Finding Text
The County did not have adequate internal controls for ensuring compliance with federal subrecipient monitoring requirements.
Assistance Listing Number and Title: 21.027 – COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of Treasury
Federal Award/Contract Number: N/A
Pass-through Entity Name: WA State Department of Commerce
Pass-through Award/Contract Number: 21-4619C-108
Known Questioned Cost Amount: $0
Prior Year Audit Finding: N/A
Background
The purpose of the Coronavirus State and Local Fiscal Recovery Funds program is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide premium pay to essential workers during the pandemic, provide government services to the extent COVID-19 caused a reduction in revenues collected, and make necessary investments in water, sewer or broadband infrastructure. During 2023, the County spent $8,167,780 in program funds. Of this, it passed through $5,777,956 of the Washington State Department of Commerce’s Eviction Rent Assistance program funding to three subrecipients.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
Whenever the County passes on federal funding to subrecipients, federal regulations require it to monitor subrecipients to ensure they comply with the terms and conditions of the federal award. For this subaward, monitoring would include verifying the subrecipients only provided assistance to participants who met the program eligibility requirements. Further, subrecipient requirements require the County to verify whether the awardee received an audit if they expended more than $750,000 in federal awards, and to follow up on any findings issued.
Description of Condition
Our audit found the County did not have internal controls in place to monitor its subrecipients, as federal regulations require. Specifically, the County did not obtain documentation from three subrecipients to ensure the program participants were eligible for the Eviction Rent Assistance Program from the Washington State Department of Commerce. Further, the County did not ensure it checked whether one subrecipient expended more than $750,000 in federal awards or received an audit.
We consider this deficiency in internal controls to be a material weakness that led to material noncompliance.
Cause of Condition
During 2023, the County experienced turnover in the position responsible for performing subrecipient monitoring procedures, and it did not have procedures to ensure it performed the required monitoring.
Effect of Condition
The County did not monitor subrecipients to ensure they complied with the terms and conditions of the subaward and appropriately used federal program funds. Since the County did not monitor its subrecipients, it was unable to confirm only eligible households received assistance.
Further, without verifying a subrecipient received a single audit, the County would be unaware if any findings were issued relating to program requirements that would require follow-up.
Recommendation
We recommend the County establish procedures to perform monitoring activities, including verifying whether participants were eligible for services and ensuring subrecipients receive an audit as required by federal regulations.
County’s Response
Grant County and staff thank the State Auditor’s Office for their time in conducting a thorough audit.
Unfortunately, staff turnover and transition of acquainted and well-versed personnel in key departments are contributing factors to the deficiencies noted. The County is committed to continuing to improve processes and procedures over internal controls and in making internal controls a priority by putting in place necessary policies and procedures to ensure all grant contracts/agreements have internal controls identified and monitored.
The County will put in place a sub-recipient agreement/contract checklist to be completed at the department level. This checklist will provide internal controls to ensure all items for this type of agreement/contract have been met per Uniform Guidance. A review of the checklist to ensure all required items have been addressed will be performed annually, if not more frequently.
Auditor’s Remarks
We thank the County for its cooperation and assistance during the audit and acknowledge its commitment to improve the condition described. We will review the status of this issue 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 2 CFR Part 200, Uniform Guidance, section 332, Requirements for passthrough entities, establishes the requirements for subrecipient monitoring and management requirements for pass through entities