Finding Text
2025-002 Material Weakness in Internal Control and Material Compliance over Subrecipient Monitoring: Failure to Verify Single Audit Requirement and Follow Up on Findings Identification of federal programs: Federal Agency: Department of Commerce (DOI) ALN: 11.438 Pacific Coast Salmon Recovery Pacific Salmon Treaty Program Awards: NA22NMF4380226, NA20NMF4380258, and NA21NMF4380467 Criteria: The entity did not verify whether subrecipients who expended $750,000 or more in federal funds obtained the required single audit. Additionally, the entity did not document any follow-up or management decisions on potential subrecipient audit findings. Under 2 CFR 200.332(f)–(g), pass-through entities must: Verify that subrecipients expending $750,000 or more in federal awards during the fiscal year have obtained a single audit in accordance with Subpart F. Review subrecipient audits to determine whether findings related to the program exist. Issue management decisions on audit findings, when applicable, and ensure timely corrective action. Condition: During our testing of subrecipient monitoring, we identified significant deficiencies in the entity’s processes for determining whether subrecipients were required to obtain a Single Audit and for following up on known audit findings: The entity did not document whether the subrecipient spent $750,000 or more in federal awards and therefore did not determine whether a Single Audit was required under 2 CFR 200.501(a). One subrecipients had publicly available Single Audit reports that included material weaknesses, yet the entity did not obtain the audit reports, review them, or follow up on corrective action plans. No documentation was maintained to demonstrate that the entity performed annual verification of audit status, reviewed the Federal Audit Clearinghouse, or communicated with subrecipients regarding audit results. Recommendations: We recommend the entity develop and implement written procedures to: Annually assess subrecipient federal expenditures to determine single audit requirements, obtain and review subrecipient audit reports, including follow-up on any findings, document management decisions and track corrective action until resolution. Views of Responsible Officials: See Corrective Action Plan. Cause: The entity lacks formal policies and procedures for monitoring subrecipients in conformance with Uniform Guidance, including annual confirmation of federal expenditures and review of audit reports. Effect or potential effect: Failure to verify audit requirements and follow up on findings limits the entity’s ability to ensure subrecipients comply with federal regulations. This increases the risk of unaddressed noncompliance, misuse of federal funds, and potential liability for the pass-through entity. Questioned Costs: None. Context: There were seven subrecipients under the program of which 4 subrecipients were reviewed related to the monitoring of audit requirements. In 2025, subrecipient expenditures totaled $784,907. Identification of Repeat Finding: Not applicable.