Audit 409614

Criteria The grant terms and 2 CFR § 200.329 require recipients to submit performance reports in the form, frequency, and timeframe established by the federal awarding agency. Reports should accurately describe program accomplishments, progress toward established objectives, reasons for delays, and relevant financial or project information. Condition Performance reports submitted to the U.S. Environmental Protection Agency (“EPA”) for the period under audit were not accurate and required multiple revisions. The EPA notified the Town that it was not in compliance with the grant terms until a correct report was submitted. In addition, the Town did not have written procedures to identify, track, prepare, review, and submit required performance reports. Instead, the Town relied on reminders from EPA regarding reporting deadlines and requirements. Cause The Town had not established formal grant-reporting procedures for this program or assigned sufficient oversight to ensure that responsible personnel understood the reporting requirements and verified reports against the grant agreement, approved workplan, and supporting records before submission. Effect The Town was not in compliance with the grant’s reporting requirements until corrected reports were submitted. The absence of procedures also increases the risk that future reports will be inaccurate, incomplete, or submitted late, which could delay grant actions or result in other federal remedies. Questioned Costs Unknown Recommendation We recommend that the Town establish written procedures for federal performance reporting that include a reporting calendar, assigned responsibilities, supervisory review, verification against grant and financial records, timely submission, and retention of documentation demonstrating federal acceptance. Views of Responsible Officials Management agrees with this finding. Community Development will establish written procedures for federal performance reporting that includes a reporting calendar, assigned responsibilities, supervisory review, verification against grant and financial records, timely submission and retention of documentation demonstrating federal acceptance.

Criteria 2 CFR § 200.332 requires a pass-through entity to evaluate each subrecipient’s risk of noncompliance and monitor the subrecipient’s activities as necessary to ensure that the subaward is used for authorized purposes, complies with applicable requirements, and achieves performance goals. Monitoring includes reviewing financial and performance reports and following up on identified deficiencies. Condition The Town awarded $3,575,000 of EPA grant funds to the Suffolk County Water Authority (the “Subrecipient”) as a subrecipient. Although the Town verified that the Subrecipient obtained required single audits for 2024 and 2025, the Town did not have adequate procedures to review the Subrecipient’s expenditures for allowability before including them in applications for payment. In addition, the Town did not have procedures in place to monitor the Subrecipient’s procurement process relating to this program for compliance with the grant agreement. The Town’s executed subrecipient agreement with the Subrecipient did not include all compliance requirements as identified by the grant agreement. Accordingly, the Town’s monitoring did not provide reasonable assurance that subaward funds were used for authorized purposes and in accordance with the federal award. Cause While the Town did assess the Subrecipient’s risk of non-compliance, the Town did not implement procedures to compare the subrecipient agreement to the grant agreement prior to issuance, and did not implement procedures to effectively monitor the Subrecipient for this program. Effect Without adequate communication of compliance requirements to the Subrecipient, and monitoring of the Subrecipient’s procurement and expenditures, there is an increased risk that the Town will not be in compliance with the terms of the grant agreement. Questioned Costs Unknown Recommendation We recommend that the Town ensure subrecipient agreements include all grant terms identified in the grant agreement and implement procedures to monitor the Subrecipient’s expenditures for allowability and compliance with procurement requirements prior to submission of requests for payment to the EPA. Views of Responsible Officials Management agrees with this finding. Community Development will review existing and future subrecipient agreements and update as necessary to ensure that all grant terms are included in the agreements. In addition, Community Development will establish and implement procedures to monitor the subrecipient’s expenditures for allowability and compliance with procurement requirements prior to submission of requests for payment to the EPA for all existing and future subrecipient agreements.