Audit 388589

2025-001 Internal Controls Systems and Compliance Over Subrecipient Monitoring – U.S. Department of Treasury, COVID-19 Coronavirus State and Local Fiscal Recovery Funds, Passed Through the State of Nevada Department of Education Criteria: In accordance with 2 CFR 200.332(a)(1), the auditee must maintain a system of internal control to ensure information related to federal awards is clearly identified to the subrecipient at the time of the subaward and if any data elements change, include the changes in a subsequent subaward modification. Condition: The Organization receives funding for the Nevada Ready! program through the State of Nevada Department of Education. The amount of funding provided by Federal and state sources changes annually as does the Federal program from which the funds are derived. The Organization did not receive clear documentation from their grantor on the source of grant funding and did not clarify with the grantor on these requirements. The Organization then did not identify the correct Federal agency and assistance listing number for the grant awards provided to subrecipients. Context: Sixteen preschool centers received notification of subawards with an incorrect Federal agency and assistance listing number for the Federal funds received. Cause: The design and implementation of internal controls over subrecipient monitoring was not operating effectively. Effect: Not communicating the correct Federal agency and assistance listing number in a subaward to subrecipients could result in the subrecipients not complying with Federal regulations. Repeat Finding: Yes. Prior finding 2024-001. Recommendation: We recommend management design and implement a system of internal controls whereby every subaward that includes Federal funding be clearly identified to the subrecipient as a Federal subaward and include all data elements required to be provided to the subrecipient at the time of the subaward. For any information where the Organization’s grantor has provided unclear or incomplete information, appropriate follow-up with the grantor should be performed. Additionally, if any of the data elements change, those changes should be included in a subsequent subaward modification. Views of Responsible Officials and Planned Corrective Action: We appreciate the identification of this compliance issue and are committed to addressing the finding with a robust corrective action plan. The following steps outline the measures we will take to ensure compliance with federal requirements for subrecipients. 1. Each subaward will be clearly identified as a federal subaward and include all required data elements at the time of issuance. Any subsequent changes will be communicated through a formal subaward modification process. 2. Each required data element will be reviewed and compared to the source data by the preparer and the final signer. If elements are unclear or incomplete, follow-up with the grantor will be performed before the execution of the agreement. If clarity cannot be obtained, the agreements will be executed, noting the area of unclear or incomplete data and that the information will be obtained and updated promptly through a formal subaward modification agreement. 3. In the event subsequent changes occur, these changes will be communicated through a formal subaward modification agreement.