Finding Text
2023-009 – Subrecipient Monitoring
Finding Type. Immaterial Noncompliance/Sigificant Deficiency in Internal Control over Compliance (Subrecipient Monitoring).
Program. Substance Abuse and Mental Health Services - Projects of Regional and National Significance; U.S. Department of Health and Human Services; Assistance Listing Number 93.243; Award Number 1H79SM084918-01.
Criteria. When a grant recipient makes subawards to other recipients, certain compliance requirements are required in order to monitor the activity of the subrecipients. The Uniform Guidance requires that the pass-through entity clearly identify to the subrecipient: (1) the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); (2) all requirements imposed by the Pass-Through Entity (PTE) on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); and (3) any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). The Uniform Guidance further requires that the pass-through entity valuate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.331(b)). This evaluation of risk may include consideration of such factors as: (1) The subrecipient’s prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR part 200, subpart F, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency).
Condition. Subaward contracts review did not contain appropriate information related to the federal program. No assistance listing number or federal program name was noted in the language of the agreements. In addition, no evidence of formal risk assessment was documented.
Cause. The City does not have the proper internal controls in place to ensure that contract language contains all of the information required to be communicated under the Uniform Guidance or that documentation of the risk assessment process related to subrecipients of federal awards is maintained.
Effect. The City is exposed to an increased risk that future noncompliance could occur and not be prevented or detected by the City's internal controls.
Questioned Costs. No costs were required to be questioned as a result of this finding inasmuch as our testing of the monitoring process and tests of transactions did not indicate any unallowable costs.
Recommendation. We recommend that the City implement necessary internal controls to ensure documentation of its compliance with the requirements of the Uniform Guidance is maintained.
View of Responsible Officials. The City will implement the necessary internal controls to ensure the policy for compliance is followed and documented. Part of the solution will be implementing grant management software.