Audit 405688

Criteria or specific requirement: Uniform Guidance §200.332 requires pass-through entities to monitor the activities of subrecipients to ensure that the subaward is used for authorized purposes and in compliance with federal statutes, regulations, and the terms and conditions of the subaward. This includes performing and documenting subrecipient monitoring activities in accordance with established internal control procedures. In addition, Uniform Guidance §200.303(a) requires the establishment, documentation, and maintenance of effective internal control over Federal awards to provide reasonable assurance of compliance. Condition: During the fiscal year, the City and County of Denver did not consistently follow its documented internal control procedures for subrecipient monitoring related to the TANF program. Specifically, certain monitoring procedures outlined in the City and County of Denver’s policies were not documented in accordance with established requirements. However, mitigating controls were applied throughout the year, and all other required elements of subrecipient monitoring were completed for the transactions selected for testing. These included ongoing review of subrecipient financial and programmatic reports, communication with subrecipients regarding compliance requirements, and follow‑up procedures as deemed necessary. No instances of subrecipient noncompliance were identified. Questioned costs: None Context: The audit procedures included testing compliance with subrecipient monitoring requirements for the TANF program. Testing identified that deviations were related solely to adherence to documented procedures, rather than the absence of monitoring activities. The condition represents a procedural deficiency rather than a systemic breakdown in subrecipient oversight. The deficiency was limited in scope and did not result in questioned costs or identified noncompliance by subrecipients. Cause: Management relied on alternative monitoring practices that were not formally documented within existing subrecipient monitoring procedures and did not consistently update internal documentation to reflect actual practices performed due to limitations from employee turnover. Effect: The failure to follow documented subrecipient monitoring procedures increases the risk that noncompliance by subrecipients may not be identified or addressed in a timely manner. Due to the mitigating controls in place and completion of substantive monitoring activities, no material noncompliance or questioned costs were identified. Repeat Finding: No Recommendation: We recommend that management update and formalize subrecipient monitoring procedures to align with actual monitoring practices performed and ensure monitoring activities are consistently documented in accordance with Uniform Guidance requirements. Views of responsible officials: There is no disagreement with the audit finding.

Criteria or specific requirement: Uniform Guidance §200.332 requires pass‑through entities to monitor the activities of subrecipients to ensure federal awards are used for authorized purposes and in compliance with applicable federal statutes, regulations, and the terms and conditions of the award. Subrecipient monitoring controls should be designed and implemented to identify and resolve audit findings and ensure ongoing compliance. In addition, Uniform Guidance §200.303(c)–(d) requires entities to evaluate and monitor compliance and take prompt action when instances of noncompliance are identified. Condition: The City and County of Denver (the City) did not document a review of the subrecipient’s Single Audit report for the WIOA Cluster during the fiscal year. The City has one subrecipient for this program. As part of our audit procedures, we noted the subrecipient’s Single Audit report had no findings related to WIOA programs. For the subrecipient selected for testing, the City completed an initial risk assessment and evaluation at contract inception and performed other subrecipient monitoring activities. No instances of subrecipient noncompliance were identified through our testing. Questioned costs: None Context: The audit included procedures to evaluate the design and implementation of internal controls over subrecipient monitoring for the WIOA Cluster. The condition represents a control execution deficiency related to the monitoring framework. The deficiency was limited to one subrecipient and did not result in questioned costs or identified program noncompliance. Cause: Management did not document review of the subrecipient’s Single Audit report and monitoring activities were primarily focused on alternative oversight procedures. Effect: The absence of documentation of the subrecipient’s Single Audit report reduces the effectiveness of internal controls over subrecipient monitoring and increases the risk that subrecipient noncompliance may not be detected in a timely manner. Due to the limited number of subrecipients, mitigating oversight activities, and the absence of subrecipient findings, no material noncompliance or questioned costs were identified. Repeat Finding: No Recommendation: We recommend that management document review of subrecipient Single Audit reports when available. Views of responsible officials: There is no disagreement with the audit finding.