Audit 387586

Condition: The City entered into a written agreement with a subrecipient; however, the agreement did not include language requiring the subrecipient to compliance with the Uniform Guidance. As a result, the subrecipient was not formally notified of its responsibility to adhere to federal administrative, cost, and audit requirements. Criteria: 2 CFR §200.332(a) requires pass-through entities to ensure that subaward agreements include all required federal award information and clearly identify applicable federal statutes, regulations, and terms and conditions, including compliance with Uniform Guidance (2 CFR Part 200). Cause: The City had a preexisting agreement with an entity who later became a subrecipient of federal grant pass-through funds. The City did not amend their agreement to include the required components after receiving the grant nor report the funds as federal revenues or expenditures in the City’s financial statements. Effect or Potential Effect: Without a formal subaward agreement, the pass-through entity lacks assurance that the subrecipient understands and complies with applicable federal requirements, increasing the risk of noncompliance, improper use of federal funds, and questioned costs. The subrecipient may also not be aware of their responsibility to report the related federal expenditures on the subrecipient’s schedule of expenditures of federal awards. Questioned Costs: None. Recommendation: We recommend that the City identify all federal expenditures and passthrough awards and notify all subrecipients of their receipt of federal awards by identifying the award granted, specific compliance requirements passed-through and other requirements of 2 CFR 200.332. Management’s Comments Regarding Corrective Actions Planned: Management agrees with the finding. The City had a preexisting agreement with the subrecipient for a project that was already in progress when the federal grant was awarded. The subrecipient had in-depth involvement during the federal grant application process and is aware of specific compliance requirements under the Uniform Guidance (2 CFR Part 200). We will make sure that all future subrecipients of pass-through federal grants are notified in writing of the responsibility to adhere to federal administrative, cost, and audit requirements.