware of the suspension and debarment requirements associated with the SLFRF grant. Because the City does not typically receive large federal awards, it did not have formal policies or procedures in place to verify vendors' suspension and debarment status. The City hired a consultant to provide guidance related to a large reconstruction project and to assist with federal grant requirements; however, the City relied on this general guidance and did not establish its own process to ensure compliance with the suspension and debarment requirement. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot ensure contractors paid with federal funds are eligible to participate in federal programs. Any program funds the City used to pay contractors who have been suspended or debarred would be unallowable, and the funding agency could potentially recover them. Furthermore, 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 City. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City establish and implement a formal system of internal controls to ensure compliance with suspension and debarment requirements. This should include developing and strengthening written policies and procedures to verify, prior to entering into a contract or making payments of $25,000 or more with federal funds, that contractors are not suspended, debarred, or otherwise excluded from participation in federal assistance programs. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-003 Subject: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii - Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Community Development Block Grants/State's program and Non-Entitlement Grants in Hawaii Assistance Listings Number: 14.228 Federal Award Number and Year (or Other Identifying Number): SI-22-109 Pass-Through Entity: Indiana Office of Community and Rural Affairs Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context The City was awarded Community Development Block Grant funds to support a large infrastructure project. To assist with project oversight and grant compliance, the City contracted with a consultant. The grant agreement between the City and the awarding agency required the City to submit written progress reports on a semi-annual basis. These reports were to provide detailed information regarding the project's progress and performance. Although the consultant prepared and submitted the semi‑annual progress reports on behalf of the City, the City did not have a properly designed system of internal controls to ensure the reports were reviewed and approved by a City employee or official prior to submission. As a result, required reports were submitted without documented City oversight or authorization. The City remained responsible under the grant agreement for ensuring the accuracy, completeness, and timely submission of all required written progress reports. 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 The City did not design or implement internal controls over the semi-annual progress reports because it relied on the consultant to perform the reporting and compliance functions. City staff believed that hiring the consultant satisfied the City's responsibilities over the reports. INDIANA STATE BOARD OF ACCOUNTS 18 CITY OF HUNTINGTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Because the City did not design or implement internal controls over the semi-annual progress reports, there was increased risk of noncompliance with the reporting requirement, including the potential for inaccurate information to be submitted or reports to be filed untimely. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City design and implement internal controls to ensure all required reports are reviewed and approved by a designated City employee or official prior to submission. These controls should clearly define staff responsibilities, include documented review and approval procedures, and ensure that the City maintains appropriate oversight even when using a consultant to assist with grant administration. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2021-002 Subject: Airport Improvement Program, COVID-19 - Airports Programs, and Infrastructure Investment and Jobs Act Programs - Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Transportation Federal Program: Airport Improvement Program, COVID-19 - Airports Programs, and Infrastructure Investment and Jobs Act Programs Assistance Listings Number: 20.106 Federal Award Numbers and Years (or Other Identifying Numbers): 3-18-0036-018-2020, 3-18-0036-020-2021 Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Audit Finding: Material Weakness Condition and Context An effective internal control system, which would include segregation of duties, was not in place at the City to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement. The City had not designed or implemented adequate policies or procedures to ensure that contractors or subcontractors submitted certified payrolls weekly. There was no oversight, review, or approval process in place at the City to ensure that certified payrolls were received each week. 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 The City had not developed a system of internal control that would have ensured compliance with the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement. Effect The failure to establish an effective internal control system placed the City at risk of noncompliance with the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a system of internal control, including segregation of duties, related to the grant agreement and the Special Tests and Provisions - Wage Rate Requirements compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2021-003 Subject: Assistance to Firefighters Grant - Reporting Federal Agency: Department of Homeland Security Federal Program: Assistance to Firefighters Grant Assistance Listings Number: 97.044 Federal Award Number and Year (or Other Identifying Number): EMW-2019-FG-01441 Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context An effective internal control system was not in place at the City to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The City had not designed or implemented a system of internal control to ensure the Federal Financial Reports (SF-435) were accurately submitted. The Federal Financial Reports (SF-435) were prepared by one employee without an oversight or review process in place to prevent, or detect and correct, errors. 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 Management had not developed or implemented a system of internal control that would have ensured compliance with the grant agreement and the Reporting compliance requirement. Effect The failure to establish an effective internal control system placed the City at risk of noncompliance with the grant agreement and the Reporting compliance requirement. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a system of internal control related to the grant agreement and the Reporting compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2021-004 Subject: Assistance to Firefighters Grant - Cash Management Federal Agency: Department of Homeland Security Federal Program: Assistance to Firefighters Grant Assistance Listings Number: 97.044 Federal Award Number and Year (or Other Identifying Number): EMW-2019-FG-01441 Compliance Requirement: Cash Management Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the City to ensure compliance with requirements related to the grant agreement and the Cash Management compliance requirement. On October 29, 2020, the City requested an advance of $1,194,593 of the awarded grant funds. The request was received and receipted into the City's ledger on November 9, 2020. Disbursements to vendors for $1,167,091 and $27,503, were made 190 and 574 days, respectively, after receipt of the funds. The lack of effective 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). . . ." Recipients shall be paid in advance, provided they maintain, or demonstrate the willingness and ability to maintain procedures to minimize the time elapsing between the transfer of funds and its disbursement by the recipient (not to exceed 30 days), and the financial management systems that meet the standards for fund control and accountability as established in 2 C.F.R. Part 200. (FY19 Assistance to Firefighter (AFG) Notice of Funding Opportunity (NOFO)) Cause Management had not developed a system of internal control that would have ensured compliance with the grant agreement and the Cash Management compliance requirement. Effect The failure to design and implement an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the Cash Management compliance requirement could have resulted in the loss of federal funds to the City. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Cash Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2021-005 Subject: Assistance to Firefighters Grant - Procurement and Suspension and Debarment Federal Agency: Department of Homeland Security Federal Program: Assistance to Firefighters Grant Assistance Listings Number: 97.044 Federal Award Number and Year (or Other Identifying Number): EMW-2019-FG-01441 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective system of internal control was not in place at the City to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Procurement The City had not designed or implemented a system of internal control to ensure proper procurement procedures were followed. Procured vendors were determined by one employee without an oversight or review process in place to prevent, or detect and correct, errors. Suspension and Debarment The City did not follow procedures established by the grant agreement to ensure applicable vendors who received federal funds were not suspended or debarred from participation in federal awards programs. The City entered into two purchasing contracts that exceeded $25,000. The City did not perform procedures to ensure these vendors were not suspended, debarred, or otherwise excluded from or ineligible for participation in federal assistance programs or activities. The lack of internal controls and noncompliance were systemic 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 18.300 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management had not developed or implemented a system of internal control that would have ensured compliance with the compliance requirement listed above. Effect The failure to establish an effective system of internal control enabled material noncompliance related to the suspension and debarment requirements to go undetected, and placed the City at risk of noncompliance with the grant agreement and the procurement requirements. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the City's management establish a system of internal control to ensure compliance and comply with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.