Finding Text
The Organization’s internal controls were inadequate for ensuring
compliance with subrecipient monitoring requirements.
Assistance Listing Number and Title: 93.958 – Block Grants for
Community Mental Health Services
93.959 – Block Grants for
Prevention and Treatment of
Substance Abuse
Federal Grantor Name: U.S. Department of Health and
Human Services
Federal Award/Contract Number: N/A
Pass-through Entity Name: Washington State Department of
Social and Health Services
Pass-through Award/Contract
Number:
K4163, K4185, K4764, K4717
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2019-002
Background
The Community Mental Health Services Block Grant (MHBG) program awards
funds to states and territories to implement plans for providing comprehensive,
community-based mental health services for adults with serious mental illness and
children with serious emotional disturbances. To ensure creative and cost-effective
delivery of services, states are encouraged to develop solutions for the specific
mental health concerns of their local communities. During fiscal year 2020, the
Organization spent $911,583 in MHBG funds. The Organization passed through
$304,812 of these funds to one subrecipient.
The Substance Abuse Prevention and Treatment Block Grant (SABG) program
awards funds to states, territories and one Indian tribe for planning, implementing,
and evaluating activities that prevent and treat substance abuse. During fiscal year
2020, the Organization spent $966,542 in SABG funds. The Organization passed
through $271,094 of these funds to five subrecipients.
Federal regulations require recipients to establish and follow internal controls that
ensure compliance with program requirements. These controls include
understanding program requirements and monitoring the effectiveness of
established controls.
Description of Condition
When grant recipients pass through federal funds to subrecipients, they must
evaluate each subrecipient’s risk of noncompliance with federal requirements to
determine the appropriate level of subrecipient monitoring. Monitoring
requirements include ensuring compliance with program requirements, ensuring
subrecipients receive audits when required, following up and ensuring
subrecipients take timely and appropriate action on audit findings that relate to the
federal awards it makes to its subrecipients, and issuing management decisions as
required.
Our audit found the Organization lacked effective controls for complying with
subrecipient monitoring requirements. We tested the Organization’s monitoring of
five of its subrecipients and determined it did not:
• Complete risk assessments or monitor program compliance
• Verify the subrecipients received required single audits
• Follow up on corrective actions taken for any identified deficiencies related
to the federal awards it made to its subrecipients
• Issue management decisions within six months of audit report issuance for
applicable audit findings
We consider this deficiency in internal controls to be a material weakness that led
to material noncompliance.
Cause of Condition
The Organization did not dedicate the necessary time and resources to ensure staff
responsible for administering these grants fully understood and could implement
controls for complying with related grant requirements.
Effect of Condition
Without performing risk assessments or adequately monitoring subrecipients, the
Organization increases its risk that subrecipients would not know of or comply with
program requirements. Additionally, subrecipients may spend funds for
unallowable purposes.
Recommendation
We recommend the Organization improve its internal controls by performing risk
assessments and monitoring subrecipients accordingly to ensure they comply with
federal program requirements.
Organization’s Response
Thurston Mason Behavioral Health Organization agrees with finding 2020-001
regarding the Organization’s lack of adequate internal controls for ensuring
compliance with subrecipient monitoring requirements.
We understand and recognize the importance of subrecipient monitoring to ensure
that subrecipients are following federal requirements for use of federal block grant
funds for both Block Grants for Community Mental health Services 93.958 and
Block Grants for Prevention and Treatment of Substance Abuse 93.959.
It is noted in the description of condition for this finding that it was an audit finding
in 2018 and 2019 as well. Due to the timing of the completion of our audits and
issuance of the findings there was not an opportunity to complete corrective actions
for these periods.
Following the issuance of the previous findings our organization has had key fiscal
staff attended Federal Block Grant training and have reviewed the federal funding
requirement language passed down in the contracts issued to us by the Health Care
Authority with our awards. To ensure that subrecipient monitoring requirements
are met the Finance Director has developed a tracking tool that is currently in use
that includes the following:
• Identified subrecipients
• Period of award
• Fiscal staff assigned to conduct risk assessment and monitoring follow up
• Risk assessment completion date
• Monitoring schedule, status, and completion date
• Verification of single audits being received, if required
• Issuance of corrective action taken if needed and
• Issuance of management decisions within six months of audit report
issuance for applicable audit findings
The tool is actively being used by the fiscal team to ensure that activities are
completed in a timely manner. The status of the activities is discussed with assigned
staff at periodic fiscal team meetings and all items are reviewed by the Finance
Director prior to an item being marked as completed.
TMBHO is confident that audits for subsequent years after the date of the initial
finding and repeat findings that the SAO will find the entity to be in compliance
with this requirement.
Auditor’s Remarks
We thank the Organization for its cooperation throughout the audit and the steps it
is taking to address these concerns. We will review the status of the Organization’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 45 CFR Part 75, Uniform Administrative Requirements, Cost Principles, and
Audit Requirements for HHS Awards, section 352, Requirements for pass-through
entities, establishes subrecipient monitoring regulations.