Finding Text
Program: Coronavirus State and Local Fiscal Recovery Funds
ALN #: 21.027
Federal Agency: U.S. Department of Treasury
Federal Award Number: NA
Award Year: July 1, 2022–June 30, 2023
Subrecipient Monitoring
Type of finding: Material weakness and noncompliance
Prior-year finding: Yes
Statistically valid sample: No
Criteria
The 2 CFR sections 200.332(d) through (f) provide the principles to be applied to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals. According to 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Condition
The City does not have properly designed controls and documented procedures in place to ensure compliance with the following requirements:
• Each subrecipients risk of noncompliance is appropriately evaluated.
• Verification that subrecipients are audited as required when they are expected to exceed the threshold for having a single audit.
During our audit, we noted that audited financial statements were obtained for the four subrecipients selected for testing, but there was no documentation to evidence the nature and extent of the City’s review of the audit reports obtained. Additionally, a documented risk assessment was not performed by the City over the four subrecipients selected for testing prior to entering into a contract.
Cause
The City requires that audited financial statements are obtained for subrecipients, but there is no checklist or formal documentation required to indicate what should be reviewed when reviewing the audit reports to ensure compliance with subrecipient monitoring requirements. Additionally, the City requires a risk assessment be completed over each subrecipient. However, due to time constraints, a risk assessment was not completed or documented.
Effect
Lack of effective controls and written policies and procedures over subrecipient monitoring could result in the City’s noncompliance with program requirements.
Questioned Costs
None
Recommendation
We recommend the City establish a checklist or formal documentation requirements for both risk assessments and review of single audit report procedures. Employees can complete these checklists when obtaining subrecipient audit reports to ensure required monitoring procedures are performed and well documented.
Views of Responsible Officials and Corrective Actions
The City will use a subrecipient audit certification form and a subrecipient risk assessment questionnaire to evaluate a subrecipient's risk/experience with federal funds as well as assess their federal funding threshold for having a single audit.
Implementation Date
FY25 Contracts (7/1/2024)
Responsible Officials
Michele Kincaid, Assistant Finance Director, and Sharon Pu, Grants Management