Finding 403891 (2022-003)

Compliance Requirement Subrecipient monitoring Material Weakness Material Noncompliance 2022-003. The County should establish controls to ensure subrecipients are sufficiently monitored. Assistance Listing Number 21.027 Federal Award Coronavirus State and Local Fiscal Recovery Funds Federal Agency U.S. Department of the Treasury Pass-through N/A – Direct Award Questioned Costs None Context There was one transaction passed-through to a subrecipient. Repeat Finding No Criteria The Federal Compliance Supplement and 2 CFR Section 200.332 requires pass-through entities to communicate and clearly identify to the subrecipient: 1) the award as a subaward at the time of the subaward by providing the information described in 2 CFR section 200.332(a)(1); 2) all requirements imposed by the pass-through entity on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and terms and conditions of the award; and 3) any additional requirements the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility for the federal award. It also requires the pass-through entity to verify that every subrecipient is audited under the Uniform Guidance when required. Condition The County did not have an effective process in place to ensure required communications occurred with subrecipients of federal awards. There was no agreement with the subrecipient that explicitly included certain information required under 2 CFR 200.332(a)(1). During our audit of the County’s federal expenditures, we noted that the only procedure in place to monitor the subrecipient’s use of federal awards was a visual inspection of the work completed. Cause Management was not aware of the additional communication requirements imposed on pass-through entities. Effect Failure to monitor subrecipient’s use of federal awards could result in the erroneous or fraudulent spending of federal awards, as well as a risk the subrecipient may not be audited in accordance with the Uniform Guidance when required. Recommendation We recommend the County update its communications with the subrecipient to include the required communications of the subrecipient’s responsibilities under the federal requirements, grant agreements and award requirements including, but not limited to its audit obligations under the Uniform Guidance. Views of Responsible Official(s) This payment was a one-time payment for a single project completed by the City of Meridian. Moving forward, Lauderdale County will document the completion of the project.