audit_findings: 1

This data as json

rowid	source	report_number	finding_number	muni_id	state	entity_name	entity_type	entity_ext_id	place_geoid	match_method	auditor	report_title	audit_type	fiscal_year	period_start	period_end	published_date	finding_category	severity	questioned_cost	cost_basis	finding_title	finding_text	report_url	fetched_at
1	wa-sao	1017656	2015-001	4	WA	City of Seattle	City/Town	0433	5363000	geoid_place	Washington State Auditor's Office	Financial and Federal audit — City of Seattle	Financial and Federal	2015	2015-01-01	2015-12-31	2019-08-19	federal_award_compliance	material_weakness	928647.0	Questioned Cost Amount: $928,647	The City did not have adequate internal controls in place to ensure compliance with federal subrecipient monitoring requirements. CFDA Number and Title: 14.218 Community Development Block Grants/Entitlement Grants Federal Grantor Name: U. S. Department of Housing and Urban Development Federal Award/Contract Number: B10MC530005, B11MC530005, B12MC530005, B13MC530005, B14MC530005, B15MC530005 Pass-t	Description of Condition The objective of the Community Development Block Grant program is to develop viable urban communities by providing decent housing, a suitable living environment, and expanding economic opportunities, principally for persons of low and moderate income. The City of Seattle spent $11.6 million in grant funds from the U. S. Department of Housing and Urban Development. The City’s Human Service Department passed on $3.8 million to five subrecipients during 2015 to provide homeless assistance to City’s residents. Federal regulations require the City to perform risk evaluations to evaluate subrecipients’ risk of noncompliance to determine the appropriate level of monitoring. It also requires the City to monitor the subrecipients’ activities to ensure that the subawards are used for authorized purposes which can be accomplished by either requiring subrecipient invoices to contain supporting documentation or reviewing supporting documentation during on -site visits. That monitoring, particularly the on -site visit s, is important to ensure that the subrecipients’ administration of programs are appropriate and in compliance with applicable requirements, including those related to allowable and supported costs. Washington State Auditor’s Office Page 10 The City requires the subrecipients to submit detailed general ledger reports as part of the request for payment and has a policy for semi-annual on-site visits to review documentation included in the report to ensure the costs are allowable and supported. The City’s process for subrecipient monitoring is not working as intended. During our audit, we found:  The Human Service Department did not perform risk assessments for the three subrecipients we selected for review.  For two of the three subrecipients reviewed, the Human Service Department did not obtain supporting documentation with the requests for payment, nor did they perform on-site visits, where a review of documentation to support the costs reimbursed would have been done. We consider these deficiencies in internal controls to be significant deficiencies. Cause of Condition The Departments were not aware that risk evaluations are required for all subrecipients receiving money from federal awards. The Grants and Contracts Specialists who are responsible for approving subrecipient payments and performi ng on -site visits did not have the necessary training and resources to perform adequate reviews. Effect of Condition and Questioned Costs Without adequate internal controls in place, the Department cannot ensure that the subrecipients used the program fu nds in accordance with the grant agreement and federal requirements. The Human Service Department paid $928,647 to two subrecipients without performing on-site visits or requiring adequate supporting documentation for costs incurred. As a result, we are questioning the total amount paid to these subrecipients. Recommendation We recommend that the Departments establish internal controls to ensure compliance with the subrecipient monitoring requirements including:  Conduct a risk assessment to evaluate each subrecipient's risk of noncompliance for purposes of determining the appropriate monitoring activities. Washington State Auditor’s Office Page 11  Provide training to program specialists to ensure they have an adequate understanding of federal subrecipient monitoring requirements and Department policies.  Require subrecipients to provide adequate documentation to support the costs incurred or perform on -site visits that includes a review of source documentation. City’s Response The City understands the Auditor’s concerns regarding inadequate internal controls in place and is taking immediate and long -term corrective actions to ensure compliance with federal subrecipient monitoring requirements going forward. Auditor’s Remarks We thank the City for its assistance during the audit and will follow up on corrective actions taken during the next audit. Applicable Laws and Regulations The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, as follows: .11 For purposes of adapting GAAS to a compliance audit, the following terms have the meanings attributed as follows: . . . Deficiency in internal control over compliance. A deficiency in internal control over compliance exists w hen the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. A deficiency in design exists when (a) a control necessary to meet the control objective is missing, or (b) an existing control is not properly designed so that, even if the control operates as designed, the control objective would not be met. A deficiency in operation exists when a pr operly designed control does not operate as designed or the person performing the control does not possess the necessary authority or competence to perform the control effectively. . . Washington State Auditor’s Office Page 12 Material weakness in internal control over compliance. A deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a compliance requirement will not be prevented, or detected and corrected, on a timely basis. In this section, a reasonable possibility exists when the likelihood of the event is either reasonably possible or probable as defined as follows: Reasonably possible. The chance of the future event or events occurring is more than remote but less than likely. Remote. The c hance of the future event or events occurring is slight. Probable. The future event or events are likely to occur. Significant deficiency in internal control over compliance. A deficiency, or a combination of deficiencies, in internal control over compliance that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Title 2 Code of Federal Regulations Section 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal 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). (b) Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards. Washington State Auditor’s Office Page 13 Title 2 Code of Federal Regulations Subpart D Post Federal Award Requirements Section 200.331 Requirements for pass-through entities states in part: All pass-through entities must: (b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F—Audit Requirements of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are a chieved. Pass -through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all de ficiencies pertaining to the Federal award provided to the subrecipient from the pass -through entity detected through audits, on-site reviews, and other means. Washington State Auditor’s Office Page 14 (3) Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521 Management decision. (e) Depending upon the pass -through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), the following monitoring tools may be useful for the pass -through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: (1) Providing subrecipients with training and technical assistance on program-related matters; and (2) Performing on -site reviews of the subrecipient's program operations; (3) Arranging for agreed-upon-procedures engagements as described in §200.425 Audit services. (f) Verify that every subrecipient is audited as required by Subpart F —Audit Requirements of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501 Audit requirements. (g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass -through entity's own records. (h) Consider taking enforcement action against noncompliant subrecipients as described in §200.338 Remedies for noncompliance of this part and in program regulations. Washington State Auditor’s Office Page 15 Title 2 Code of Federal Regulations Subpart E Cost Principles Sections 200.400 through 200.403 General Provisions and Basic Considerations states in part: §200.400 Policy guide. The application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non -Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. (d) The application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non -Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles, and must provide for adequate documentation to support costs charged to the Federal award. §200.402 Composition of costs. Total cost. The total cost of a Federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits. Washington State Auditor’s Office Page 16 §200.403 Factors affecting allowability of costs. Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth i n these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally -financed and other activities of the non-Federal entity. (d) Be accorded consistent treatm ent. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (g) Be adequately documented. See also §§200.300 Statutory and national policy requirements through 200.309 Period of performance of this part. Washington State Auditor’s Office Page 17	https://portal.sao.wa.gov/ReportSearch/Home/ViewReportFile?arn=1017656&isFinding=false&sp=false	2026-07-30 13:24:54