Finding 1200831 (2025-004)

Reference Number: 2025-004 Prior Year Finding: No Federal Agency: U.S. Department of Labor State Agency: Department of Labor and Workforce Development Federal Program: WIOA Cluster Assistance Listing Number: 17.258, 17.259, 17.278 Award Number and Year: AA-34783-20-55-A-34 (7/1/2021 – 6/30/2024) AA-36334-21-55-A-34 (7/1/2021 – 6/30/2024) AA-38544-22-55-A-34 (7/1/2022 – 6/30/2025) 23A55AY000022 (7/1/2023 – 6/30/2026) 23A55AT000047 (7/1/2023 – 6/30/2026) 23A55AW000045 (7/1/2023 – 6/30/2026) Compliance Requirement: Subrecipient Monitoring Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or specific requirement: Compliance: Per 2 CFR section 200.332(a) - Requirements for Pass-Through Entities states, in part, that all pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes 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. Per 2 CFR section 200.332(e) and (g), pass-through entities must monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In monitoring a subrecipient, a pass-through entity must review financial and performance reports, ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward, issue a management decision for audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity, resolve audit findings specifically related to the subaward, and verify that a subrecipient is audited as required by Subpart F. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The Department of Labor and Workforce Development (Department) omitted required federal award information from subawards and did not ensure that subrecipients were audited as required by Subpart F. Context: For eight of eight subawards selected for testing, the subaward agreement did not include all required federal award information. Specifically, we noted the following: • 8 or 8 subawards were missing identification of whether the award was research and development • 7 or 8 subawards were missing the federal award identification number (FAIN) • 4 of 8 subawards were missing the federal award date for when the Federal agency awarded the funds to the prime recipient For one of eight subrecipients selected for testing, the Department did not ensure the subrecipient was audited as required by Subpart F. Cause: The Department’s procedures and internal controls were not sufficient to ensure that subawards included all required information in accordance with 2 CFR section 200.332, nor that subrecipients were audited as required by Subpart F. Effect: Excluding required federal grant award information at the time of the subaward may cause subrecipients and their auditors to be uninformed about specific program information and other regulations that apply to the funds they receive. There is also the potential for subrecipients to have incomplete Schedules of Expenditures of Federal Awards (SEFA) in their Single Audit reports, and federal funds may not be properly audited at the subrecipient level in accordance with the Uniform Guidance. Failure to perform subrecipient monitoring and ensure that subrecipients are audited as required by Subpart F may result in a failure of the Department to detect that subrecipients are not meeting compliance requirements or program goals. It may also result in these deficiencies to not be corrected on a timely basis. Questioned costs: Undetermined. Recommendation: We recommend the Department review and enhance internal controls and procedures to ensure that required federal award information is included in its subawards and that subrecipients are monitored and audited as required by Subpart F. Views of Responsible Officials: The New Jersey Department of Labor and Workforce Development’s (DLWD) Workforce Division will review and enhance internal controls and procedures in accordance with 2CFR 200.303 to ensure that all required federal award information is included in its subawards. Additionally, DLWD will monitor all subrecipients to verify they are audited as required under Subpart F of the Uniform Guidance.