Audit 407991

2025 – 003 Subrecipient Monitoring Federal Award Identification: Coronavirus State and Local Fiscal Recovery Funds (SLFRF)(ALN 21.027) Criteria: Under 2 CFR §200.332, pass-through entities are required to monitor the activities of subrecipients as necessary to ensure compliance with Federal statutes, regulations, and the terms and conditions of the subaward. Such monitoring includes reviewing Single Audit reports, considering whether audit findings relate to the pass-through entity's subawards, and ensuring that subrecipients take timely and appropriate corrective action on deficiencies pertaining to Federal awards provided by the pass-through entity. Condition: The City passed through portions of SLFRF funding to a nonprofit organization. The City also provided Homeowners Assistance Fund Program (HAF) funds to that same organization. The City did not document that it had obtained the subrecipient's Single Audit reports, nor did it document its review of amounts reported in the SEFA and its evaluation of a finding reported by the subrecipient related to the SLFRF program with an assessment of corrective actions taken by the subrecipient. The subrecipient’s SEFA for June 30, 2025, did not properly identify the City as a passthrough entity of HAF funding. Rather, the expenditures appeared to be direct funding from Treasury due to the lack of passthrough agency identification. The City did not document timely inquiry, review, or follow-up regarding the omission of HAF expenditures from the subrecipient's SEFA, despite the City having provided HAF funding to the nonprofit during the period. Cause: The City's subrecipient monitoring procedures were not adequately designed or implemented to ensure that subrecipient Single Audit findings were formally reviewed and followed up on, and discrepancies identified in subrecipient reporting were investigated and resolved. Effect: Failure to evaluate and follow up on subrecipient audit findings and reporting discrepancies may allow noncompliance to remain unresolved, increase the risk of improper use of Federal funds, impair the City's ability to identify potential questioned costs, and result in noncompliance with Uniform Guidance subrecipient monitoring requirements. As a result, the City lacked additional assurance that its subawards were administered in accordance with applicable Federal requirements. Questioned Costs: Undeterminable Recommendation: We recommend that the City strengthen its subrecipient monitoring procedures to: • Document its review of subrecipient Single Audit reports; • Evaluate whether reported audit findings relate to City-funded subawards; • Follow up on corrective actions for applicable findings and maintain supporting documentation of that review; and • Investigate and resolve discrepancies in subrecipient Federal award reporting, including omissions identified on the SEFA. • Amend its existing grants administration policy to include a section related to subrecipient monitoring responsibilities Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding. The City will establish and document formal subrecipient-monitoring procedures consistent with 2 CFR §200.332.