Audit 408819

Finding 2025-001: Subrecipient Monitoring Significant Deficiency and Other Noncompliance Federal Program: USAID Foreign Assistance for Program Overseas (ALN 98.001) Federal Awarding Agency: United States Agency for International Development Awards: • Direct award: Resilient Coastal Community – 72065622CA00010 • Direct award: Urban Sanitation Activity – 72068724CA00001 • Pass-Through from UC Davis – A23-3500-S001 Criteria: 2 CFR 200.332 lists requirements for pass-through entities to perform as part of the subrecipient monitoring compliance requirement. This includes performing an evaluation of fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring procedures. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. 2 CFR 200.303 states that a receipt or subrecipient of federal awards must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). Condition: During fiscal year 2025, iDE passed federal funds to subrecipients under active federal awards that remained operational during a portion of the year prior to the termination of the underlying grant agreements. Although iDE reviewed subrecipient liquidation reports and reimbursement requests supporting expenditures incurred prior to award termination, iDE did not perform or document formal subrecipient risk assessments. Further, because risk assessments were not performed, iDE did not establish or implement monitoring procedures commensurate with assessed risk, such as documented reviews of performance information, follow-up on compliance matters, review of Single Audit reports, or other monitoring activities required by Uniform Guidance. Cause: Employee turnover and terminated programs. Effect: Inadequate procedures and controls for subrecipient monitoring could result in material noncompliance with applicable federal statutes, regulations, or award terms and conditions. Repeat finding: Yes—see Finding 2024-002. Questioned costs: None