Finding Text
Reference Number: 2024-006 – Subrecipient Monitoring
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258 BWC
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Subrecipient Monitoring
Type of Finding: Material Weakness in Internal Control over Compliance, Instance of Noncompliance
Criteria
In accordance with Title 2 U.S. Code of Federal Regulations (CFR) § 200.332, all pass-through entities (PTE) must:
(a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes:
(1) Federal award identification:
i. Subrecipient name (which must match the name associated with its unique entity identifier);
ii. Subrecipient's unique entity identifier;
iii. Federal Award Identification Number (FAIN);
iv. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency;
v. Subaward Period of Performance Start and End Date;
vi. Subaward Budget Period Start and End Date;
vii. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient;
viii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation;
ix. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity;
x. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA);
xi. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity;
xii. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;
xiii. Identification of whether the award is R&D; and
xiv. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414.
(b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section.
(c) Monitor the 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.
(d) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501.
Condition
During our audit of compliance with subrecipient monitoring, we noted that for one (1) subrecipient agreement, the agreement did not include one or more of the required elements defined in 2 CFR § 200.332 (a)(1) in the subrecipient’s agreement. For the same one (1) subrecipient, the Organization did not perform the risk assessment procedures defined in 2 CFR § 200.332 (b) or verify that the subrecipient should be audited as defined in 2 CFR § 200.332 (d).
Cause
Due to significant turnover in key personnel in the Organization’s finance department and management in past years, the Organization has no documented policies and procedures for subrecipient monitoring.
Effect
Not providing sufficient documentation to auditors to demonstrate compliance with federal compliance results in an audit scope limitation. Failure to provide all the required subaward information may result in subrecipients incorrectly reporting on federal pass-through awards in their Single Audit reports. Failure to document subrecipient risk assessment and verifying the subrecipient audit requirement result in noncompliance with the subrecipient monitoring requirements 2 CFR § 200.332.
Questioned Costs
Questioned costs were not determinable.
Context
For one (1) subrecipient selected for testing, with total expenditures of $325,977, from a population of one (1) subrecipient, the Company did not communicate all of the required subaward data elements, did not perform subrecipient risk assessment, and did not verify if subrecipient received audit.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization perform the following:
(1) Develop procedures for future subrecipient agreements to ensure agreements will include all the required elements of 2 CFR § 200.332 (a)(1).
(2) For existing subrecipients that were not provided the required elements, provide a letter or amended agreement to include all the required elements of 2 CFR § 200.332 (a)(1).
(3) Maintain sufficient records of subrecipient risk assessment and monitoring subrecipients in accordance with subrecipient monitoring requirements noted in 2 CFR § 200.332 (b) – (d).
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The Organization will update its subrecipient monitoring policies to ensure all required elements as defined in 2 CFR § 200.332 (a)(1) are included in subrecipient agreements, Additionally, a checklist will be established to perform a risk assessment process to evaluate subrecipient risk prior to contract execution and annually thereafter and to verify each subrecipient’s that meets the audit threshold and if required has a current Single Audit on file or is otherwise in compliance.
Anticipated Implementation Date: July 1, 2025