In early August, the State Auditor’s Office (SAO) released a report outlining how state agencies did spending $37 billion of federal funds including COVID-19 relief funds in 2021.

The 2021 Single Audit was the first review of an entire year covering how state agencies spent COVID-19 funding. In total, the Auditor issued 61 findings across 21 federal programs. Additionally, the Auditor is questioning more than $1 billion in COVID-19 state agency expenses. Key findings from the report include:

• Significant problems with how state agencies monitored the COVID-19 relief funding and other federal money they awarded to other organizations.
• State agencies lacked safeguards to ensure they spent federal money only for allowable purposes and properly document their expenses.

The full report is more than 1,000 pages long and is available on the Auditor’s website. A summary of the report is available here.

This report is a good reminder for cities that despite increased flexibility with federal funding distributed under the American Rescue Plan Act (ARPA), it is critical to maintain proper internal controls and safeguards as well as strict sub-recipient or sub-contractor monitoring. In 2021, several cities were issued findings by the Auditor for issues related to sub-recipient monitoring under the CARES Act. The Auditor’s Office has a few articles that may be helpful to cities as they establish contracts with sub-recipients using federal funds:

• Sharing your federal money with other agencies? Do your homework first
• Lack of subrecipient monitoring is leading to an increase in audit issues. Learn what you can do today