Finding Text
2025-002 Reporting – Federal Funding Accountability and Transparency Act (FFATA) Prior Year Finding Number: N/A Year of Finding Origination: 2025 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Housing and Urban Development Program: 14.218 Community Development Block Grants/Entitlement Grants Award Number and Year: B-24-MC-27-0002, 2024 and B-25-MC-27-0002, 2025 Pass-Through Agency: N/A – Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, that are codified in Title 2 U.S. Code of Federal Regulations, Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) or SAM.gov. Title 2 U.S. Code of Federal Regulations, Appendix A to Part 170, requires reporting a subaward, once issued, by the end of the subsequent month. Condition: In the sample of four transactions selected from the 2025 submitted FFATA subawards, two subawards were not submitted by the due date. One of these subaward reports was incorrectly entered in SAM.gov. Additionally, one sub-award issued during 2025 relating to the 2024 award year in the amount of $78,300, was not submitted in SAM.gov. Transactions Tested Subaward Not Reported Report Not Timely Subaward Amount Incorrect 4 1 2 1 Dollar Amount of Tested Transactions Subaward Not Reported Report Not Timely Subaward Amount Incorrect $ 505,480 $ 78,300 $ 75,480 $ 30,000 Questioned Costs: None. Context: For the subaward not reported, a subrecipient requested that safety improvements be incorporated in a City road project and requested federal funding from the City to pay for those improvements. The City originated an award in the amount of $78,300, provided federal funding to the subrecipient, and made the safety improvements. The subrecipient then reimbursed that funding to the City. For the two reports not reported timely, these were due in late January 2026 but were submitted a month late. For the subaward reported for the incorrect amount, the amount submitted to SAM.gov was $30,000 but the subaward was issued for $25,000 and, therefore, would be exempt from FFATA reporting requirements. The population included nine subawards reported in 2025 totaling $959,480, with the sample of four subawards totaling $505,480. The sample size was based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The City of Duluth is not in compliance with FFATA reporting requirements. Cause: The subaward not reported by the City was omitted from FFATA reporting under the mistaken assumption that the reimbursement received from the subrecipient exempted the transaction from compliance. City staff reported they had difficulties in January 2026 with accessing the SAM.gov website which delayed the submission of the subaward reports until February 27, 2026. The incorrect subaward in SAM.gov was the result of an entry error; the submissions to SAM.gov are not reviewed. Recommendation: We recommend the City of Duluth implement procedures to ensure reports are submitted as required by FFATA. View of Responsible Official: Concur