Finding 1080645 (2023-001)

Material Weakness
Requirement
M
Questioned Costs
-
Year
2023
Accepted
2024-10-30
Audit: 326681
Organization: Holland Home (MI)

AI Summary

  • Core Issue: The Organization failed to execute a formal agreement with a subrecipient before distributing funds, violating compliance requirements.
  • Impacted Requirements: Noncompliance with 2 CFR 200 and grant agreement terms, including the need for a formal risk assessment of subrecipients.
  • Recommended Follow-up: Execute a subrecipient agreement and implement formal policies to ensure compliance and proper monitoring of subrecipient activities.

Finding Text

Assistance Listing, Federal Agency, and Program Name - 21.027, COVID-19 Coronavirus State and Local Fiscal Recovery Funds Pass-through Entity - Michigan Department of Health and Human Services (MDHHS) Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - The Organization should have internal controls in place to ensure subrecipient agreements are executed prior to distribution of funds to a subrecipient to ensure proper compliance with the requirements of 2 CFR 200 and as a condition of the grant agreement with MDHHS. Additionally, uniform grant guidance requires a pass-through entity to conduct a formal risk assessment of subrecipient candidates prior to the commencement of a subrecipient relationship. Condition - The Organization has engaged a subrecipient as part of this grant program, which was subsequently determined, but did not have an executed agreement with the subrecipient and as a result did not meet the requirements of having performed formal risk assessment procedures. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A Context - The Organization identified the subrecipient in the grant application submitted to MDHHS; however, at the time of the grant application submission, the relationship with the subrecipient was not fully determined. A subsequent evaluation of the relationship revealed that the subrecipient met the requirements as a subrecipient and therefore, the Organization failed to execute a formal subrecipient award agreement or conduct a formal risk assessment, as required of identified subrecipients. In addition, although the Organization has an informal process to monitor the subrecipient for costs being charged to the grant, the Organization could not produce documentation to support these process and controls in place. Cause and Effect - The Organization did not have controls in place to ensure these criteria were met. In addition to non compliance with 2 CFR 200 and the terms and conditions of the grant agreement, the monthly Financial Status Reports (FSRs) being filed monthly with MDHHS did not denote any subrecipient dollars being passed through to another entity. Recommendation - The Organization should execute a subrecipient agreement that is in accordance with 2 CFR 200. Views of Responsible Officials and Corrective Action Plan - Management will formalize an executed agreement with the identified subrecipient, and implement formalized policies and procedures to ensure no risk factors for non compliance exist and to properly monitor the subrecipient activity. Management is working with the granting agency to amend the appropriate reporting and budget submissions related to the grant program.

Categories

Subrecipient Monitoring Material Weakness Reporting

Other Findings in this Audit

  • 504203 2023-001
    Material Weakness
  • 504204 2023-002
    Material Weakness
  • 1080646 2023-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
21.027 Covid-19 - Coronavirus State and Local Fiscal Recovery Funds $1.23M
93.498 Covid-19 - Provider Relief Fund and American Rescue Plan (arp) Rural Distribution $195,000