Finding Text
2022-003 Internal Control over Compliance and Compliance with Subrecipient Monitoring Information on the Major Federal Program ? United States Department of Treasury Assistance Listing Number: 21.027 Assistance Listing Name: Coronavirus State and Local Fiscal Recovery Funds Passthrough Entity: State of Illinois, Department of Commerce and Economic Opportunity Program Title - Small Business Community Navigators Program Pass-through Entity Identifying Number - 21-483011 Sub-award Period - July 1, 2021 to June 30, 2022 Criteria - In accordance with ?200.331(b) and ?200.331(d), Requirements for Pass-Through Entities, the Trust (including consolidated entity National Main Street Center (NMSC), the recipient of these federal funds) must evaluate each subrecipient?s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. The Trust must also monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statues, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) reviewing financial and performance reports required by the pass-through entity; (2) following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means; and (3) issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the pass-through entity. Condition - During our testing of subrecipient monitoring, we selected five subrecipient samples. We identified the following conditions: ? For each sample tested, NMSC was unable to provide documented evidence for the evaluation of each subrecipient?s risk assessment. ? For each sample tested, there was no timely evidence that NMSC verified the subrecipients? audit requirements. Subsequently, management verified that one of the five subrecipients tested was subject to a single audit and as such, risk assessment and monitoring activities around the federal award recipient were not performed by NMSC in accordance with ?200.331(b) and ?200.331(d). We verified that the Trust performed monitoring on the subrecipients under the federal grant by reviewing video conference call records between the Trust and the subrecipients throughout the grant period; further, we verified that the Trust submitted monitoring reports on a monthly basis to the State of Illinois detailing how monitoring occurred, which included speaking to each subrecipient at least weekly and through group video conference calls every other week. We also noted that the Trust submitted subrecipient invoices to the State of Illinois as part of the monthly reporting package. Cause ? The Trust did not follow its policies and procedures in place to ensure compliance with the requirements regarding subrecipient monitoring. Effect or Potential Effect - Failure to comply with the subrecipient monitoring requirements of the Uniform Guidance could result in unallowable expenses being charged to the grants by the subrecipients. Questioned Costs - None. Context - This is a condition identified based upon our review of the Trust?s compliance with specified requirements. The sample was selected based on a non-statistical basis. The prevalence of these findings is detailed in the condition section above. Repeat finding ? This is not a repeat finding. Recommendation ? We recommend that the Trust follow its policies and procedures to ensure the subrecipient process, from identification of that subrecipient through verification of subrecipients? audit requirements, occurs to ensure compliance. To address the many compliance requirements when dealing with subrecipients, most organizations have developed pre-award assessment toolkits, audit requirement monitoring toolkits and other types of subrecipient management aids to assist in ensuring the steps are performed as required. Views of Responsible Officials - In June 2022, the Trust hired a Grants & Compliance Specialist to implement subrecipient monitoring procedures for NMSC, the entity responsible for this federal program. All National Trust and NMSC pass-through programs in effect during fiscal year 2023 are subject to these procedures.