Finding Text
2022-1 Criteria or Specific Requirement - The Uniform Guidance Section 200.332(d) requires a pass-through entity to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statues, regulations and the terms and conditions of the subaward; and that subaward performance goals are achieved. Condition and Context - The Organization did not perform adequate subrecipient monitoring. Effect - Inadequate subrecipient monitoring puts the Organization at risk that subawards are not used for authorized purposes and are not in compliance with Federal statutes, regulations and the terms and conditions of the subaward; and that subaward performance goals are not achieved. In addition, the Organization has not determined whether there are subaward dollars that should be returned to the Federal agency for the reporting period, thus creating a risk that the expenditures and revenue reported in the Organization's basic financial statements and the Schedule of Expenditures of Federal Awards are overstated. During the audit period, the Organization disbursed approximately $164,000 to subrecipients that remained unspent through the end of the budget period, resulting in unallowable costs. Cause - The Organization has not yet designed or implemented its subrecipient monitoring program. Recommendation - The Organization should adopt and implement a subrecipient monitoring program that complies with the requirements of Uniform Guidance Section 200.332(d). The Organization should recoup the unallowable costs and return the funds to the granting agency. Views of Responsible Officials and Planned Corrective Action - Management agrees with the finding. The Organization is in the process of implementing a new compliance monitoring process: ? Subrecipients will receive their awards on a cost reimbursement basis. ? Subrecipient payments will be disbursed quarterly. ? Subrecipient payments will only be issued after submission, review, and approval of required financial and performance reports. Moving to a cost reimbursement model will reduce the risk of overstating the Organization?s revenue and expenditures and motivate subrecipients to record and submit detailed data on a quarterly basis. This new model will be effective for the grant year beginning April 1, 2023 and a memo of change is being distributed to subrecipients under contract. The Organization will work with the granting agency to determine whether the Organization will pay back the funds or will be allowed to carry them forward to the next period.