Finding Text
2024-003 – Subrecipient Monitoring – Internal Control and Compliance over Subrecipient Monitoring (Significant Deficiency)
Identification of the Federal Program:
Assistance Listing Number: 21.027
Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds
Federal Agency: Department of Treasury
Pass-Through Entity: N/A
Federal Award Number and Award Year: N/A
Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation):
C.F.R. § 200.332 prescribes that the pass-through entity must conduct monitoring 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. Pass-through entity monitoring of the subrecipient must include:
1. Reviewing financial and performance reports required by the pass-through entity.
2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward.
3. Issuing a management decision for applicable audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521.
4. The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving crosscutting findings.
Condition:
During the review of subrecipient monitoring records, several areas were noted for improvement:
• For two (2) out of three (3) subrecipients, the official agreement was not formally documented. One subrecipient agreement was executed via internal resolution and email approval; another subrecipient’s agreement lacked sufficient identification and award details, omitting key funding terminology.
• The City’s Subrecipient Monitoring Policy, which became effective on April 17, 2024, does not cover the period before the policy took effect. For all three (3) subrecipients, the City is unable to provide any documentation of the review of Financial and Performance Reports.
• The required Pre-Award Risk Assessments have not been provided for at least one subrecipient because the City’s Subrecipient Monitoring Policy, which became effective on April 17, 2024, does not cover the period before the policy took effect.
Cause:
These conditions appear to stem from transitional challenges as the City implemented the new Monitoring Policy on April 17, 2024. In addition, there is an opportunity to enhance the documentation processes by moving from informal approvals to more formal subrecipient agreements, and by ensuring that Pre-Award Risk Assessments are consistently documented and maintained.
Effect or Potential Effect:
The City was not able to do the necessary subrecipient monitoring activities resulted to internal control and compliance requirement finding.
Questioned Costs:
None.
Context:
See condition above for context of the finding.
Identification as a Repeat Finding, If Applicable:
Yes. See prior year finding 2023-006.
Recommendation:
We recommended the City to fully implement its Monitoring Policy by formalizing subrecipient agreements, strengthening internal controls, and establishing consistent processes for documenting Pre-Award Risk Assessments and Financial and Performance Reports.
Views of Responsible Officials:
Management concurs.