2025-002 – Subrecipient Monitoring Activities (repeat finding) Finding Type. Immaterial Noncompliance/Significant Deficiency in Internal Control over Compliance (Subrecipient Monitoring). Program. Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; ALN 21.027, Small Business Support Hubs Program passed through the Michigan Strategic Fund. Criteria. When a grant recipient makes subawards to other recipients, certain compliance requirements are required in order to monitor the activity of the subrecipients. The following are included as requirements of the pass-through entity: (a) identify the award and applicable requirements, (b) evaluate risk related to the subrecipient, and (c) monitor the activities of the subrecipient. Condition. Although there were improvements in the monitoring process from the prior year, during testing in the current year of seven subrecipients, it was determined: 1) The Assistance Listing Number (ALN) for the grant was not included in the subgrant agreement. All other applicable program information was noted, 2) Searches at www.sam.gov performed by management were not timely reviewed and no certification of eligibility was present in the subgrant agreements. Cause. This condition was caused by management oversight in knowing the federal compliance requirements of the grant. Effect. As a result of this condition, the Organization did not fully comply with the requirements of the Uniform Guidance. Questioned Costs. No costs were required to be questioned as a result of this finding inasmuch as our testing did not identify any unallowed costs. Recommendation. We recommend that management become familiar with the subrecipient monitoring requirements and draft a policy and procedures that provide reasonable assurance that future subrecipient arrangements will be in compliance with the Uniform Guidance. View of Responsible Officials. Management accepts this finding and prepared a Corrective Action Plan
2025-003 – Grant Reporting (repeat finding) Finding Type. Immaterial Noncompliance/Significant Deficiency in Internal Control over Compliance (Reporting). Program. Coronavirus State and Local Fiscal Recovery Funds; U.S. Department of Treasury; ALN 21.027, Small Business Support Hubs Program passed through the Michigan Strategic Fund. Criteria. The federal reporting requirements for this program are only applicable to the primary recipient. However, the pass-through grant agreement stipulates that the following reports are required: (1) State Progress Report, Due October 10, (2) Federal Quarterly Reports, Due January 10, April 10, July 7 and October 10, and (3) Federal Annual Report, Due July 7. Condition. Reporting did not agree to the audited general ledger or to the schedule of expenditures of federal awards (SEFA) due to: 1) Management recording in the general ledger and reporting to the pass-through agency, amounts that were transfers to an internal program, the actual costs of which were being reported under a separate cost center. Because transfers to an internal program do not qualify as grant expenditures or, for that matter expenses in general, the amounts reported as cumulative expenditures of grant funds were reported inaccurately and required adjustment as part of the consolidated financial statement audit, and 2) Audit adjustments were necessary to adjust subrecipient expenses per the general ledger to actual costs per the subrecipient reporting and back up files. In the initial general ledger, the balance of advances from the prior year, plus advances paid to subrecipients during the year, were recorded as grant expenses. In addition, we noted that the reports did not appear to be reviewed for accuracy or completeness. Cause. The errors in the reporting were due to inadequate internal controls over the grant management process, including lack of proper training for personnel responsible for preparing and submitting the reports and lack of management oversight over this grant management process. Effect. As a result of this condition, the Organization reported inaccurate amounts to the grant pass-through agency. Questioned Costs. No costs were required to be questioned as a result of this finding inasmuch as our testing did not identify any unallowed costs. Recommendation. We recommend that management continue reviewing all refundable advances associated with revenues, and those made to subrecipients, particularly around year-end, to identify amounts that should be recorded as refundable advances and what amounts should be recorded as grant expenses. This is important because the general ledger can then be used as a base for all grant financial reporting. We further recommend that the reporting be reconciled to the schedule of expenditures of federal awards at year-end. In addition, all reports should be reviewed and approved by appropriate personnel prior to submission. View of Responsible Officials. Management accepts this finding and prepared a Corrective Action Plan.