Finding Text
The City did not have adequate internal controls for ensuring compliance with federal subrecipient monitoring requirements.
Assistance Listing Number and Title: 21.027, COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of the Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: Thurston County
Pass-through Award/Contract Number: 1505-0271
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2023-002
Background
During fiscal year 2024, the City spent $600,000 in federal funding for the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) program, all of which it passed through to one subrecipient. The purpose of this SLFRF award is to provide funding for a tiny village for affordable housing.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
When the City passes on federal funds to subrecipients, federal regulations require the City to ensure every subaward agreement clearly identifies that it is a federal award and includes the applicable federal requirements. The City is required to report 14 federal award identification elements in each subaward agreement.
Description of Condition
Our audit found the City did not have adequate controls in place to ensure the subrecipient agreement contained all required elements.
We consider this deficiency in internal controls to be a significant deficiency.
Cause of Condition
Staff overseeing the program did not know these were SLFRF funds at the time the contract was executed and did not know the entity it passed on funds to was considered a subrecipient.
Effect of Condition
The City did not provide its subrecipient with a contract including all the required contract elements, such as the federal award identification number, Assistance Listing Number, unique entity identifier, federal award date, indirect cost rate, etc. Without this information, the subrecipient is less likely to know that the award comes from a federal program. This also increases the risk that the subrecipient would not know they need to comply with specific program requirements, which could potentially lead them to spend funds for unallowable purposes.
Recommendation
We recommend the City include all required elements in federally funded subaward agreements to ensure the subrecipient is aware they are receiving federal funds.
City’s Response
The City takes seriously the use of federal funds and the compliance requirements associated with them. While there were no compliance violations found due to this lack of controls, the Homelessness Response team is committed to continuing to improve controls to ensure compliance requirements are met, and improve the documentation surrounding these control procedures. Improvements to control procedures has been in progress since the prior year audit, but implementation is not fully complete due to staff turnover. We will be scheduling additional trainings and implementing additional required documentation into our processes, including a secondary review for necessary contract elements prior to executing contracts involving federal awards. We thank the auditors for bringing these requirements to our attention.
Auditor’s Remarks
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements.
The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for passthrough entities, establishes subrecipient monitoring and management requirements for pass-through entities