Finding 59287 (2022-002)

Significant Deficiency
Requirement
C
Questioned Costs
-
Year
2022
Accepted
2023-09-27

AI Summary

  • Core Issue: Subrecipients are not being monitored effectively, leading to over $223,500 in unspent funds as of July 2023.
  • Impacted Requirements: Compliance with 2 CFR Section 200.305(b)(1) is lacking, as timely cash management and monitoring of subrecipient activities are not being enforced.
  • Recommended Follow-Up: Revise subaward agreements to include more frequent reporting and conduct regular monitoring to ensure timely fund usage and compliance with federal requirements.

Finding Text

Finding 2022-002 ? Lack of Subrecipient Monitoring, Assistance Listing 10.309, Specialty Crop Research Initiative - Cash Management Criteria: 2 CFR Section 200.305(b)(1) Pass through entities must monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the transfer of federal funds to the subrecipient and their disbursement for program purposes is minimized as required by the applicable cash management requirements in the federal award to the recipient. Pass through entities are also required to monitor the activities of the subrecipients as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves the performance goals. Condition: Subrecipients were advanced funds according to an approved budget with semi-annual reporting requirements per their subaward agreements. Of the about $359,700 at December 31, 2022 in outstanding advances made to sub-recipients during the year, a significant amount of approximately $223,500 remains unspent as of July 2023. Cause of Condition: Sub-award agreements only require semi-annual reporting which does not provide the Organization the ability to adequately monitor and determine if funds have been expended timely on allowable costs and activities by the sub-recipients. Due to the impact of COVID-19 on the labor force, and difficulties of hiring qualified persons, funds advanced for salary expenses remain unspent. Potential Effect: As a result of the condition above, use of funds passed to subrecipients cannot be monitored timely which could result in unallowable costs, waste and abuse. These conditions may provide opportunities for errors, fraud or waste and abuse to occur and cause material misstatements of the financial statements and SEFA. Questioned Costs: None Context: Management lacks a full understanding of all federal compliance requirements. Recommendation: Recommend Management include in subaward agreements and conduct regular monitoring of subrecipients for timely spending of federal awards and adherence with federal cost principles and compliance requirements. We further recommend one of the reporting periods coincide with the Organization?s fiscal year end to ensure a complete and accurate schedule of expenditures of federal awards.

Corrective Action Plan

The primary recipient of cash advanced under the SCRI program was the USDA Agricultural Research Service (ARS). The USDA-ARS Trust agreement with SHAC allowed for advancement of funds to the Federal agency so they could hire staff under their contracting agreements with the Department of Energy?s ORISE program. Funds are required up front for ORISE hiring contracts. USDA-ARS manages the risk by portioning out payments to ORISE so funds can be suspended upon unsatisfactory performance. Secondarily, cash advances were also made to the Land Grant University Subawardees for similar hiring and supply procurement reasons at the start of the grant. Due to extreme labor shortages caused by post-pandemic issues with available staffing, some positions remained unfilled for longer than expected, creating a discrepancy in expected expenses. This issue has been resolved. All Subawardee contracts were transitioned to a cost-reimbursement basis in the 2023-24 grant period. SHAC will ensure proper reporting of expenditures in a timely manner from its Subawardees through timely pursuit of invoices from University sponsored program offices. Relevant Personnel details: Mike Miyahira, Accountant, mike@shachawaii.org, Ph 808-987-8438 Suzanne Shriner, Executive Director, suzanne@shachawaii.org, Ph 808-365-9041

Categories

Subrecipient Monitoring Allowable Costs / Cost Principles Reporting

Other Findings in this Audit

  • 59284 2022-001
    Material Weakness
  • 59285 2022-001
    Material Weakness
  • 59286 2022-001
    Material Weakness
  • 59288 2022-001
    Material Weakness
  • 635726 2022-001
    Material Weakness
  • 635727 2022-001
    Material Weakness
  • 635728 2022-001
    Material Weakness
  • 635729 2022-002
    Significant Deficiency
  • 635730 2022-001
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
10.309 Specialty Crop Research Initiative $833,841
10.601 Market Access Program $444,105
10.001 Agricultural Research_basic and Applied Research $19,304