Finding 1207133 (2025-003)

Finding Number: 2025-003 Federal Program: Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number: 31-6400223 Assistance Listing Number (ALN): 21.027 Federal Awarding Agency: Department of Treasury Compliance Requirement: Subrecipient Monitoring Pass-through Entity: Direct Award Repeat Finding: No Prior Audit Finding Number: N/A Significant Deficiency and Noncompliance – Subrecipient Monitoring Criteria Under 2 CFR § 200.332, pass-through entities are required to monitor the activities of subrecipients to ensure compliance with applicable federal statutes, regulations, and the terms and conditions of the subaward. This includes reviewing financial and performance reports, following up on deficiencies, and ensuring corrective action is taken. Condition During our testing of three subrecipient agreements, we noted that the City did not perform or document monitoring procedures for one subrecipient. Specifically, there was no evidence of review of financial reports, site visits, or other oversight activities for this subrecipient during the audit period. This condition only applies to subawards below a certain threshold, of which, the subrecipient activity is immaterial. For subawards above that threshold, the City utilizes a third-party consulting firm to perform subrecipient monitoring. The subawards tested that were monitored by the consulting firm did not indicate noncompliance. Cause The City does not have a consistent process in place to ensure all subrecipients are monitored in accordance with federal requirements. In this instance, monitoring procedures were either not performed or not documented. Effect Without proper monitoring, the City cannot ensure that subrecipients are using funds in compliance with program requirements. This increases the risk of noncompliance, improper use of funds, and undetected errors or irregularities. Recommendation We recommend the City implement and consistently follow formal subrecipient monitoring procedures. These should include documenting reviews of financial and performance reports, performing risk-based monitoring activities, and maintaining evidence of oversight for each subrecipient. Officials’ Response: See Corrective Action Plan.