Finding Text
FINDING 2023-003
Program Information: COVID-19 Education Stabilization Fund (ALN #84.425C)
Criteria or Specific Requirement (Including Statutory, Regulatory
or Other Citation): Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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) (2 CFR 200.303).
M. Subrecipient Monitoring - Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved (2 CFR 200.332(d).
Condition: The Organization’s control processes failed to detect unallowable costs included in quarterly reimbursement requests by local club subrecipients. Although these amounts were not approved by the State agency and ultimately were not reimbursed, the Alliance did not have sufficient internal controls in place in order to independently detect unallowable costs submitted by subrecipients and to provide reasonable assurance the Alliance is managing the Federal award in compliance with the award terms.
Cause: Lack of sufficient controls in place over subrecipient monitoring, allowable costs, and reporting compliance requirements.
Effect or Potential Effect: For 3 out of 3 quarterly reports, the Organization failed to detect unallowable costs requested for reimbursement by local club subrecipients, resulting in inaccurate reporting and insufficient subrecipient monitoring. The control failure was determined to be a material weakness in internal controls over subrecipient monitoring, allowable costs, and reporting compliance requirements.
Questioned Costs: None
Context: The Organization approved unallowable costs for reimbursement, which demonstrated ineffective management oversight related to subrecipient monitoring, allowable costs, and reporting compliance requirements. As the control failed to detect unallowable costs for all 3 quarters of the grant period during the fiscal year, and there were no compensating controls to mitigate the severity of the deficiency, we determined the control deficiency to be a material weakness.
Identification as a Repeat Finding: No similar findings noted in the prior year.
Recommendation: We recommend that the Organization enhance its procedures and internal controls with respect to subrecipient monitoring, allowable costs, and reporting compliance requirements.
Views of Responsible Officials and Planned Corrective Actions: The Organization will enhance its procedures and internal controls with respect to monitoring subrecipient activities, and reimbursement payments, by working with the State of Montana grantor to ensure local clubs are using subawards for authorized purposes.