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STATE BOARD OF ACCOUNTS 302 West Washington Street Room E418 INDIANAPOLIS, INDIANA 46204-2769 FEDERAL SINGLE AUDIT REPORT OF ALLEN COUNTY, INDIANA January 1, 2016 to December 31, 2016 B49102 FILED 12/06/2017 ---PAGE BREAK--- ---PAGE BREAK--- TABLE OF CONTENTS Description Page Schedule of Officials 2 Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 3-4 Independent Auditor's Report on Compliance for Each Major Federal Program; Report on Internal Control over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by Uniform Guidance 5-7 Schedule of Expenditures of Federal Awards and Accompanying Notes: Schedule of Expenditures of Federal Awards 10-11 Notes to Schedule of Expenditures of Federal Awards 12 Schedule of Findings and Questioned Costs 13-18 Auditee Prepared Schedule: Corrective Action Plan 20-24 Other Reports 25 ---PAGE BREAK--- SCHEDULE OF OFFICIALS Office Official Term County Auditor Tera K. Klutz 01-01-15 to 01-18-17 Nicholas D. Jordan 01-19-17 to 12-31-18 County Treasurer Susan L. Orth 01-01-13 to 12-31-16 William F. Royce 01-01-17 to 12-31-20 Clerk of the Circuit Court Lisbeth A. Borgmann 01-01-15 to 12-31-18 County Sheriff David J. Gladieux 01-01-15 to 12-31-18 County Recorder Anita A. Mather 01-01-15 to 12-31-18 Circuit Court Judge Honorable Thomas J. Felts 01-01-15 to 12-31-20 Superior Court Judge Honorable Daniel G. Heath 01-01-15 to 12-31-20 President of the Board of County Commissioners F. Nelson Peters 01-01-16 to 12-31-16 Therese M. Brown 01-01-17 to 12-31-17 President of the County Council Roy A. Buskirk (deceased) 01-01-16 to 11-06-16 (Vacant) 11-07-16 to 11-16-16 Larry L. Brown 11-17-16 to 12-31-17 ---PAGE BREAK--- STATE OF INDIANA AN EQUAL OPPORTUNITY EMPLOYER STATE BOARD OF ACCOUNTS 302 WEST WASHINGTON STREET ROOM E418 INDIANAPOLIS, INDIANA 46204-2769 Telephone: (317) 232-2513 Fax: (317) 232-4711 Web Site: www.in.gov/sboa INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS TO: THE OFFICIALS OF THE ALLEN COUNTY, INDIANA We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of Allen County (County), as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the County's basic financial statements and have issued our report thereon dated October 26, 2017. The opinions to the financial statements were qualified due to a qualified opinion on the aggregate discretely presented component units. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the County's inter- nal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County's internal control. Accordingly, we do not express an opinion on the effectiveness of the County's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the County's financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weak- nesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficien- cies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. ---PAGE BREAK--- INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS (Continued) Compliance and Other Matters As part of obtaining reasonable assurance about whether the County's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regu- lations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the County's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Paul D. Joyce, CPA State Examiner October 26, 2017 ---PAGE BREAK--- STATE OF INDIANA AN EQUAL OPPORTUNITY EMPLOYER STATE BOARD OF ACCOUNTS 302 WEST WASHINGTON STREET ROOM E418 INDIANAPOLIS, INDIANA 46204-2769 Telephone: (317) 232-2513 Fax: (317) 232-4711 Web Site: www.in.gov/sboa INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE TO: THE OFFICIALS OF ALLEN COUNTY, INDIANA Report on Compliance for Each Major Federal Program We have audited Allen County's (County) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2016. The County's major federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the County's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compli- ance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the County's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the County's compliance. Basis for Qualified Opinion on Equitable Sharing Program As described in the accompanying Schedule of Findings and Questioned Costs, the County did not comply with requirements regarding the Equitable Sharing Program related to the Reporting, Procurement and Suspension and Debarment, and Special Tests and Provisions - Wage Rate Requirements compliance requirements. Compliance with such requirements is necessary, in our opinion, for the County to comply with requirements applicable to that program. ---PAGE BREAK--- INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE (Continued) Qualified Opinion on Equitable Sharing Program In our opinion, except for the noncompliance described in the Basis for Qualified Opinion on Equitable Sharing Program paragraph, the County complied, in all material respects, with the types of com- pliance requirements referred to above that could have a direct and material effect on the Equitable Sharing Program for the year ended December 31, 2016. Unmodified Opinion on Each of the Other Major Federal Programs In our opinion, the County complied, in all material respects, with the types of compliance require- ments referred to above that could have a direct and material effect on each of its other major federal programs identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs for the year ended December 31, 2016. Report on Internal Control over Compliance Management of the County is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effective- ness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reason- able possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compli- ance that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. We identified certain deficiencies in internal con- trol over compliance, as described in the accompanying schedule of findings and questioned costs as items 2016-001, 2016-002, and 2016-003, that we consider to be material weaknesses. The County's response to the internal control over compliance findings identified in our audit is described in the accompanying Corrective Action Plan. The County's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. ---PAGE BREAK--- INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE (Continued) Report on Schedule of Expenditures of Federal Awards Required by Uniform Guidance We have audited the financial statements of governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County, as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise the County's basic financial statements. We issued our report thereon dated October 26, 2017, which contained unmodified opinions on those financial statements except for the aggregate discretely presented component units, for which the opinion was qualified. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively com- prise the basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the finan- cial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such informa- tion directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated in all material respects in relation to the basic financial statements as a whole. Paul D. Joyce, CPA State Examiner October 26, 2017 ---PAGE BREAK--- (This page intentionally left blank.) ---PAGE BREAK--- SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND ACCOMPANYING NOTES The Schedule of Expenditures of Federal Awards and accompanying notes presented were prepared by management of the County. The schedule and notes are presented as intended by the County. ---PAGE BREAK--- Pass-Through Federal Entity (or Other) Total Federal Grantor Agency CFDA Identifying Pass-Through Federal Award Cluster Title/Program Title/Project Title Pass-Through Entity or Direct Grant Number Number To Subrecipient Expended Department of Agriculture Child Nutrition Cluster School Breakfast Program Indiana Department of Education 10.553 School Breakfast FY 2016 - $ 52,247 $ National School Lunch Program 10.555 School Lunch FY 2016 - 97,328 Total - Child Nutrition Cluster - 149,575 Total - Department of Agriculture - 149,575 Department of Justice State Criminal Alien Assistance Program Direct Grant 16.606 Criminal Alien Assist Grant 2016-H1551-IN-AP - 8,079 Equitable Sharing Program Direct Grant 16.922 Asset Seizure - Sheriff FY 2016 10,000 355,735 Juvenile Accountability Block Grants Indiana Criminal Justice Institute 16.523 2015-JB-FX-0068 - 12,923 Crime Victim Assistance Indiana Criminal Justice Institute 16.575 Victims of Crime 2015-VOCA-4264 - 36,197 2016-VOCA-4264 - 12,280 Total - Crime Victim Assistance - 48,477 Violence Against Women Formula Grants Indiana Criminal Justice Institute 16.588 Violence Against Women Office 2014-WF-AX-0005 - 35,894 16STOP5115 - 21,952 Total - Violence Against Women Formula Grants - 57,846 Edward Byrne Memorial Justice Assistance Grant Program Indiana Criminal Justice Institute 16.738 Air Service Pilot Fund 2015-DJ-BX-1071 - 95,100 Sheriff Drug Task Force D3-16-10844 - 11,694 Total - Edward Byrne Memorial Justice Assistance Grant Program - 106,794 Total - Department of Justice 10,000 589,854 Department of Transportation Highway Planning and Construction Cluster Highway Planning and Construction Indiana Department of Transportation 20.205 NIRCC 16800647 FY 2016 - 353,221 NIRCC 16803029 FY 2016 - 7,875 NIRCC 16702753 FY 2016 - 52,599 NIRCC 17805329 FY 2016 - 177,058 NIRCC 17802586 FY 2016 - 8,625 NIRCC 17802816 FY 2016 - 31,098 Preliminary Engineering Des. 400582 - 95,598 Construction Engineering Des. 400583 - 64,553 Construction Engineering Des. 400584 - 153,051 Utility Relocation Des. 400584 - 344,147 Preliminary Engineering Des. 400584 - 114,439 Right of Way Des. 400584 - 82,858 Construction Engineering Des. 710075 - 4,205 Construction Engineering Des. 710077 - 3,007 Preliminary Engineering Des. 1297238 - 79,324 Construction Engineering Des. 1297753 - 1,126 Preliminary Engineering Des. 1382100 - 165,705 Right of Way Des. 1382492 - 64,895 Preliminary Engineering Des. 1382497 - 60,486 Right of Way Des. 1382497 - 12,996 Preliminary Engineering Des. 1382818 - 27,800 Right of Way Des. 1382818 - 47,666 Right of Way Des. 1592356 - 57,019 Construction Engineering Des. 1592356 - 123,723 Total - Highway Planning and Construction Cluster - 2,133,074 Highway Safety Cluster City of Fort Wayne 20.600 State and Community Highway Safety D3-17-11165 - 37,867 Total Highway Safety Cluster - 37,867 Interagency Hazardous Materials Public Sector Training and Planning Grants Indiana Department of Homeland Security 20.703 Hazardous Materials Emergency Preparedness HM-HMP-0498-15-01 - 13,000 Total - Department of Transportation - 2,183,941 Environmental Protection Agency State Indoor Radon Grants Indiana State Department of Health 66.032 14449 - 180 Total - Environmental Protection Agency - 180 Allen County Schedule of Expenditures of Federal Awards For the Year Ending December 31, 2016 -10- ---PAGE BREAK--- Pass-Through Federal Entity (or Other) Total Federal Grantor Agency CFDA Identifying Pass-Through Federal Award Cluster Title/Program Title/Project Title Pass-Through Entity or Direct Grant Number Number To Subrecipient Expended Allen County Schedule of Expenditures of Federal Awards For the Year Ending December 31, 2016 Department of Health and Human Services Hospital Preparedness Program (HPP) and Public Health Emergency Indiana Department of Health 93.074 Preparedness (PHEP) Aligned Cooperative Agreements HPP 16801 - 3,459 Centers for Disease Control and Prevention Immunization Cooperative Agreements 93.268 A70-5-0731158 - 149,254 Child Support Enforcement Indiana Department of Child Services 93.563 Child Support Enforcement FY 2016 - 2,718,773 Refugee and Entrant Assistance_State Administered Programs Indiana Family and Social Services Administration 93.566 Refugee Health Screens A70-5-106111 - 35,877 State Court Improvement Program Indiana Supreme Court Court Improvement 93.586 Allen-CIP-2015BT - 20,958 Allen-CIP-2016BD - 4,125 Total - State Court Improvement Program - 25,083 HIV Prevention Activities_Health Department Based Indiana Department of Health 93.940 HIV/AIDS Program U62PS003682 - 31,800 Total - Department of Health and Human Services - 2,964,246 Department of Homeland Security Emergency Management Performance Grants Indiana Department of Homeland Security 97.042 16348 - 92,346 14516 - 5,111 Total - Emergency Management Performance Grants - 97,457 Homeland Security Grant Program 97.067 C44P-5-567B - 7,403 Total - Department of Homeland Security - 104,860 10,000 $ 5,992,656 $ The accompanying notes are an integral part of the Schedule of Expenditures of Federal Awards. -11- ---PAGE BREAK--- -12- ALLEN COUNTY NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Note 1. Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards (SEFA) includes the federal grant activity of the County under programs of the federal government for the year ended December 31, 2016. The information in the SEFA is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the SEFA presents only a select portion of the operations of the County, it is not intended to and does not present the financial position of the County. Note 2. Summary of Significant Accounting Policies Expenditures reported on the SEFA are reported on the accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, or the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowed or are limited as to reimbursement. When federal grants are received on a reimbursement basis, the federal awards are considered expended when the reimbursement is received. The County has elected not to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. ---PAGE BREAK--- -13- ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS Section I - Summary of Auditor's Results Financial Statements: Type of auditor's report issued: Qualified Internal control over financial reporting: Material weakness identified? no Significant deficiency identified? none reported Noncompliance material to financial statements noted? no Federal Awards: Internal control over major programs: Material weaknesses identified? yes Significant deficiency identified? none reported Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? yes Identification of Major Programs and type of auditor's report issued on compliance for each: CFDA Number Name of Federal Program or Cluster Opinion Issued 16.922 Equitable Sharing Program Qualified Highway Planning and Construction Cluster Unmodified Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee? no Section II - Financial Statement Findings No matters are reportable. Section III - Federal Award Findings and Questioned Costs FINDING 2016-001 Subject: Equitable Sharing Program - Reporting Federal Agency: Department of Justice Federal Program: Equitable Sharing Program CFDA Number: 16.922 Federal Award Number and Year (or Other Identifying Number): FY 2016 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion - Noncompliance ---PAGE BREAK--- -14- ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition An effective internal control system was not in place at the County in order to ensure compliance with requirements related to the grant agreement and the Reporting compliance requirement. The County is a participant in the Department of Justice Equitable Sharing Program. Participants must annually submit an Equitable Sharing Agreement and Certification form to the Department of Justice Criminal Division, Asset Forfeiture and Money Laundering Section. The purpose of this form is for participants to certify that they have read and understood their obligations under the Equitable Sharing Agreement and to disclose their financial activity of the program. The form submitted by the County for calendar year ending 2016 did not agree to the County Auditor's fund ledgers. Context The County's Equitable Sharing Agreement and Certification form contained the following errors: 1. The beginning Equitable Sharing fund balance was overstated by $100,436. 2. Other income was understated by $24,529. 3. Law enforcement operations and investigations expenditures were overstated by $6,100. 4. Training and education expenditures were overstated by $1,765. 5. Law enforcement equipment expenditures were understated by $2,857. Criteria 2 CFR 200.302(b)(2) states in part: "Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in 200.327 Financial reporting and 200.328 Monitoring and reporting program performance. . . 2 CFR 200.303 states in part: "The non-Federal entity must: 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 a system of internal controls that would have ensured accurate reporting of the Equitable Sharing Agreement and Certification form. ---PAGE BREAK--- -15- ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to establish internal controls enabled material noncompliance to go undetected, which could have resulted in the loss of federal funds to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management establish controls, including segregation of duties, to ensure compliance with 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 2016-002 Subject: Equitable Sharing Program - Procurement and Suspension and Debarment Federal Agency: Department of Justice Federal Program: Equitable Sharing Program CFDA Number: 16.922 Federal Award Number and Year (or Other Identifying Number): FY 2016 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion - Noncompliance Condition An effective internal control system was not in place at the County in order to ensure compliance with requirements related to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. The Department of Justice Criminal Division, Asset Forfeiture and Money Laundering Section (AFMLS) issued the Guide to Equitable Sharing for State and Local Law Enforcement Agencies for permissible uses of Equitable Sharing Program funds. According to this guide, approval from the AFMLS is required prior to making capital expenditures relating to law enforcement and detention facilities. On August 5, 2016, the County contracted with a construction company to construct a training facility for the County Sheriff's Department. The construction of the training facility was funded through Equitable Sharing Program funds. The County received approval from the AFMLS after the procurement of the training facility on August 15, 2017. Furthermore, the County did not verify that the awarded construction company was not suspended or debarred. The communications with the awarded construction company did not contain any statements regarding suspension or debarment. Context The lack of controls and noncompliance related to the Procurement and Suspension and Debarment compliance requirement were systemic issues during the audit period. ---PAGE BREAK--- -16- ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria Guide to Equitable Sharing for State and Local Law Enforcement Agencies, Chapter VIII, A.1 states in part: Law enforcement and detention facilities—the costs associated with the purchase, lease, construction, expansion, improvement, or operation of law enforcement or detention facilities used or managed by the recipient agency. . . . Approval from AFMLS is required prior to making such capital expenditures. . . 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: Checking SAM Exclusions; or Collecting a certification from that person; or Adding a clause or condition to the covered transaction with that person." 2 CFR 200.303 states in part: "The non-Federal entity must: 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 a system of internal controls relating to the grant agreement and the Procurement and Suspension and Debarment compliance requirement. Effect The failure to establish internal controls enabled material noncompliance to go undetected, which could have resulted in the loss of federal funds to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management establish controls, including segregation of duties, to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. ---PAGE BREAK--- -17- ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report. FINDING 2016-003 Subject: Equitable Sharing Program - Special Tests and Provisions - Wage Rate Requirements Federal Agency: Department of Justice Federal Program: Equitable Sharing Program CFDA Number: 16.922 Federal Award Number and Year (or Other Identifying Number): FY 2016 Compliance Requirement: Special Tests and Provisions - Wage Rate Requirements Auditing Findings: Material Weakness, Modified Opinion - Noncompliance Condition An effective internal control system was not in place at the County in order to ensure compliance with requirements related to the grant agreement and the Special Tests and Provisions - Wage Rate Requirements. On August 5, 2016, the County contracted with a construction company to construct a training facility for the County Sheriff's Department. The construction of the training facility was funded through Equitable Sharing Program funds. The County did not request or receive certified payrolls from the con- struction company to determine if prevailing wages were being properly paid. Context No certified payrolls from the construction company were received for any of the weeks during which construction was performed. The lack of controls and noncompliance related to the Special Tests and Provisions - Wage Rate Requirements compliance requirement were systemic issues. Criteria 2 CFR 200.326 states: "The non-Federal entity's contracts must contain the applicable provisions described in Appendix II to Part 200—Contract Provisions for non-Federal Entity Contracts Under Federal Awards." 2 CFR Appendix II to Part 200(D) states in part: "Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non-Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, 'Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction'). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. . . ---PAGE BREAK--- -18- ALLEN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 29 CFR section 5.5(a)(3)(ii)(A) states in part: "The contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the (write in name of appropriate federal agency) if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the payrolls to the applicant, sponsor, or owner, as the case may be, for transmission to the (write in name of agency). The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i) . . 2 CFR 200.303 states in part: "The non-Federal entity must: 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 a system of internal controls relating to the grant agreement and the compliance requirements for Special Tests and Provisions - Wage Rate Requirements. Effect The failure to establish internal controls enabled material noncompliance to go undetected, which could have resulted in the loss of federal funds to the County. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the County's management establish controls, including segregation of duties, to ensure compliance with 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. ---PAGE BREAK--- -19- AUDITEE-PREPARED SCHEDULES The subsequent schedules were provided by management of the County. The schedules are pre- sented as intended by the County. ---PAGE BREAK--- -20- ---PAGE BREAK--- -21- ---PAGE BREAK--- -22- ---PAGE BREAK--- ALLEN COUNTY DEPARTMENT OF PUBLIC PURCHASE Dawn Rose, Director Citizens Square 200 E. Berry St., Suite 495 Fort Wayne, IN 46802 Phone: (260)449-7567 Fax: (260)449-8978 www.co.allen.in.us/purchasing Corrective Action Plan Finding 2016-002 October 23, 2017 Contact person responsible for the corrective action: Dawn Rose Contact Phone Number: [PHONE REDACTED] Views of Responsible Official: Allen County Department of Public Purchase concurs with the finding and proposes this corrective action plan. Subject: Equitable Sharing Program – Procurement, Suspension, and Debarment Description of Corrective Action Plan: In order for the Board of Commissioners of the County of Allen to award a contract for a public works project expected to equal or exceed $25,000, and funded through the Equitable Sharing Program, a search of the System of Award Manager Center website will take place confirming Contractor is not excluded or disqualified per established requirements for Procurement, Suspension, and Debarment. Allen County Department of Public Purchase will be responsible for verification involving federally funded public works projects utilizing the Equitable Sharing Program funds. Specific verbiage will be added to bid specification documents informing bidders of this compliance requirement. Anticipated Completion Date: It is anticipated that the creation and implementation of this procedure will begin as soon as possible but no later than January 2, 2018. -23- ---PAGE BREAK--- ALLEN COUNTY DEPARTMENT OF PUBLIC PURCHASE Dawn Rose, Director Citizens Square 200 E. Berry St., Suite 495 Fort Wayne, IN 46802 Phone: (260)449‐7567 Fax: (260)449‐8978 www.co.allen.in.us/purchasing Finding 2016-003 Contact person responsible for the corrective action: Dawn Rose Contact Phone Number: [PHONE REDACTED] Views of Responsible Official: Allen County Department of Public Purchase concurs with the finding and proposes this corrective action plan. Subject: Equitable Sharing Program – Compliance with Special Tests and Provisions – Wage Rate Requirements Description of Corrective Action Plan: This fund was established to receive and disburse Allen County’s share of Federal Forfeiture income and states that the fund shall be administered by the Allen County Sheriff and the sheriff shall be charged with compliance with all other aspects of the Federal Forfeited Property Rules. The Board of Commissioners of the County of Allen will create a procedure for implementation, review and document control for the Davis-Bacon Act; related to certified payroll review and verification procedures. This procedure will identify the roles of the individuals responsible for completing the tasks. The Board of Commissioners is currently exploring contracting with NIRCC to handle non-highway federal contract compliance work. Anticipated Completion Date: It is anticipated that the creation and implementation of this procedure will require several meetings in order to involve legal counsel for Allen County Sheriff’s Department, the sheriff’s internal staff designee responsible for compliance of the Equitable Sharing Program, Allen County’s attorney, Allen County purchasing director, a NIRCC representative and the Board of Commissioners’ legal liaison. The target date will be January 2, 2018. -24- ---PAGE BREAK--- -25- OTHER REPORTS In addition to this report, other reports may have been issued for the County. All reports can be found on the Indiana State Board of Accounts' website: http://www.in.gov/sboa/.