Finding Text
Subrecipient Monitoring ALN 10:854: Rural Economic Development Loan and Grant Criteria: if the Cooperative serves as a passthrough entity, in accordance with 2 CFR 200.332 they must: • Clearly identify the award and applicable requirements to the subrecipient; • Monitor the activities of the subrecipient as necessary to ensure the subrecipient complies with federal requirements; • Verify that a subrecipient is audited. Condition: The Cooperative does not have written procedures that discuss subrecipients and how they will comply with the federal requirements as a passthrough entity, did not verify that the subrecipient was audited, and did not clearly identify to the subrecipient all the information required in the regulations. Context: There was a promissory note and loan agreement signed between the Cooperative and the subrecipient, and the agreement references to 2 CFR 200 via the incorporated Rural Economic Loan Agreement. Effect: The Cooperative is not fully following federal regulations regarding subrecipient monitoring. Questioned Costs: None. Cause: This is the first year the Cooperative received these loan funds, and written procedures were not in place prior to receiving the funds and not all of the requirements for pass through entities were followed. Auditor Recommendation: We recommend the Cooperative create procedures addressing the requirements in 2 CFR 200.332 and retain documentation showing that all required steps for passthrough entities were followed. Fergus Electric Cooperative Response: Fergus worked in conjunction and regularly communicated with the local Montana USDA REDL/G office to understand program requirements, provide requested information, and meet federal guidelines. Loan agreement RD 4280-5, (Dated 10/31/2024) refers to 7 CFR part 4280, Subpart A, as (“Regulations”). Fergus was unaware that 2 CFR 200 regulations are associated with 7 CFR part 4280, Subpart A. Fergus regretfully acknowledges that we were not informed or aware of obligations to meet the regulatory requirements within 2 CFR 200. Fergus has adopted and implemented a policy, Federal Funding Compliance, to establish formal procedures and ensure ongoing compliance with applicable federal regulations, including 7 CFR 4280, Subpart A and 2 CFR 200.