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Finding Number: 2022 004 Program: Coronavirus State and Local Fiscal Recovery Funds ALN #: 21.027 Federal Agency: U.S. Department of Treasury Federal Award Number: SLFRP1982 Award Year: 7/1/2021 ? 6/30/2022 Subrecipient Monitoring Type of finding: Material Weakness and Noncompliance Prior year finding: No Statistically valid sample: No Criteria The 2 CFR sections 200.332(d) through (f) provide the principles to be applied to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. According to 2 CFR 200.303, the non Federal entity must Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The City does not have properly designed controls and documented procedures in place to ensure compliance with the following requirements: ? Each subrecipients risk of noncompliance is appropriately evaluated ? Monitoring activities over subrecipients are performed on a timely basis ? Verification that subrecipients are audited as required when they are expected to exceed the threshold for having a single audit. During our audit, we noted the City does not have formally documented policies and procedures related to subrecipient monitoring and risk assessment prior to entering into contracts with subrecipients. For 1 of our 2 subrecipients selected for testing, there was no evidence of risk assessment prior to entering into contract. We noted that audited financial statements were obtained for 2 of the 2 subrecipients selected for testing, but there was no documentation to evidence monitoring procedures performed over the reports obtained. Cause The City requires that audited financial statements are obtained for subrecipients, but there is no checklist or formally documented policies and procedures for subrecipient monitoring and risk assessment to ensure compliance with subrecipient monitoring requirements. Effect Lack of effective controls resulted in the City not complying with 2 CFR 200.303. Questioned Costs None Recommendation We recommend the City establish well documented policies and procedures over subrecipient monitoring including a checklist or formal documentation requirements that employees can complete when obtaining subrecipient audit reports and making determinations on subrecipients contracts to ensure required monitoring procedures are performed and well documented. Views of Responsible Officials and Corrective Actions The City has established an Audit Review Certification form that will be completed by employees to formally document the review of subrecipient agencies? audit reports. Implementation Date The checklist is completed, and the City will start using the form immediately as new subrecipients are awarded ARPA funds. Responsible Officials Betty Lyons, Federal Grants Manager