City of Marion

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): FY2023 Compliance Requirement: Procurement and Suspension and Debarment 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 the requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Suspension and Debarment 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 beneficiaries 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 certification from that person, or adding a clause or condition to the covered transaction with that person. Two vendors were selected for testing that equaled or exceeded $25,000 paid from SLFRF funds during the audit period was identified, totaling $166,579. For one of the two vendors, the City did not verify the suspension and debarment status prior to payment. INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF MARION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 200.318(a) states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non- Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." 2 CFR 180.300 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 ELPS; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause The City's management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. The City did not obtain evidence of one vendor's verification for suspension and debarment, since it is up to the individual departments to complete that verification. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. As a result, adequate documentation was not retained for suspension and debarment. 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. INDIANA STATE BOARD OF ACCOUNTS 17 CITY OF MARION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the City establish a proper system of internal controls and develop policies and procedures to ensure all required documentation related to suspension and debarment is maintained. We also recommended that the City perform suspension and debarment procedures on all vendors with purchases above $25,000 and ensure that documentation is maintained to show the verification was performed. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2024-003 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): FY2023 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context Recipients are required to submit quarterly or annually Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its 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 City was classified as a city with a population below 250,000 residents that was allocated less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds funding. As such, the P&E report, covering the period April 1, 2023 to March 31, 2024, was required to be submitted to the Treasury by April 30, 2024. The subsequent annual reports are to cover one year from April 1 to March 31 and must be submitted to the Treasury by April 30 of each year. The City submitted the P&E report by April 30, 2024, as required, and there was more than one employee involved in the process of submission; however, internal controls were not effective to prevent, or detect and correct, errors. The data submitted included amounts that were not supported by the City's records and amounts that should not have been included. Errors identified included the following:  Total Cumulative Obligations were overstated by $452,808.  Current Period Obligations were overstated by $1,819,927.  Current Period Expenditures and Total Cumulative Expenditures were overstated by $1,400,000. The lack of internal controls and noncompliance was a systemic issue throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 18 CITY OF MARION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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). . . ." 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 City included the total amount appropriated to each of the projects that were overstated on the report and did not only include the amounts that were obligated as of the end date of the report. Also, the City included transfers to other funds in cumulative and current expenditures, but the funds were not expended as of the end of the report date. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the City did not accurately report current period obligations and cumulative obligations when filing the P&E report for the period April 1, 2023 to March 31, 2024. Noncompliance with the provisions of federal 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. INDIANA STATE BOARD OF ACCOUNTS 19 CITY OF MARION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the City design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight of federal reports are taking place. We also recommended the development of policies and procedures to ensure the City provides 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.

FINDING 2023-001 Subject: Formula Grants for Rural Areas and Tribal Transit Program - Procurement and Suspension and Debarment Federal Agency: Department of Transportation Federal Program: Formula Grants for Rural Areas and Tribal Transit Program Assistance Listings Number: 20.509 Federal Award Numbers and Years (or Other Identifying Numbers): DES1804006O, 18039060 Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 13 CITY OF MARION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-002. Condition and Context Prior to entering into subawards and covered transactions with Formula Grants for Rural Areas and Tribal Transit Program award funds, recipients are required to verify that such contracts and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under procurement and nonprocurement transactions (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs Exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Two covered transactions for goods or services that equaled or exceeded $25,000 paid from Formula Grants for Rural Areas and Tribal Transit Program funds during the audit period were identified. Both covered transactions, totaling $75,580, were examined to determine whether the City verified the suspension and debarment status of each vendor prior to payment. The City had established the following procedures:  The City Controller searches the SAM website for vendors the City enters into a covered transaction with over $25,000. The results are printed and signed.  The printed results are then provided to the Transportation Director for his review and signature.  In addition, a debarment and suspension certification from the prospective third-party contractor is collected or a clause is included in the third-party contract regarding disclosure which is reviewed and approved by the Board of Public Works and Safety. However, for both covered transactions, the City did not follow their procedures as outlined above and thus did not verify the vendors' suspension and debarment status prior to payment. 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 14 CITY OF MARION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 180.300 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 A proper system of internal controls was not designed by management of the City. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. 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 that 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 or 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 management of the City strengthen its system of internal controls and to ensure that all contractors 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 contracts. We also recommended strengthening its policies and procedures to ensure that documentation is kept and all covered transactions are verified. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-001 Subject: Formula Grants for Rural Areas and Tribal Transit Program - Reporting Federal Agency: Department of Transportation Federal Program: Formula Grants for Rural Areas and Tribal Transit Program Assistance Listings Number: 20.509 Federal Award Numbers and Years (or Other Identifying Numbers): 1804006O, 1803906O Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The City had not properly designed or implemented a system of internal controls that would likely be effective in preventing, or detecting and correcting, noncompliance. Recipients of the Formula Grants for Rural Areas and Tribal Transit Program are required to submit claim vouchers quarterly to the Indiana Department of Transportation (INDOT). Each quarterly reimbursement request is to reflect the total expenditures for the quarter then ended. The City submitted a total of five claim vouchers during the audit period; however, one of the claim vouchers was not properly prepared. The fourth quarter claim voucher for 2021, covering the period of October 2021 to December 2021, submitted to the INDOT by the City, incorrectly included the expenditures for September 2021 instead of the expenditures for October 2021. This caused the September 2021 expenditures to be reimbursed for a second time, and the October 2021 expenditures to not be reimbursed. The September 2021 expenditure amount was $72,824; however, the October 2021 expenditure amount was $182,909. The October 2021 expenditures have not been requested for reimbursement to date. The lack of internal controls and noncompliance was isolated to the fourth quarter claim voucher for 2021. 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 200.328 states: "Unless otherwise approved by OMB, the Federal awarding agency must solicit only the OMBapproved governmentwide data elements for collection of financial information (at time of publication the Federal Financial Report or such future, OMB-approved, governmentwide data elements available from the OMB-designated standards lead. This information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes, and preferably in coordination with performance reporting. The Federal awarding agency must use OMB-approved common information collections, as applicable, when providing financial and performance reporting information." Cause A proper system of internal controls over the quarterly expenditure report was not designed by management of the City to ensure the correct expenditures were requested for reimbursement. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, 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 City. In addition, not requesting reimbursement for the correct amount led to the City not being reimbursed for all applicable expenditures. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the City design and implement a proper system of internal controls that would provide a segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2022-002 Subject: Formula Grants for Rural Areas and Tribal Transit Program - Procurement and Suspension and Debarment Federal Agency: Department of Transportation Federal Program: Formula Grants for Rural Areas and Tribal Transit Program Assistance Listings Number: 20.509 Federal Award Numbers and Years (or Other Identifying Numbers): 1804006O, 1803906O Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Procurement Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000. However, Indiana Code 5-22-8 has a more restrictive threshold of $150,000 or less for when small purchase procedures may be used. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds. Micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold, but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The City obtained price or rate quotes for all three vendors tested that were less than the simplified acquisition threshold of $150,000, but exceeded the $10,000 micro-purchase threshold. However, the City did not obtain a contract for one vendor as required by Indiana Code for purchases between $50,000 and $150,000. Suspension and Debarment Prior to entering into subawards and covered transactions with the Formula Grants for Rural Areas and Tribal Transit Program award funds (program funds), recipients are required to verify that such contracts and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to contracts for goods and services awarded under procurement and non-procurement transactions (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAMs Exclusions, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Four covered transactions for goods or services that equaled or exceeded $25,000 paid from program funds during the audit period were identified. All four transactions, totaling $153,753, were examined to determine whether the City verified the suspension and debarment status of each vendor prior to payment. The City's procedures were as follows: ? The City Controller searches the SAM website for vendors the City has entered into a covered transaction with over $25,000 or more and prints out the results. ? The City Controller signs the results and the Transportation Director reviews and signs the results. ? In addition, a debarment and suspension certification from the prospective third-party contractor will be collected or a clause included in the third-party contract regarding disclosures, which are reviewed and approved by the City of Marion Board of Public Works and Safety. However, for three of the four transactions, the City did not follow its procedures as outlined and thus did not verify the vendors' suspension and debarment status prior to payment. 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). . . ." Indiana Code 5-22-8-3 states in part: "(a) This section applies only if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) If the purchasing agent receives a satisfactory quote, the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 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 A proper system of internal controls was not designed by management of the City. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. 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 a result, contracts were not entered into for purchases in excess of $50,000 but below $150,000, and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or 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 management of the City establish a proper system of internal controls and develop policies and procedures to ensure that contracts are entered into when the value of the procurement is in excess of $50,000, and that contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2019-001 Subject: Formula Grants for Rural Areas and Tribal Transit Program - Procurement and Suspension and Debarment 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): 1803706O, 1803606O Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 13 CITY OF MARION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a partial repeat finding from the immediately prior audit report. The prior audit finding number was 2018-001. Condition and Context An effective internal control system was not in place at the City in order to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Procurement The City did not obtain quotes for all items with purchases under the small purchase procurement method. The City did not obtain price quotations from other vendors or document the basis for purchasing from these vendors. Suspension and Debarment The City did not follow procedures established by the grant agreement to ensure that vendors with contracts that exceeded $25,000 were not suspended or debarred from participation in federal award programs. The City Council entered into a contract with a vendor that exceeded the $25,000 threshold and did not perform any procedures to ensure compliance with requirements regarding verification that the vendor was not suspended or debarred from participation in federal programs. The lack of controls and noncompliance occurred 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 Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards 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 200.320 states in part: "The non-Federal entity must use one of the following methods of procurement. . . . (b) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources. . . ." INDIANA STATE BOARD OF ACCOUNTS 14 CITY OF MARION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 180.300 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 The City's management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the 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 internal controls 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.

GSA_MIGRATION