Finding 1113897 (2024-001)

Finding 2024 - 001 Lack of Subrecipient Monitoring Procedures – Verification of Audits Information on the Federal Programs: 19.511 Criteria: Per 2 CFR § 200.332(f), pass-through entities must ensure that subrecipients expending $750,000 or more in Federal awards during the subrecipient’s fiscal year undergo a single or program-specific audit as required by 2 CFR § 200.501. Additionally, per 2 CFR § 200.332(d), passthrough entities must monitor subrecipients to ensure compliance with Federal statutes, regulations, and the terms and conditions of the subaward. Condition: During the audit, it was noted that the entity does not have a formalized process in place to verify whether subrecipients required to undergo a single audit have completed and submitted the audit as required. Specifically, there was no documented evidence that the entity reviewed audit reports or followed up on subrecipient audit compliance. Cause: The entity has not established or implemented adequate policies and procedures to monitor subrecipient compliance with audit requirements under the Uniform Guidance. Effect or Potential Effect: Failure to verify and review subrecipient audit reports increases the risk that noncompliance, questioned costs, or internal control deficiencies at the subrecipient level go undetected, potentially resulting in unallowable costs or noncompliance with Federal regulations. Questioned Costs: None noted at this time; however, the lack of monitoring increases the risk of unallowable costs in Federal programs. Context: BRAC USA has one primary subrecipient for which a single audit was not performed prior to our audit fieldwork. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that the entity develop and implement formal written procedures to ensure subrecipient audit requirements are met. These procedures should include:  Identifying subrecipients required to undergo a single audit.  Requiring subrecipients to submit audit reports and management letters annually.  Reviewing subrecipient audit reports to identify findings that may impact the entity.  Establishing follow-up procedures to address and resolve subrecipient audit findings.  Maintaining documentation of audit verification and any corrective actions taken.