Finding 1230156 (2025-001)

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Pierce County January 1, 2025 through December 31, 2025 2025-001 The County did not have adequate internal controls for ensuring compliance with federal subrecipient monitoring requirements. Assistance Listing Number and Title: 59.059 – Congressional Grants Federal Grantor Name: Small Business Administration Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The Congressional Grant awarded by the Small Business Administration is used to provide targeted funding for impactful community projects that promote small business development and entrepreneurship initiatives, supporting both programmatic and construction efforts. In 2025, the County spent $748,473 in program funds. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The County passed through $736,857 in program funds to one subrecipient via a subrecipient agreement. When the County passes on federal funds to subrecipients, federal regulations require it to monitor its subrecipients’ activities. This includes ensuring the subrecipient receives a federal single audit when required, following up and ensuring the subrecipient takes timely and appropriate action on all audit findings, and issuing a management decision as required. Description of Condition The County did not have effective internal controls for ensuring compliance with subrecipient monitoring requirements. Specifically, the County did not sufficiently monitor the subrecipient as federal regulations require to ensure the subrecipient received a single audit and that it followed up with the results of that audit. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition County management did not know they needed to obtain and retain documentation of the County’s request for the subrecipient’s audit results. Effect of Condition The County did not monitor and obtain the subrecipient’s audit and was not aware of the audit results. The County cannot ensure it is properly monitoring its subrecipient and that the subrecipient complied with federal program requirements. Recommendation We recommend the County strengthen its internal controls to ensure compliance with federal requirements. Specifically, we recommend the County verify all subrecipients receive single audits when required and retain sufficient documentation of this verification. County’s Response Pierce County appreciates the thorough review provided by the Office of the Washington State Auditor. The County concurs with the finding and recommendation that the County monitor the subrecipient as federal regulations require to ensure they receive a single audit and follow up with the results of that audit. In response, internal controls have been strengthened to ensure compliance with federal program requirements. Auditor’s Remarks We thank the County for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the County’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for passthrough entities, establishes subrecipient monitoring and management requirements for pass-through entities.