Finding 1057112 (2023-002)

Item: 2023-002 Assistance Listing Number: 21.027 Programs: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Federal Agency: U.S. Department of Treasury Pass-Through Agencies: State of Arizona, Office of the Governor Pass-Through Grantor Identifying Number: EL9HZNBAN1B9 Award Year: July 1, 2022 – June 30, 2023 Compliance Requirement: Subrecipient Monitoring Criteria: In accordance with 2 CFR sections 200.330, .331, and .501(h), pass-through entities must (a) identify the award and applicable requirements, (b) evaluate the subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CR section 200.332(b), (c) monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR section 200.332(d) through (f), and (d) ensure accountability for any for-profit subrecipients. Condition: In connection with our testing of Arizona Foundation for Human Service Providers (the Foundation) subrecipient monitoring, we noted that the Foundation did not timely or effectively monitor the activities of subrecipients post-payment to ensure that the subawards were used for authorized purposes and complied with the terms and conditions of the subaward. Questioned Costs: N/A Context: In a population of 58 subrecipients, we conducted a nonstatistical sample of 9 subrecipients to assess the Foundation’s compliance with subrecipient monitoring. In all instances, we noted the Foundation did not obtain and review monitoring reports in a timely fashion. For 2 of 9 subrecipients, we noted monitoring activities were not effective as it was determined that the subrecipients expended funds under the subaward on activities that were not part of their original approved action plan. However, we noted the activities reported were still allowable under the subaward but were not in accordance with the sub awardees originally communicated funding use plan. Effect: Subrecipients were not timely or effectively monitored post-payment to ensure that the subawards were used for authorized purposes and complied with the terms and conditions of the subaward. This is deemed to be a material weakness in internal control on compliance. Cause: The Foundation did not have sufficient controls in place to timely or effectively monitor subrecipients. Additionally, the Foundation did not have sufficient procedures for the ongoing post-payment review of subawards. Identification as a Repeat Finding: Not a repeat finding Recommendation: We recommend that the Foundation enhance their existing policies and procedures to ensure sufficient controls are in place to properly monitor subrecipients. This should include specific enhancements to the ongoing post-payment review of subawards and well as supervision and review controls to ensure the procedures are performed in a timely and thorough manner. Views of Responsible Officials: Management of the Foundation concurs in part with the finding. See Corrective Action Plan.