Town of Whitestown

FINDING 2023-002 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): ARP2021 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) awards 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 expended 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 Town's policies related to the SLFRF suspension and debarment requirement did not include checking the EPLS for vendor suspension and debarment. Three covered transactions were identified. All three covered transactions were selected for testing. The three covered transactions, totaling $1,836,413, did not include the appropriate provisions in the contracts, nor did the Town require a certification or check the EPLS to ensure the entity was not suspended or debarred prior to making payment. Additionally, the Town did not have a formalized procurement policy outlining its processes and procedures with regards to the procurement of goods and services using federal grant funds. The policy must conform to the procurement standards identified in 2 CFR 200.317 through 200.327 and should address ensuring vendors are not suspended or debarred prior to entering into covered transactions if the contract is expected to equal or exceed $25,000. The lack of internal controls and noncompliance was a systemic issue throughout the audit period and enabled material noncompliance to occur and remain undetected. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 16 TOWN OF WHITESTOWN 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 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." 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." Cause The system of internal controls as established by management of the Town was not properly implemented to ensure that the policies and procedures in place related to suspension and debarment were appropriately followed. The Town did not verify that the entities were not suspended or debarred prior to entering into the covered transactions. In addition, management of the Town had not established a system of internal controls, including policies and procedures, for the procurement of goods or services with federal funds. Effect Without the proper implementation of an effectively designed system of internal controls, the Town could not ensure the vendors paid with federal funds were eligible to participate in federal programs. Any program funds the Town used to pay vendors that have been suspended or debarred would be unallowable, and the funding agency could potentially recover them. In addition, procurements of goods or services could have been noncompliant. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 17 TOWN OF WHITESTOWN SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended the Town strengthen its system of internal controls to ensure vendors 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 covered transactions. We also recommended the Town adopt a formal procurement policy for the purchase of goods or services with federal funds that complies with the procurement standards outlined in the Code of Federal Regulations. 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 (Auditor Assigned Reference Number) Finding Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds – Procurement and Suspension and Debarment Summary of Finding: The Town's policies related to SLFRF suspension and debarment requirement did not include checking the EPLS for vendor suspension and debarment. All three covered transactions tested did not have documentation provided to show the vendor was checked for suspension and debarment. Additionally, the Town did not have a formalized procurement policy outlining its processes and procedures with regards to the procurement of goods and services using federal grant funds. Contact Person Responsible for Corrective Action: Matt Sumner Contact Phone Number and Email Address: 317-732-4532, msumner@whitestown.in.gov Views of Responsible Officials: We concur with the finding. Description of Corrective Action Plan: We will be more diligent in finding out if our grants are federal and what requirements they have for us to follow. We will check applicable vendors for suspension and debarment and implement a control/review over those searches. Anticipated Completion Date: November 1, 2024