FAC Explorer

Finding 971170 (2023-013)

Material Weakness
Requirement
M
Questioned Costs
-
Year
2023
Accepted
2024-04-25
Audit: 304593
Organization: Charter County of Wayne, Michigan (MI)
Auditor: Plante & Moran PLLC

AI Summary

  • Core Issue: The County's agreements with local communities incorrectly included subrecipient language, leading to potential misunderstandings about compliance requirements.
  • Impacted Requirements: The agreements did not align with federal guidelines, which state that revenue loss funds do not create subrecipient relationships.
  • Recommended Follow-up: The County should review its agreement controls and provide clear guidance to communities about the nature of their funding relationships.

Finding Text

Assistance Listing Number, Federal Agency, and Program Name - 21.027, U.S. Department of the Treasury, COVID-19 - Coronavirus State and Local Fiscal Recovery Fund (CSLFRF) Federal Award Identification Number and Year - N/A Pass-through Entity - N/A Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - Per 2 CFR 200.201(a), the federal awarding agency or pass-through entity must decide on the appropriate instrument for the federal award (i.e., grant agreement, cooperative agreement, or contract) in accordance with the Federal Grant and Cooperative Agreement Act (31 U.S.C. 631-08). Per guidance within Treasury FAQs, recipients’ use of revenue loss funds does not give rise to subrecipient relationships given that there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. Condition - The County entered into intergovernmental agreements with local communities using the revenue loss provision of the County’s CSLFRF award. Those contracts contained subrecipient language/provisions. The County did not have adequate controls in place to ensure that the form and substance of these agreements were in compliance with the intended nature of the relationship and/or the requirements of the federal award. Questioned Costs - None Identification of How Questioned Costs Were Computed Not applicable, as there were no questioned costs identified Context - The County entered into agreements with local communities to fund various projects to benefit residents in these communities that amounted to approximately $71 million under the revenue loss provisions. During the fiscal year ended September 30, 2023, these communities spent and were reimbursed for approximately $6.7 million of costs under these agreements. The agreements included language that suggested Uniform Guidance applicability and that indicated the existence of a pass through/subrecipient relationship between the County and the local communities. Cause and Effect - The County provided funding to the communities via an intergovernmental agreement that included subrecipient language/provisions. Without further communication to the communities about the intended nature of the relationship, communities may improperly conclude they are subject to certain compliance requirements, including but not limited to incorrectly concluding that they are required to report expenditures incurred under the agreements on their schedule of expenditures of federal awards, which could further lead to those communities to incorrectly concluding that they are subject to the requirement to obtain a single audit and/or to incorrect major program determinations being made in conjunction with their single audit engagements. Recommendation - We recommend the County evaluate its controls to ensure the substance and form of each agreement. We further recommend the County evaluate whether additional guidance needs to be provided to recipients. Views of Responsible Officials and Planned Corrective Actions - Management does not agree with this finding. As noted in the Condition of this finding itself, the agreements in question are intergovernmental agreements , clearly labeled as such. They specifically state they are funding each project with SLFRF funds under the Revenue Replacement Category (Category 6.1). Section 4.01 states “Project Funds must be used for eligible activities for revenue replacement funds as described in the SLFRF final rules, regulations, and guidance.” As Management informed the auditor before auditor edited its preliminary finding to reflect this, “as described in the SLFRF final rules, regulations, and guidance” under 6.1 there are no subrecipients by definition as the County itself is the beneficiary. The County is being "made whole" for calculated revenue loss due to the pandemic under this category; therefore, once the funds are obligated and spent by the County the purpose has been satisfied. The entity receiving those funds would not have subrecipient obligations. FAQ 13.14 confirms this understanding. The communities enter into subrecipient agreements on an annual basis with the County and are very familiar with the format of such agreements. Those agreements always state clearly that they are subrecipient agreements in the title and the introductory paragraph. The communities also enter into intergovernmental agreements with the County on an annual basis. Therefore, they are aware that these two types of agreement are distinct. In this case the agreements are clearly labeled as intergovernmental agreements in the title and the introductory paragraph and there is no mention of subrecipient status in the body of the agreement. In fact, Section 4.05, Relationship of Parties, states “Relationship of the Community to the County is, and will continue to be, that of an independent contractor.” In the subrecipient agreements the County enters into with these communities on an annual basis this clause says the relationship is that of a subrecipient. Therefore, the agreement is clear on the relationship and the communities would know to consult the County if there is any question of compliance requirements. Any language requiring compliance with provisions applicable to subrecipients was paired with the qualifier "applicable." For example Article IX requires compliance with laws only “as applicable”. This is catch-all language and is good legal practice to include for contingencies. In this case, the program being a new federal program, the County intentionally included this catch-all language referencing compliance with 2 CFR 200 (Uniform Guidance) “as applicable” and required the community to “provide any disclosures required by law.” to allow itself the ability to enforce should the laws, rules, or regulations be interpreted in a certain manner to be applicable or even changed. This is based on experience with programs such as the Neighborhood Stabilization Program through HUD where such occurrences were noted. Consequently; the County believes it would actually be irresponsible not to include such language. As far as the recommendation of increased guidance to contracted communities, given the increased guidance available now the County has provided such guidance as needed. Auditor seems to indicate that the communities “may improperly conclude they are subject to certain compliance requirements, including but not limited to incorrectly concluding they are required to report expenditures incurred under the agreements on their schedule of expenditures of federal awards, which could further lead to those communities incorrectly concluding they are subject to the requirement to obtain a single audit and/or incorrect major program determinations being made in conjunction with their single audit engagements.” The finding is essentially noting that if these communities conclude that they have a subrecipient relationship and that the Uniform Guidance is applicable to them as subrecipients it is an improper conclusion. Given the wide availability of FAQs and guidance on this topic, Management agrees it would be an improper conclusion.

Categories

Subrecipient Monitoring Special Tests & Provisions HUD Housing Programs Material Weakness Reporting

Other Findings in this Audit

  • 394712 2023-010
    Material Weakness
  • 394713 2023-011
    Significant Deficiency
  • 394714 2023-012
    Material Weakness
  • 394715 2023-012
    Material Weakness
  • 394716 2023-012
    Material Weakness
  • 394717 2023-012
    Material Weakness
  • 394718 2023-012
    Material Weakness
  • 394719 2023-012
    Material Weakness
  • 394720 2023-012
    Material Weakness
  • 394721 2023-012
    Material Weakness
  • 394722 2023-012
    Material Weakness
  • 394723 2023-012
    Material Weakness
  • 394724 2023-012
    Material Weakness
  • 394725 2023-012
    Material Weakness
  • 394726 2023-012
    Material Weakness
  • 394727 2023-012
    Material Weakness
  • 394728 2023-013
    Material Weakness
  • 394729 2023-014
    Material Weakness Repeat
  • 394730 2023-014
    Material Weakness Repeat
  • 394731 2023-015
    Material Weakness Repeat
  • 394732 2023-015
    Material Weakness Repeat
  • 394733 2023-015
    Material Weakness Repeat
  • 394734 2023-015
    Material Weakness Repeat
  • 394735 2023-015
    Material Weakness Repeat
  • 394736 2023-015
    Material Weakness Repeat
  • 394737 2023-015
    Material Weakness Repeat
  • 394738 2023-015
    Material Weakness Repeat
  • 394739 2023-016
    Significant Deficiency
  • 394740 2023-016
    Significant Deficiency
  • 394741 2023-016
    Significant Deficiency
  • 394742 2023-016
    Significant Deficiency
  • 394743 2023-016
    Significant Deficiency
  • 394744 2023-016
    Significant Deficiency
  • 394745 2023-016
    Significant Deficiency
  • 394746 2023-016
    Significant Deficiency
  • 394747 2023-017
    Significant Deficiency
  • 971154 2023-010
    Material Weakness
  • 971155 2023-011
    Significant Deficiency
  • 971156 2023-012
    Material Weakness
  • 971157 2023-012
    Material Weakness
  • 971158 2023-012
    Material Weakness
  • 971159 2023-012
    Material Weakness
  • 971160 2023-012
    Material Weakness
  • 971161 2023-012
    Material Weakness
  • 971162 2023-012
    Material Weakness
  • 971163 2023-012
    Material Weakness
  • 971164 2023-012
    Material Weakness
  • 971165 2023-012
    Material Weakness
  • 971166 2023-012
    Material Weakness
  • 971167 2023-012
    Material Weakness
  • 971168 2023-012
    Material Weakness
  • 971169 2023-012
    Material Weakness
  • 971171 2023-014
    Material Weakness Repeat
  • 971172 2023-014
    Material Weakness Repeat
  • 971173 2023-015
    Material Weakness Repeat
  • 971174 2023-015
    Material Weakness Repeat
  • 971175 2023-015
    Material Weakness Repeat
  • 971176 2023-015
    Material Weakness Repeat
  • 971177 2023-015
    Material Weakness Repeat
  • 971178 2023-015
    Material Weakness Repeat
  • 971179 2023-015
    Material Weakness Repeat
  • 971180 2023-015
    Material Weakness Repeat
  • 971181 2023-016
    Significant Deficiency
  • 971182 2023-016
    Significant Deficiency
  • 971183 2023-016
    Significant Deficiency
  • 971184 2023-016
    Significant Deficiency
  • 971185 2023-016
    Significant Deficiency
  • 971186 2023-016
    Significant Deficiency
  • 971187 2023-016
    Significant Deficiency
  • 971188 2023-016
    Significant Deficiency
  • 971189 2023-017
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
21.023 Covid-19 - Emergency Rental Assistance Program $13.81M
93.323 Covid-19 - Epidemiology and Laboratory Capacity for Infectious Diseases (elc) $2.77M
14.218 Covid-19 - Community Development Block Grants/entitlement Grants $1.81M
93.224 Consolidated Health Centers (community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) $1.42M
93.045 Special Programs for the Aging_title Iii, Part C_nutrition Services $1.41M
14.231 Covid-19 - Emergency Solutions Grant Program $1.14M
66.469 Great Lakes Program $1.01M
21.027 Covid-19 Coronavirus State and Local Fiscal Recovery Funds $957,000
93.137 Covid-19 - Community Programs to Improve Minority Health Grant Program $947,779
14.228 Covid-19 - Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $862,345
93.268 Covid-19 - Immunization Cooperative Agreements $843,398
16.575 Crime Victim Assistance $834,082
93.658 Foster Care_title IV-E $741,000
93.053 Nutrition Services Incentive Program $654,605
93.563 Child Support Enforcement $648,004
14.218 Community Development Block Grants/entitlement Grants $508,760
93.870 Maternal, Infant and Early Childhood Home Visiting Grant $503,426
93.224 Covid-19 - Consolidated Health Centers (community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) $374,516
93.354 Covid-19 - Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response $332,125
93.268 Immunization Cooperative Agreements $321,880
16.590 Grants to Encourage Arrest Policies and Enforcement of Protection Orders Program $306,867
16.588 Violence Against Women Formula Grants $275,834
10.557 Special Supplemental Nutrition Program for Women, Infants, and Children $261,069
16.820 Postconviction Testing of Dna Evidence to Exonerate the Innocent $239,291
14.231 Emergency Solutions Grant Program $235,226
93.767 Children's Health Insurance Program $234,037
16.606 State Criminal Alien Assistance Program $184,035
93.889 National Bioterrorism Hospital Preparedness Program $145,701
93.940 Hiv Prevention Activities_health Department Based $144,819
20.205 Highway Planning and Construction $140,613
16.585 Drug Court Discretionary Grant Program $131,223
97.012 Boating Safety Financial Assistance $129,200
16.710 Public Safety Partnership and Community Policing Grants $128,323
97.067 Homeland Security Grant Program $80,844
97.042 Emergency Management Performance Grants $62,952
93.069 Public Health Emergency Preparedness $59,381
16.738 Edward Byrne Memorial Justice Assistance Grant Program $53,010
93.527 Affordable Care Act (aca) Grants for New and Expanded Services Under the Health Center Program $49,496
14.239 Covid-19 - Home Investment Partnerships Program $32,655
16.833 National Sexual Assault Kit Initiative $27,915
66.818 Brownfields Assessment and Cleanup Cooperative Agreements $26,720
16.034 Covid-19 Coronavirus Emergency Supplemental Funding Program $24,242
20.703 Interagency Hazardous Materials Public Sector Training and Planning Grants $23,997
14.239 Home Investment Partnerships Program $21,419
93.472 Title IV-E Prevention and Family Services and Programs (a) $19,458
16.554 National Criminal History Improvement Program (nchip) $18,695
93.778 Medical Assistance Program $16,670
93.116 Project Grants and Cooperative Agreements for Tuberculosis Control Programs $14,383
93.870 Covid-19 - Maternal, Infant and Early Childhood Home Visiting Grant $9,907
95.001 High Intensity Drug Trafficking Areas Program $8,232
93.323 Epidemiology and Laboratory Capacity for Infectious Diseases (elc) $7,764
93.994 Maternal and Child Health Services Block Grant to the States $239
66.468 Capitalization Grants for Drinking Water State Revolving Funds $231