Finding Text
Finding 2023-003: 21.027 - Coronavirus State and Local Fiscal Recovery Funds:COVID-19 - Material Weakness Compliance Requirement: Reporting and Subrecipient Monitoring Criteria: In accordance with the Federal Funding Accountability and Transparency Act (FFATA), as implemented by 2 CFR Part 170, recipients of Federal awards are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) in a timely and complete manner. Additionally, pursuant to 2 CFR Part 200, including §200.332 (Requirements for Pass-Through Entities) and §200.214 (Suspension and Debarment), pass-through entities are required to establish and maintain procedures to monitor subrecipients to ensure Federal awards are used for authorized purposes and in compliance with laws, regulations, and award provisions. These responsibilities include: • Verifying subrecipients are not suspended or debarred. • Performing and documenting subrecipient risk assessments. • Monitoring subrecipient activities, including review of required audit reports under Subpart F. • Ensuring proper reporting of Federal awards, including Schedule of Federal Awards (“SEFA”) reporting by subrecipients. • Reporting first-tier subawards in FSRS, as required by FFATA. Condition: The Organization did not establish formal policies or procedures to ensure compliance with subrecipient monitoring and reporting requirements. During testing, we noted the following: • Required first-tier subaward information was not reported to FSRS for applicable subawards of $30,000 or more. • The Organization did not document verification of suspension and debarment status prior to issuing subawards. • The Organization did not perform or document subrecipient risk assessments. • Procedures were not in place to obtain and review subrecipient Single Audit reports. • The Federal award passed through by the Organization was not identified on the subrecipient’s Schedule of Expenditures of Federal Awards (SEFA). • The Organization did not have procedures to monitor or verify supporting documentation for personnel costs charged by subrecipients and subcontractors. Effect: Due to not having adequate subrecipient monitoring and reporting controls, the Organization was not in compliance with FFATA and Uniform Guidance requirements. The Organization cannot ensure that subrecipients were eligible to receive Federal funds, that subrecipient activities were properly monitored, or that Federal awards were accurately reported at both the prime and subrecipient levels. This also increases the risk that Federal expenditures may be misstated or not properly reported for Single Audit purposes. Questioned Cost: None Cause: The Organization did not establish formal written policies, procedures, or internal controls to address subrecipient monitoring and FFATA reporting requirements. Additionally, there was insufficient training and oversight to ensure compliance with Federal regulations related to subrecipient management and reporting. Pass-Through Entity Monitoring Results: The Colorado Department of Labor and Employment (CDLE), the pass-through entity, issued a Financial Desk Review in April 2023 covering the period from December 1, 2021 through July 31, 2022. The desk review identified deficiencies substantially similar to those described in this finding and required corrective actions, with supporting documentation requested by April 10, 2023. Based on our audit procedures, we determined that the related internal controls were not operating effectively during the 2023 audit period, as evidenced by the substantially similar compliance deficiencies identified during our testing. This information is provided as relevant background regarding the significance of the deficiencies and is not intended to indicate the existence of a prior-year audit finding. Recommendation: We recommend the Organization implement comprehensive subrecipient monitoring and reporting policies and procedures in accordance with 2 CFR §200.332 and 2 CFR Part 170, including: • Reporting all applicable first-tier subawards to FSRS in a timely and complete manner. • Documenting suspension and debarment verification for all subrecipients (e.g., SAM.gov). • Performing and documenting subrecipient risk assessments prior to issuing subawards. • Establishing procedures to monitor subrecipient activities, including financial and programmatic reviews. • Obtaining and reviewing subrecipient Single Audit reports and following up on any related findings. • Ensuring subaward agreements include all required Federal award information and reporting requirements, including SEFA reporting. • Implementing procedures to ensure subrecipients and subcontractors maintain adequate supporting documentation for personnel costs. Response: There is no disagreement with the audit finding. In fact, the Organization worked towards developing and implementing enhancements to its subrecipient monitoring framework as suggested by the CDLE Financial Desk Review, from the date the Organization received it and throughout the remainder of the year, including revisions to policies, procedures, and oversight activities.