CITY OF PLYMOUTH

FINDING 2023-001 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): IN0387 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The City elected to receive the standard revenue loss allowance, allowing the City to claim its total State and Local Fiscal Recovery Funds (SLFRF) allocation of $2,262,192 as revenue loss to use for government services. As such, all SLFRF program funds were expended 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 given that there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. Prior to entering into subawards and covered transactions with 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. Due to 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. Upon inquiry, the City divulged they were unaware of the suspension and debarment requirements related to the SLFRF awards until November 2023, and, therefore, did not have polices or procedures in place to verify that contractors were neither suspended nor debarred, or otherwise excluded or disqualified, from participating in federal assistance programs or activities. During the audit period, two covered transactions for goods or services that equaled or exceeded $25,000 paid from SLFRF funds were identified. For both of these transactions, the City 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: INDIANA STATE BOARD OF ACCOUNTS 14 CITY OF PLYMOUTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (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 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 unable to provide documentation to demonstrate it had verified vendors were not suspended or debarred prior to entering into covered transactions that exceeded $25,000 due to not having established procedures in place. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot ensure the 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 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 management of the City establish a system of internal controls and develop policies and procedures to ensure the City checked the EPLS, collected a certification, or added a clause to the covered transaction prior to payment for all covered transactions that are $25,000 or more, paid all or in part with federal funds. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2023-002 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): IN0387 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context Recipients are required quarterly or annually to submit 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 received an allocation of less than $10 million in State and Local Fiscal Recovery Funds. As such, the P&E report, covering the period from March 3, 2022 to March 31, 2023, was required to be submitted to the Treasury by April 30, 2023. The P&E report was prepared by one employee without an oversight or review process in place to ensure accuracy. The P&E report submitted was not mathematically accurate or complete. Per Resolution 2022-1028, approved on December 12, 2022, the City obligated funds for six separate projects, totaling $2,257,927. However, the P&E report submitted on April 18, 2023, only included one project, resulting in an understatement of total obligations of $1,807,927. Additionally, for the one project submitted, the key line items of "Current Period Expenditures," "Total Cumulative Expenditures," and "Current Period Obligations" as reported on the P&E report did not agree to the City's financial ledger. Errors were as follows:  The "Current Period Expenditures" and "Total Cumulative Expenditures" were overstated by $68,609.  "Current Period Obligations" were understated by $381,391. 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 16 CITY OF PLYMOUTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 City did not have procedures in place to verify that the information contained within the P&E report accurately reflected the City's expenditures and obligations prior to, or in a timely manner following, submission. Effect Without the proper implementation of an effectively designed system of internal controls, the City cannot ensure that P&E reports are materially accurate and correct. The P&E reports contained the errors identified in the Condition and Context. In addition, not meeting the reporting requirements increases the likelihood that the public 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 City's management establish a system of internal controls to ensure that the City provides the Clerk-Treasurer 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.