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Finding Number: 2022 003 Program: Emergency Solutions Grant Program (ESG) ALN #: 14.231 Federal Agency: Housing and Urban Development Federal Award Number: E 20 MC 25 005; E 20 MW 25 0005 Award Year: 7/1/2021 ? 6/30/2022 E 21 MC 25 0005 Subrecipient Monitoring Type of finding: Material Weakness Prior year finding: No Statistically valid sample: No Criteria The 2 CFR sections 200.332(d) through (f) provide the principles to be applied to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. According to 2 CFR 200.303, the non Federal entity must Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition The City does not have properly designed controls and documented procedures in place to ensure compliance with the following requirements: ? Each subrecipients risk of noncompliance is appropriately evaluated ? Monitoring activities over subrecipients are performed on a timely basis ? Verification that subrecipients are audited as required when they are expected to exceed the threshold for having a single audit. During our audit, we noted that audited financial statements were obtained for 5 of the 5 subrecipients selected for testing, but there was no documentation to evidence consideration of the compliance requirements indicated above. Cause The City requires that audited financial statements are obtained for subrecipients, but there is no checklist or formal documentation required to indicate what should be reviewed when reviewing the audit reports to ensure compliance with subrecipient monitoring requirements. Effect Lack of effective controls could result in the City?s noncompliance with program requirements. Questioned Costs None Recommendation We recommend the City establish a checklist or formal documentation requirements that employees can complete when obtaining subrecipient audit reports to ensure required monitoring procedures are performed and well documented. Views of Responsible Officials and Corrective Actions The City has established an Audit Review Certification form that will be completed by employees to formally document review of subrecipient agencies? audit reports. Implementation Date The City will implement use of the Audit Review Certification form as part of the ESG subrecipient application process for the FY24 program year beginning July 1, 2023. Responsible Officials Anthony Woods, Planner and Contract Manager; Liz Mengers Magargee, Planning and Development Manager