Finding Text
Finding 2026-002: Inadequate Subrecipient Monitoring – Failure to Evaluate Subrecipient Audit Findings Significant Deficiency in Internal Control over Compliance Federal Program Information • Federal agency: U.S. Department of Health and Human Services • Program: Temporary Assistance for Needy Families (TANF) • Assistance Listing Number - 93.558 • Compliance Requirement - Subrecipient Monitoring Criteria • 2 CFR 200.332(d)(4): The pass-through entity must review subrecipient audit findings to determine whether prompt and appropriate corrective action has been taken. • 2 CFR 200.332(f): The pass-through entity must ensure that subrecipients take timely and appropriate action on all deficiencies related to the federal award. • 2 CFR 200.303: The entity must establish and maintain effective internal control over federal awards. Condition The auditee obtained subrecipient Single Audit reports; however, there was no evidence that management: • Evaluated reported findings for relevance to the federal programs passed through. • Assessed the severity or potential impact of findings (e.g., material weaknesses, significant deficiencies, questioned costs). • Documented conclusions or follow-up on corrective actions. Cause The auditee did not have a formalized process or control requiring documented review and evaluation of subrecipient audit findings, including assignment of responsibility and supervisory oversight. Effect • The auditee may not identify or address subrecipient noncompliance affecting federal programs. • There is an increased risk that federal funds could be used in a manner inconsistent with compliance requirements. • Failure to ensure corrective action could result in questioned costs or federal sanctions. Questioned Costs None identified. Analysis / Auditor’s Perspective • While subrecipient audit reports were obtained, the absence of documented evaluation and follow-up indicates a breakdown in monitoring controls. Given that subrecipient monitoring is a key compliance requirement and the presence (or potential presence) of findings increases risk, this control deficiency is important enough to merit attention by those charged with governance but does not rise to the level of a material weakness, as no direct material noncompliance associated with the Organization’s pass-through funds or questioned costs were identified. Recommendation • Implement a standardized review process requiring documented evaluation of all subrecipient audit findings. • Develop a tracking mechanism for findings, corrective actions, and resolution status. • Assign responsibility for review and require evidence of supervisory approval. Views of Responsible Officials • Management agrees with the finding and its classification as a significant deficiency. • Management has begun developing a formal process through review of the Federal Audit Clearinghouse portal and inquiry and inspection of supporting pass-through grant detail to determine which organizations they pass-through funds to require single audits and to review any findings reported to determine if additional action as allowed under 2 CFR is necessitated. • Management has assigned responsibility to appropriate program personnel to carry out the detailed review and development of any action plans, if applicable, based on the results of subrecipient audits. • Management anticipates that the new procedures will be implemented and operating effectively by the end of the next fiscal year.