King County Regional Homelessness Authority
January 1, 2023 through December 31, 2023
2023-001 The Authority’s internal controls were inadequate for ensuring
compliance with federal requirements for subrecipient monitoring.
Assistance Listing Number and Title: 21.027 – COVID-19 – Coronavirus
State and Local Fiscal Recovery
Funds
Federal Grantor Name: U.S. Department of the Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: King County, City of Seattle and
the Washington State Department
of Commerce
Pass-through Award/Contract
Number:
6277361
DM22-5212
SFY23-46141-002
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2022-002
Background
The purpose of the Coronavirus State and Local Fiscal Recovery Funds (SLFRF)
program is to respond to the COVID-19 pandemic’s negative effects on public
health and the economy, provide premium pay to essential workers during the
pandemic, provide government services to the extent COVID-19 caused a reduction
in revenues collected and make necessary investments in water, sewer or broadband
infrastructure.
During 2023, the Authority spent $23,641,074 in program funds to provide
homelessness and shelter services. Of this amount, the Authority passed through
$21,665,841.56 in 41 subaward agreements to 21 subrecipients to fulfill some of
the program’s objectives. The program funds the Authority passed through to its
subrecipients funded homelessness mitigation projects related to COVID-19. These
projects included COVID-19 mitigation in shelters, capacity building, providing
emergency housing services assistance to households, rapid rehousing, safe parking
and non-congregate shelter resources.
Federal regulations require recipients to establish and maintain internal controls
that ensure compliance with program requirements. These controls include
understanding program requirements and monitoring the effectiveness of
established controls.
When the Authority passes on federal funds to subrecipients, federal regulations
require the Authority to ensure every subaward agreement clearly identifies that it
is a federal award and includes the applicable requirements. Federal regulations
require the Authority to include 14 federal award identification elements in each
subaward agreement. When passing federal funding to subrecipients, federal
regulations also require the Authority to monitor them and ensure they comply with
the federal award’s terms and conditions.
Description of Condition
Our audit found the Authority’s internal controls were ineffective for ensuring it
included all 14 required elements in the subaward agreements. Specifically, the
Authority did not include the following elements:
• Subrecipients’ Unique Entity Identifiers
• Federal Award Identification Number (FAIN)
• Federal award date
• Amount of federal funds obligated
• Total amount of the federal award
• Name of the federal awarding agency
• Assistance Listing Number and program title
• All federal program requirements imposed by the pass-through entity
• Indirect cost rate
We consider this deficiency in internal controls to be a significant deficiency.
Cause of Condition
The Authority was recently established and began full-scale operations in 2022. It
was still expanding its finance and accounting staff and developing its subrecipient
monitoring procedures during the 2023 audit period.
The Authority implemented processes and procedures to ensure it included all 14
required elements in any new subaward agreements after receiving the prior audit
finding. However, due to staff turnover and technical limitations in its grant
management software, the Authority was unable to issue amendments to existing
subawards to include these required elements promptly to ensure compliance.
Effect of Condition
The Authority did not include all the required information in 11 subaward
agreements. When subaward agreements do not include the required information,
subrecipients are at an increased risk of not knowing they need to comply with
specific program requirements, which could lead them to spend the funds for
unallowable purposes.
Recommendation
We recommend the Authority include all required elements in its subrecipient
agreements. We also recommend the Authority strengthen its controls to ensure
compliance with federal subrecipient monitoring requirements. This should
include:
• Dedicating the necessary resources and adequately training staff responsible for
administering federal programs
• Continuing to develop and establish policies and procedures to ensure
compliance with subrecipient monitoring requirements
Authority’s Response
KCRHA agrees with the auditors' recommendations, and the following action will
be taken to address the finding:
• New grant management software will be implemented in Q4 2024 to
significantly reduce error prone manual processes.
• Experienced accountants were hired in Q1 and Q2 2024 to replace consultants
and build the knowledge and expertise of the KCRHA team and improve
controls, policies, and procedures.
• Training efforts will continue to enhance team skills and a knowledge base,
which will be increasingly effective with a stabilizing workforce.
• Certain key positions (e.g., Dir. of Contracts and Compliance) have been and
will continue to be added to strengthen the oversight of federal
compliance. The Contracts and Compliance teams hired experienced FTE’s
in Q2 and Q3.
Auditor’s Remarks
We thank the Authority for its cooperation and assistance during the audit and
acknowledge its commitment to resolve this finding. We will review the corrective
action taken during our next audit.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards
(Uniform Guidance), section 516, Audit findings, establishes reporting
requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes
the requirements for auditees to maintain internal controls over federal programs
and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant
deficiencies and material weaknesses in its Codification of Statements on Auditing
Standards, section 935, Compliance Audits, paragraph 11.
Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for
passthrough entities, establishes subrecipient monitoring and management
requirements for pass-through entities.