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Accept the Auditor-Controller’s Internal Audit Division’s Internal Control Review of American Rescue Plan Act (ARPA) Subrecipient Contract Monitoring for contracts as of November 27, 2023
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Published Notice Required? Yes ____ No _X _
Public Hearing Required? Yes ____ No _X _
DEPARTMENTAL RECOMMENDATION:
The Auditor-Controller’s Office (ACO) recommends the Board of Supervisors accept the Internal Control Review of ARPA Subrecipient Contract Monitoring for contracts as of November 27, 2023.
SUMMARY:
In accordance with the ACO Internal Audit Division’s FY2023/24 Audit Plan, the ACO completed the internal control review of ARPA subrecipient contract monitoring. The review was conducted in conformance with the International Standards for the Professional Practice of Internal Auditing as developed by the Institute of Internal Auditors.
The objective of the review was to determine compliance with County policies and federal requirements for subrecipient monitoring of contracts funded with State and Local Fiscal Recovery Funds (SLFRF). The County had 46 contracts using SLFRF funds as of November 27, 2023.
The review identified the following two areas needing improvement:
1. Risk assessments were not documented for 2 of 30 subrecipient contracts.
2. Required information about the subaward was not included in 6 of the 30 contracts.
In any system of internal controls inherent limitations exist which may result in errors or irregularities occurring and not being detected. Limitations may include, but are not limited to, resource constraints, management override, and circumvention of internal controls by collusion. Accordingly, the review would not necessarily identify and disclose all weaknesses.
FINANCIAL IMPACT:
The acceptance of the report has no financial impact.
DISCUSSION:
The ACO reviewed County policy and federal requirements for subrecipient agreements. The ACO obtained a list of the County’s contracts using SLFRF funds as of November 27, 2023. There were 46 contracts using SLFRF funds.
Chapter 2 Section 200 of the Code of Federal Regulations (2 CFR 200) requires analysis to determine which contracts constitute a subrecipient relationship. Also, 2 CFR 200 also requires the County to assess the risk of noncompliance by the subrecipient and to conduct monitoring activities appropriate for each subrecipient based on the assessed level of risk.
The ACO confirmed a subrecipient determination was completed for each of the 46 contracts using SLFRF funds. Thirty (30) of the 46 contracts were determined to be subrecipient contracts.
Documentation of a risk assessment was available for 28 of the 30 contracts with subrecipients, leaving two (2) without a documented risk assessment. The two identified exceptions were contracts for other governmental agencies and as such initially determined to be low risk. Per management, the procedures were modified to require risk assessments for all contracts including other governmental agencies.
Twenty-four (24) of the 30 subrecipient contracts included the required federal award information, leaving six (6) without the required information. Management inadvertently excluded specific required language in a limited number of initial subaward contracts. Per management, the contract language has been modified to include the required subaward language per the Code of Federal Regulations.
The 30 contracts are assigned to four (4) contract managers for oversight. The ACO interviewed each contract manager about their monitoring practices and confirmed documentation of monitoring activities was available for a sample of five (5) contracts. An additional five (5) contracts had not begun work. In those cases, the ACO confirmed the contract manager had a plan in place to document monitoring activities.
The review determined subrecipient determinations were documented and identified opportunities to improve the documentation of risk assessments and subaward information within the contracts.
ALTERNATIVES:
The Board of Supervisors could elect not to accept the report. This alternative is not consistent with sound public policy and is therefore not recommended.
OTHER AGENCY INVOLVEMENT:
The County Administrator has reviewed and accepted the report. Management’s responses have also been included in the report.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION