Finding 1238018 (2025-001)

Material Weakness Repeat Finding
Requirement
M
Questioned Costs
-
Year
2025
Accepted
2026-09-29

AI Summary

  • Core Issue: SI2 has significant deficiencies in subrecipient monitoring, failing to document risk assessments and required federal information in subawards.
  • Impacted Requirements: Noncompliance with 2 CFR 200.331 and 200.332, including inadequate identification of subawards and lack of proper monitoring documentation.
  • Recommended Follow-Up: Amend agreements to include missing information, implement a standard checklist for subaward reviews, and ensure comprehensive documentation of monitoring activities.

Finding Text

2025-001- Subaward Documentation and Subrecipient Monitoring. Significant deficiency in internal control over compliance and noncompliance with subrecipient monitoring requirements. Under 2 CFR 200.331 and 200.332, as applicable to the respective awards, a pass-through entity must distinguish subrecipient relationships from contractor relationships, clearly identify subawards, communicate required federal award information and applicable terms, evaluate subrecipient risk, and perform appropriate monitoring. Monitoring includes reviewing financial and performance reports and following up on identified issues. SI2’s monitoring procedures should be implemented and supported by records demonstrating the activities performed and resolution of identified concerns. SI2 performed substantive activities to administer and monitor its subawards during 2025 – subrecipient invoices were reviewed and processed through SI2’s award cost trackers, which allocate each invoice between the federal share and required cost sharing. However, documented risk assessments had not been prepared, certain monitoring activities were not documented in the subaward files, and one subaward agreement did not include required federal award information and provisions, as described below. • The Kearns & West SUDS arrangement was documented through a statement-of-work rider to a master services agreement structured as a contractor arrangement, although the substance of the relationship was that of a subaward. Review of the master agreement, rider, and incorporated documents identified the omission of required subaward information and provisions, including identification of the arrangement as a subaward, the federal award identification data required by 2 CFR 200.332, the indirect cost rate provision, flow-down of the applicable federal requirements, audit and compliance requirements appropriate to the subrecipient’s entity type, records-access provisions, and closeout terms. The arrangement provided for a federal share of $579,335 with required nonfederal cost sharing of $144,834; federal expenditures under the subaward during 2025 were approximately $265,215, included in the $393,169 passed through to subrecipients under the SUDS award reported on the SEFA. • In addition, documented risk assessments had not been prepared for the 12 first-tier subawards in the population; subrecipient-versus-contractor determinations were undocumented or contained responses inconsistent with the stated conclusion for two arrangements; and, although subrecipient invoices were reviewed in connection with processing and cost-share allocation, the other monitoring activities described in SI2’s Subrecipient Monitoring Plan were not documented in the subaward files during 2025. Following receipt of the risk-assessment template provided during the audit, management began completing documented risk assessments in 2026 and had completed assessments for five subrecipients as of the date of this report; these actions are corrective in nature and are reflected in the corrective action plan. This was SI2’s first year subject to a Single Audit under the Uniform Guidance, and its subrecipient monitoring processes were in the early stages of formalization. While personnel performed substantive administrative and monitoring activities, SI2’s Accounting Policies and Procedures Manual (adopted January 2025) did not yet specify the nature, frequency, documentation, and retention of monitoring procedures, and agreements were prepared using different formats without a standardized process for confirming required federal award provisions and documenting subrecipient-versus-contractor determinations. The omission of required subaward information and provisions reduced SI2’s assurance that applicable federal requirements were communicated to the affected subrecipient. The absence of documented risk assessments and of retained monitoring documentation reduced the evidence available to demonstrate compliance with subrecipient monitoring requirements and increased the risk that instances of subrecipient noncompliance would not be prevented, or detected and corrected, on a timely basis. Our testing did not identify questioned costs associated with this finding. The population consisted of 12 first-tier subawards under the three federal awards identified above. Federal expenditures provided to subrecipients under these awards during 2025 totaled approximately $856,305, determined on the accrual basis (amounts in this paragraph are presented rounded to the nearest dollar). This amount differs from the $1,040,123 of amounts provided to subrecipients reported on the SEFA because the SEFA total also includes approximately $183,818 passed through under federal programs outside the major program (Solar Ready Vets Network, approximately $181,690, and Aspire, approximately $2,128). We examined subaward documentation, classification determinations, and available risk-assessment and monitoring records for all 12 subawards; accordingly, the subaward-file review covered the entire population and did not involve sampling. This coverage does not represent examination of every underlying expenditure. Exceptions included one subaward with missing required agreement information or provisions, 12 subawards without documented risk assessments, two arrangements with missing or inconsistent classification determinations, and 12 subawards for which the monitoring activities described above were not documented in the subaward files as of the completion of fieldwork. There were no questioned costs identified. The procedures performed did not identify specific expenditures to question in connection with this finding. We recommend that SI2: amend the Kearns & West arrangement to clearly identify it as a subaward and include the missing federal award information and applicable provisions; establish a standard agreement-review checklist addressing required subaward information, applicable federal requirements, and award-specific terms; document and review subrecipient-versus-contractor determinations based on the substance of each arrangement; document subrecipient risk assessments when making subawards and update the assessments as circumstances change; assign responsibility for monitoring, establish the nature and frequency of monitoring based on assessed risk, and retain evidence of financial and performance report reviews and follow-up; and obtain and review support for required subrecipient cost sharing, including reports and certifications required by the applicable agreements.

Corrective Action Plan

Finding 2025-001 – Subaward Documentation and Subrecipient Monitoring-Corrective Action Completed or In Progress: • In September 2026, SI2 completed documented risk assessments for five subrecipients using a form addressing the factors in 2 CFR 200.332(c), and documented its cost-share review process in a written narrative. SI2 will complete the assessments for the remaining subrecipients, prepare an assessment at the time of each new subaward, and update assessments as circumstances change. • SI2 will execute a formal subaward agreement with Kearns & West for the SUDS engagement, in the form used for the SEEDS subawards, and will adopt a standard subaward template and execution checklist for all future subawards. • SI2 will perform and retain evidence of the monitoring activities (invoice review and approval, determination of applicable subrecipient audit requirements and verification of compliance with those requirements, including review of Single Audit reports when applicable) beginning with fiscal year 2026. • SI2 will expand its Accounting Policies and Procedures Manual to specify how subrecipient monitoring activities are performed, documented, and retained.

Categories

Subrecipient Monitoring

Other Findings in this Audit

  • 1238016 2025-001
    Material Weakness Repeat
  • 1238017 2025-001
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
81.087 RENEWABLE ENERGY RESEARCH AND DEVELOPMENT $183,601
81.117 ENERGY EFFICIENCY AND RENEWABLE ENERGY INFORMATION DISSEMINATION, OUTREACH, TRAINING AND TECHNICAL ANALYSIS/ASSISTANCE $2,128