Finding Text
2023-006 – Subrecipient Monitoring
Federal Program: Refugee and Entrant Assistance Program
Federal Agency: U.S. Department of Health and Human Services
Assistance Listing Number: 93.566
Repeat of Prior Finding: No
Type of Finding: Noncompliance and Material Weakness in Internal Controls Over Compliance
Criteria
According to 2 CFR § 200.331, a pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor. If determined to be a subrecipient, the entity must adhere to the provisions in 2 CFR § 200.332 which require passthrough entities to perform certain subrecipient monitoring procedures. These procedures include providing the subrecipient necessary award information so that the federal award is used in accordance with federal regulations, evaluating risks of noncompliance of subrecipients, implementing monitoring procedures based upon identified risks, and, if applicable, obtaining a copy of the subrecipients’ annual audit, and taking appropriate action on deficiencies detected through the audits, as well as other requirements. Additionally, the nonfederal entity must establish and maintain effective internal controls over the federal award to provide reasonable assurance that the non-federal entity is managing the award in compliance with federal regulations. Further, according to 2 CFR § 200.331(a), specific information must be explicitly included in agreements with subrecipients that includes but is not limited to providing the Assistance Listing number, whether funding is COVID related, and that the subrecipient is responsible for compliance with 2 CFR § 200 including Subpart F, if applicable.
Condition and Context
The Organization did not have written policies and procedures in place to ensure that subrecipients are monitored and managed in accordance with Uniform Guidance 2 CFR § 200.332. The Organization did not have procedures in place to properly identify the party receiving funds from the Organization as a subrecipient and therefore assumed that the recipient was a subcontractor. As the proper determination was not made, there were no written agreements between the Organization and the subrecipients.
Cause
The Organization was unaware of these requirements and determined the receiver of the funds to be a subcontractor. Accordingly, there was no monitoring performed by the Organization over the subrecipient.
Effect or Potential Effect
Without a proper written grant agreement, subrecipients may be unaware that their award is subject to federal compliance requirements. The Organization could award federal funds to a high-risk entity and fail to adjust the methods of monitoring accordingly.
Questioned Costs
None noted.
Recommendations
We recommend that the Organization establish a written policy to monitor subrecipients and develop procedures for determining if the party receiving the funds is considered to be a subrecipient or a contractor. Further, we recommend maintaining a template to be in compliance with applicable regulations, ensuring that the subrecipient is aware of their responsibilities to adhere to federal regulations.
Views of Responsible Officials and Planned Corrective Actions
Management agrees with the finding and recommendations. See the attached corrective action plan