Finding Text
Finding 2023-006 – Subrecipient Monitoring
US Department of the Treasury – COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (ARPA) (ALN 21.027)
Condition: The City did not have a documented risk assessment process for evaluating subrecipient’s risk of non-compliance. Additionally, as part of the monitoring process, the City did not have controls in place to obtain and review the annual audit report of the subrecipient in a timely manner with documentation of such review.
Criteria: The 2 CFR section 200.332(b) requires pass-through entities to evaluate subrecipient risks of noncompliance as part of their subrecipient monitoring procedures. In addition, 2 CFR section 200.332(d) indicates as part of the monitoring process, the pass-through entity should ensure subrecipients take follow-up action on audit deficiencies, which would be identified as part of the review of the annual audit reports of subrecipients.
Cause: There were no procedures in place to document the City’s assessment of risk for the subrecipient. In addition, the City does not have procedures in place to adequately review the subrecipient’s audit received.
Effect: The deficiencies in subrecipient monitoring could result in the City not identifying unallowable expenses being incurred by the City’s subrecipient.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend implementation of procedures to formally document and complete a risk assessment of subrecipients. Based on the risk assessment performed, the City should develop monitoring procedures to address the risks noted, which should include a documented review of subrecipient audits and deficiencies be followed up on, if applicable.
Questioned Costs: Unknown
View of Responsible Official: The City agrees. See the corrective action plan.