Finding Text
2022-007-Subrecipient Monitoring Federal Agency: U.S. Department of the Treasury Federal Program Name: Covid-19 Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number: Z1890 Award Period: March 3, 2021, through December 31, 2026 Type of Finding: ? Significant Deficiency in Internal Control over Compliance ? Other Matters Criteria or specific requirement: 2 CFR section 200.332(a) notes pass-through entities such as Polk County, Florida need to ensure that every subaward is clearly identified to the subrecipient as a subaward and includes required information at the time of the subaward sufficient for the subrecipient to comply with federal statutes, regulation, and the terms and conditions of the award. If any of the data elements change the impact should be updated in subsequent subaward modification. 2 CFR section 200.332(b)-(f) covers required monitoring activities and management of subrecipient relationships that should be performed by the pass-through entity. Condition: During the testing of quarterly Project and Expenditure Reports submitted to the Treasury, information included for contracts and subawards was not agreeing to information reported on the Schedule of Expenditures of Federal Awards (SEFA). Auditors selected reported subrecipients, beneficiaries, and contractors to determine the validity of assigned category. A subrecipient is an entity that receives a subaward to carry out a project funded by Fiscal Recovery Funds on behalf of a recipient. Individuals or entities that are direct beneficiaries of a project funded by Fiscal Recovery Funds are not considered subrecipients. Households, communities, small businesses, nonprofits, and impacted industries are all potential beneficiaries of projects carried out with SLFRF funds. The terms and conditions of Federal awards flow down to subawards to subrecipients, requiring subrecipients to comply with all requirements of recipients such as the treatment of eligible uses of funds, procurement, and reporting requirements. Beneficiaries are not subject to the requirements placed on subrecipients in the Uniform Guidance. The distinction between a subrecipient and a beneficiary, therefore, is contingent upon the rationale for why a recipient is providing funds to the individual or entity. If the recipient is providing funds to the individual or entity for the purpose of carrying out a SLFRF program or project on behalf of the recipient, the individual or entity is acting as a subrecipient. Acting as a subrecipient, the individual or entity is subject to subrecipient monitoring and reporting requirements. Questioned costs: N/A Context: A statistically valid sample of 10 organizations listed on each of the quarterly Treasury reports (40 total items tested) was selected and tested against the entity-type determination criteria. In the sample of 40 entity types reported, there were twenty-three exceptions (23) which resulted in a conclusion that only one (1) Organization reported was truly a subrecipient. This subrecipient was not captured on the SEFA and the elements of monitoring were not in place. The review of the contract agreement between Polk County and this subrecipient did not meet all requirements under 2 CFR section 200.332(a). Cause: The distinction between the entity types receiving this federal funding was not fully understood by personnel. Effect: Recipients and subrecipients are the first line of defense and responsible for ensuring the SLFRF award funds are not used for ineligible purposes, and there is no fraud, waste, or abuse associated with their SLFRF award. The terms and conditions of Federal awards flow down to subawards to subrecipients, requiring subrecipients to comply with all requirements of recipients such as the treatment of eligible uses of funds, procurement, and reporting requirements. A lack of monitoring can lead to noncompliance by the subrecipient which ultimately impacts the compliance of the pass-through entity. Repeat Finding: No. Recommendation: We recommend an amended subrecipient contract that complies with all guidelines under 2 CFR section 200.332(a) be put into place between Polk County and the identified subrecipient. In addition, we recommend a risk assessment of this subrecipient be performed and depending on the results of the assessment, determine a planned schedule of monitoring that matches frequency and intensity that aligns with the risk assessment. Views of responsible officials: There is no disagreement with the audit finding.