City of FifeLocal Government

SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Fife January 1, 2020 through December 31, 2020 2020-001 The City lacked adequate internal controls for ensuring compliance with federal requirements for subrecipient monitoring. CFDA Number and Title: 21.019 ? COVID-19 ? Coronavirus Relief Fund Federal Grantor Name: U.S. Department of the Treasury Federal Award/Contract Number: N/A Pass-through Entity Name: Washington State Department of Commerce Pass-through Award/Contract Number: 20-6541C-182 Questioned Cost Amount: $0 Background The purpose of the Coronavirus Relief Fund program is to provide funding to state, territorial, tribal and certain eligible local governments to cover necessary expenditures incurred because of the COVID-19 pandemic. During fiscal year 2020, the City spent $551,737 in program funds, which included $91,404 passed through to a subrecipient to fulfill components of the program?s objectives. The portion of program funds the City passed through to the subrecipient provided emergency rental assistance to households financially affected by COVID-19. 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 City passes on federal funds to subrecipients, federal regulations require the City to ensure every subaward agreement clearly identifies if it is a federal award and includes the applicable federal requirements. Further, the City must evaluate each subrecipient?s risk of noncompliance with federal requirements to determine the appropriate amount and type of subrecipient monitoring. Subrecipient monitoring requirements include ensuring compliance with program requirements. Description of Condition The City contracted with a local nonprofit organization to administer the housing assistance program. The nonprofit determined which households were eligible to receive funds and used program funds to provide emergency rental assistance to households affected by COVID-19. The nonprofit is considered a subrecipient because determining household eligibility is carrying out part of the program?s objectives on the City?s behalf. However, the City incorrectly determined the nonprofit was a contractor and, as a result, did not follow subrecipient monitoring requirements. Specifically, the contract with the nonprofit did not clearly identify it was a subaward and did not include other information required for federal awards. Additionally, the City did not perform a risk assessment and did not have documentation showing it monitored the nonprofit for program compliance. We consider these deficiencies in internal controls to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The City received the new Coronavirus Relief Fund program funds while trying to react quickly to the COVID-19 pandemic. The City was unaware of the Washington State Department of Commerce?s guidance that clarified the distinctions between contractor, subrecipient, and beneficiary relationships for this program. As a result, the City incorrectly determined the nonprofit was a contractor rather than a subrecipient. Effect of Condition and Questioned Costs When contracts do not indicate they are federal subawards and do not include the required information, subrecipients are at an increased risk of not knowing the award comes from a federal program. This also increases the risk subrecipients would not know they need to comply with specific program requirements, which could lead to spending funds for unallowable purposes. Without performing risk assessments and monitoring subrecipients, the City cannot ensure it is performing the proper level of monitoring. Additionally, the City cannot demonstrate it is ensuring subrecipients are complying with program requirements. The subrecipient provided the City with documentation related to the households that received assistance and the support it used to determine their eligibility. However, the City could not demonstrate it had performed any detailed review of the information the subrecipient submitted. As a result, the City cannot determine if the payments went to eligible households. Recommendation We recommend the City: ? Review available guidance and consult with its awarding agency to ensure it correctly classifies parties it plans to contract with as subrecipients or contractors ? Clearly identify all subawards as federal awards and include all the required elements in the subaward agreements ? Performs risk assessments of subrecipients and monitor them accordingly City?s Response The City of Fife is committed to making the necessary improvements to ensure compliance with federal program requirements. To direct the most assistance to those financially impacted by the pandemic, the city council choose to use a portion of the city?s allotted CARES funds to provide rental assistance to renters within the City. The City had previously administered a Cares Act Fund utility assistance program on our own and found that it took a lot of staff time and was not efficient. Given the urgent need and compressed time to distribute the CARES Act funds to those most impacted by the pandemic, the City reached out to two neighboring cities to determine what they were doing in terms of rental assistance. In doing so, the City discovered that non-profit Living Assess Support Alliance (LASA) LASA had already administered similar CARES Act Rental Assistance Programs for two other cities in Pierce County. Our legal department drafted a services agreement like one used by another city for LASA to administer Fife?s COVID-19 Rental Assistance Program. The City did not identify LASA as a subrecipient, and thus did not perform the risk assessment and monitoring required of subrecipients. In the future, the City will improve and establish proper internal controls and oversight to ensure proper subrecipient monitoring, risk assessment, and contract compliance. The City appreciates the time and effort the State Auditor?s Office put forth while conducting the audit and working with staff to ensure the City us compliant with all federal rules, laws, and regulations. Auditor?s Remarks We thank the City for its assistance throughout the audit and the steps it is taking to address these issues. The City?s corrective action will be reviewed during our next 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 subrecipient monitoring and management requirements for pass through entities. Title 2 CFR Part 200, Uniform Guidance, section 331, Subrecipient and contractor determinations, establishes the requirements for pass through entities to make case-by-case determinations whether the agreement it makes for the disbursement of federal program funds casts the party receiving the funds in the role of a subrecipient or contractor and provides characteristics of the relationships. Title 2 CFR Part 200, Uniform Guidance, section 332, Requirements for pass-through entities, establishes 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.