Finding # 2022-003 Material weakness over subrecipient monitoring U.S. Department of Agriculture ? Rural Development 10.755 Rural Innovation Stronger Economy Finding: The Organization?s subrecipient agreements did not include the required federal award identification, and the Organization did not provide sufficient financial monitoring of its subrecipients. One subrecipient had a single audit finding, and management did not take actions to resolve the findings with the subrecipient. Recommendation: The Organization should implement a subrecipient monitoring policy that ensure a proper system to monitor, detect and take timely follow-up action on any issues identified in site visits and internal or external audits. Management should evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward and monitor the activities of the subrecipient to ensure that the subaward is used for authorized purposes. The Organization should consider on-site reviews of the subrecipient?s operations and formalizing a monitoring report checklist to ensure that all compliance requirements have been considered and documented. Corrective Action: Spruce Root will review the federal subrecipient monitoring and management guidelines and update its policies and procedures to be consistent with federal requirements. Spruce Root will issue contract amendments for its subrecipient agreements to ensure the proper federal award identification is documented. Anticipated Completion Date December 31, 2023