Finding Text
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Spokane January 1, 2025 through December 31, 2025 2025-002 The City did not have adequate internal controls and did not comply with federal reporting requirements. Assistance Listing Number and Title: 14.218 Community Development Block Grants/Entitlement Grants Federal Grantor Name: Housing and Urban Development Federal Award/Contract Number: B-24-MC-53-0006, B-23-MC-53-0006, B-22-MC-53-0006, B-21-MC-53-0006, B-25-MC-53-0006 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 primary objective of the Community Development Block Grants/Entitlement Grants (CDBG) program is to help provide decent and affordable housing, particularly for people with moderate, low and very low incomes. Funds also help recipients implement strategies for achieving an adequate supply of decent housing and providing suitable living environments and expanded economic opportunities for people with low incomes. In 2025, the City spent $5,739,184 for its CDBG program. Of this amount, it passed $5,059,168 through to subrecipients. 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 Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the U.S. General Services Administration’s System for Award Management at SAM.gov. The City must report subawards and subaward amendments by the end of the month following the month in which it made the subawards and subaward amendments. Description of Condition The City’s internal controls were ineffective for ensuring it submitted on time FFATA reports for two new subawards and two subaward amendments as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The employee responsible for submitting FFATA reports was aware of the reporting requirements but overlooked submitting them on time. Effect of Condition Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. Using a nonstatistical sample, we found four of five FFATA reports (80%) tested were not submitted on time. The table below summarizes the discrepancies we identified. During the audit period, the City submitted one FFATA report seven months late and subsequently submitted the other three FFATA reports applicable to the audit period at the time of audit, ranging from nine to 12 months late. Recommendation We recommend the City strengthen its internal controls to ensure it submits FFATA reports for all applicable subawards by the due date, as federal regulations require. City’s Response The City understands the importance of complying with federal reporting requirements and is committed to timely and accurate reporting. The City agrees with the finding regarding the untimeliness of FFATA reporting. To prevent a recurrence, the City has implemented a weekly supervisory review of FFATA reporting activities to monitor compliance with reporting requirements and ensure reports are submitted within the required timeframes. Auditor’s Remarks We appreciate the City’s commitment to resolve this finding and thank the City for its cooperation and assistance during the audit. We will review corrective action taken during the 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 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the U.S. General Services Administration’s System for Award Management at SAM.gov.