The Federal Funds Office Did Not Initiate Its Formal Remediation Process for Municipalities That Had Desk Review Findings.

A&F could not provide us with evidence that it conducted meetings with any of the municipalities from our sample of 20 desk reviews that had findings.

Overview

FFO did not initiate a formal remediation process with municipalities that had findings from a desk review. A&F could not provide us with evidence that it conducted meetings with any of the municipalities from our sample of 20 desk reviews that had findings.

If FFO does not conduct meetings with municipalities to discuss desk review findings related to CvRF compliance, then there is a higher-than-acceptable risk that those municipalities may not understand, and subsequently may not be able to employ, FFO’s recommendations, which include enhanced policies and procedures.

Authoritative Guidance

According to the “Eligibility Review” section of FFO’s “Compliance with COVID-19 Federal Funding” policy, “If there are findings on compliance with CvRF, the FFO team will initiate a formal remediation process to ensure enhanced policies and procedures are incorporated moving forward and recommend compliance best practices.”

Section II(b) of FFO’s “Desk Review Process for Coronavirus Relief Fund” document states, “FFO will engage the entity in meetings to discuss expenditure in more detail and clearly articulate documentation needed to make a final determination.” This final determination may include removing the expenditure from the grant if significant findings are revealed during the desk review process.

Reasons for Issue

When we met with FFO officials, they told us that they only conducted meetings with municipalities that they identified as having desk review findings related to CvRF compliance and that they did not meet with municipalities that had desk review findings unrelated to CvRF compliance. However, for municipalities in our sample that FFO identified as having desk review findings related to CvRF compliance, FFO did not provide any evidence that it conducted any meetings with these municipalities following a desk review.

Recommendations

1. FFO should conduct meetings with every municipality that has desk review findings.
2. FFO should, as part of its formal remediation process, develop and document guidelines for conducting meetings with any municipality that has desk review findings.

Auditee’s Response

While FFO did not have a documented formal remediation process, there was follow up conducted following findings in desk audits and there was an internal process in which FFO engaged in an interactive process with municipalities when a finding arose in the desk audit. During the course of the SAO audit, FFO provided backup documentation illustrating the remediation steps taken to address issues that arose during desk reviews, including references to and descriptions of these interactions with municipalities. The following documents were provided in response to this:

• Memorandum dated November 12, 2020, from [the] Secretary of Administration and Finance, to Chief Executives of Massachusetts Cities and Towns related to [the Coronavirus Aid, Relief, and Economic Security] Act Coronavirus Relief Fund – Desk Reviews
• Table depicts Desk Review groupings for each municipality
• Memorandum dated April 5, 2021, from [the Executive Office for Administration and Finance (ANF)]-FFO to Interested Parties regarding the Coronavirus Relief Fund Desk Review Processes
• Memorandum dated February 2022 from [an official from] ANF-FFO Compliance Counsel and Accenture [limited liability partnership] regarding the Desk Review Process for Coronavirus Relief Fund
• Table of ANF-FFO Desk Review findings by municipality

FFO also offered to make additional documentation, including email correspondence, available during the course of the audit to be responsive to this request. As part of the review process, FFO collected quarterly reports from each municipality to identify expenditures, assess eligibility for the CvRF Municipal Program, and to report to the U.S. Treasury. For all expenditures across all municipalities, FFO reviewed expense detail and descriptions for reasonableness and requested further information where necessary and did engage with the municipality as described above.

Since the timing of this audit, the CvRF Municipal Program has closed. As part of the closing process, FFO reviewed whether there were any ongoing responsibilities for FFO to continue in the practice of follow-on subrecipient monitoring. Sub-recipient monitoring in required by [Section 200.332 of Title 2 of the Code of Federal Regulations (CFR)] which applied to these funds as noted in Treasury’s [CFR] guidance. Per 2 CFR 200, these obligations only apply in years in which funds are expended by the non-federal entity. To appropriately apply these requirements, FFO consulted with the Commonwealth’s external auditor. . . . In this meeting, FFO was informed that post award close-out, we should not be monitoring subrecipients who had not expended funds in the fiscal year. Further, FFO performed comprehensive programmatic closing efforts, in accordance with US Treasury guidance, to close and report the CvRF Municipal Program. Accordingly, while FFO agrees that if continued monitoring had been needed, we would implement formal remediation processes which included meetings, that recommendation is not applicable to the current status of the program. However, should a similar program be implemented in the future, FFO will be sure to establish policies that ensure that remediation processes are properly documented and followed.

Auditor’s Reply

In its response, FFO lists documents it provided to us that it describes as “illustrating the remediation steps taken to address issues that arose during desk reviews, including references to and descriptions of these interactions with municipalities.” However, while these listed documents were provided to us for background information regarding FFO’s desk review process (including what FFO’s procedures should be), they are not evidence confirming the remediation steps that FFO actually took regarding its desk reviews. In addition, one of the listed documents includes FFO’s procedure for meeting with municipalities to discuss desk review findings. As stated in the “Authoritative Guidance” section for Finding 2, this procedure states, “FFO will engage the entity in meetings to discuss expenditure in more detail and clearly articulate documentation needed to make a final determination.” As such, FFO did not provide any evidence that it conducted any meetings with municipalities that had findings resulting from desk reviews.

FFO also discusses the subrecipient monitoring required by Section 200.332 of Title 2 of the Code of Federal Regulations and states, “Per 2 CFR 200, these obligations only apply in years in which funds are expended by the non-federal entity [in this case, municipalities].” However, Section 200.332(d)(2) of Title 2 of the Code of Federal Regulations requires that pass-through entities,³ such as FFO, follow up with subrecipients regarding all findings pertaining to federal awards. It specifically states,

Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and written confirmation from the subrecipient, highlighting the status of actions planned or taken to address Single Audit findings related to the particular subaward.

In its response, FFO states, “Post award close-out, we should not be monitoring subrecipients who had not expended funds in the fiscal year.” However, FFO’s own policies required that it conducts meetings with municipalities that had findings from desk reviews, and FFO did not provide evidence that it conducted these meetings.

We strongly encourage FFO to implement our recommendations, which are as follows: (1) FFO should conduct meetings with any municipality that has desk review findings and (2) FFO should, as part of its formal remediation process, develop and document guidelines for conducting meetings with any municipality that has desk review findings. As part of our post-audit review process, we will be following up on this issue in the near future. 

3.   According to Section 200.1 of Title 2 of the Code of Federal Regulations, a pass-through entity is “a non-Federal entity that provides a subaward to a subrecipient to carry out part of a Federal program.”

Date published:	May 29, 2024