Walla Walla County
January 1, 2022 through December 31, 2022
2022-001 The County had inadequate controls for ensuring compliance with federal subrecipient monitoring requirements.
Assistance Listing Number and Title: 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds
Federal Grantor Name: U.S. Department of Treasury
Federal Award/Contract Number: 1505-0271
Pass-through Entity Name: Washington State Department of Commerce
Pass-through Award/Contract Number: 21-4619C-129
Known Questioned Cost Amount: $0
Prior Year Audit Finding: Yes, Finding 2021-005
Description of Condition
The purpose of Coronavirus State and Local Fiscal Recovery Funds (SLFRF) is to provide direct payment to states, U.S. territories, tribal governments, metropolitan cities, counties and non-entitlement units of local government through states.
The County received an award from the Washington State Department of Commerce for its Eviction Rent Assistance Program (ERAP) 2.0, funded by SLFRF. ERAP is intended to prevent evictions that would contribute to the spread of COVID-19 by paying past due, current due and future rent to those with the greatest needs while distributing funds equitably. During fiscal year 2022, the County spent $6,534,010 of its ERAP award from Commerce. Of this amount, the County passed through $2,854,117 to one subrecipient to administer the program.
Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls.
When the County passes federal funding onto subrecipients, federal regulations require the County to monitor subrecipients to ensure they comply with the terms and conditions of the federal award. For awards dependent on household eligibility, monitoring would include verifying the subrecipients only assisted households that met program eligibility requirements. The amount of verification would depend on each subrecipient’s noncompliance risk.
Our audit found the County did not monitor its subrecipient as federal regulations require. Specifically, the County did not obtain documentation from the subrecipient to ensure the assisted households were eligible.
We consider this internal controls deficiency to be a material weakness that led to material noncompliance.
Cause of Condition
After receiving the finding in the prior audit, the County began changing its controls. However, monitoring was not performed to ensure assisted households were eligible and thus the County did not comply with federal regulations.
Effect of Condition
The County did not monitor the subrecipient to ensure it complied with the terms and conditions of the subaward and appropriately used federal program funds. Since the County did not monitor its subrecipient, it was unable to confirm only eligible households received assistance.
Recommendation
We recommend the County monitor its subrecipients to ensure they comply with the terms and conditions of their federal subawards, including providing funds only to eligible program households.
County’s Response
We appreciate the auditor's assessment, analysis, and recommendations. However, we disagree with the conclusion reached and the finding. The auditor, during oral conversation discussing context, indicated the quantity of program beneficiaries reviewed for eligibility did not reach the auditor's expected quantity for adequate monitoring. As a management team, we assessed risk and determined the level of appropriate monitoring to consist of: 1) financial monitoring through review of reimbursement requests, which contained eligibility information necessary for oversight; 2) execution of regularly scheduled status and reporting meetings wherein we obtained ongoing programmatic data; and 3) review of audit reports, where applicable. We note neither our award agreement nor applicable federal regulations require a specific quantity of files to be reviewed as part of subrecipient monitoring. Accordingly, we do not concur with the presence of a finding. In addition, no instances of ineligible beneficiaries were identified by the auditor such that a material weakness classification does not appear reasonable or appropriate.
That being said, we will assess our procedures and add greater clarity to help better tell this story going forward. We will also consider whether testing a specific number of beneficiaries is necessary and may be conducted efficiently.
Auditor’s Remarks
We reaffirm our audit finding. Our work is performed in accordance with federal regulations and governmental auditing standards. We will review the correction action taken during our next regular audit.
Applicable Laws and Regulations
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings.
Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements.
Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass through entities, establishes the requirements for subrecipient monitoring and management requirements for pass-through entities.
The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.