Finding Text
Criteria 2 CFR § 200.332 requires a pass-through entity to evaluate each subrecipient’s risk of noncompliance and monitor the subrecipient’s activities as necessary to ensure that the subaward is used for authorized purposes, complies with applicable requirements, and achieves performance goals. Monitoring includes reviewing financial and performance reports and following up on identified deficiencies. Condition The Town awarded $3,575,000 of EPA grant funds to the Suffolk County Water Authority (the “Subrecipient”) as a subrecipient. Although the Town verified that the Subrecipient obtained required single audits for 2024 and 2025, the Town did not have adequate procedures to review the Subrecipient’s expenditures for allowability before including them in applications for payment. In addition, the Town did not have procedures in place to monitor the Subrecipient’s procurement process relating to this program for compliance with the grant agreement. The Town’s executed subrecipient agreement with the Subrecipient did not include all compliance requirements as identified by the grant agreement. Accordingly, the Town’s monitoring did not provide reasonable assurance that subaward funds were used for authorized purposes and in accordance with the federal award. Cause While the Town did assess the Subrecipient’s risk of non-compliance, the Town did not implement procedures to compare the subrecipient agreement to the grant agreement prior to issuance, and did not implement procedures to effectively monitor the Subrecipient for this program. Effect Without adequate communication of compliance requirements to the Subrecipient, and monitoring of the Subrecipient’s procurement and expenditures, there is an increased risk that the Town will not be in compliance with the terms of the grant agreement. Questioned Costs Unknown Recommendation We recommend that the Town ensure subrecipient agreements include all grant terms identified in the grant agreement and implement procedures to monitor the Subrecipient’s expenditures for allowability and compliance with procurement requirements prior to submission of requests for payment to the EPA. Views of Responsible Officials Management agrees with this finding. Community Development will review existing and future subrecipient agreements and update as necessary to ensure that all grant terms are included in the agreements. In addition, Community Development will establish and implement procedures to monitor the subrecipient’s expenditures for allowability and compliance with procurement requirements prior to submission of requests for payment to the EPA for all existing and future subrecipient agreements.