Audit 389284

Finding: 2024‐002 Cash Management - Significant Deficiency in Internal Control and Noncompliance Criteria: Uniform Guidance requires the auditee on the reimbursement method to incur expenditures prior to the date of the reimbursement request. Condition: For the year ended May 31, 2024, there were 2 of 6 selected drawdowns made in relation to federal award expenditures for the Research & Development (R&D) cluster, including ALNs 47.076, 12.420, and 12.300, in which management erroneously drew down prior to the expenses being incurred. Cause: The University’s control environment over cash management and review did not include sufficient procedures to identify expenditures within the R&D cluster that had not yet been incurred, as required by Uniform Guidance and the Office of Management and Budget (OMB) Compliance Supplement. Effect and Perspective: The premature draw down of federal awards in 2 of the 6 selected from the 17 total draw downs resulted in noncompliance, at the time of the draw downs. All underlying expenditures were appropriately included in the SEFA and the financial statements; however, the draw down for expenses prior to being incurred is considered a questioned cost and an instance of noncompliance. By the end of the fiscal year, May 31, 2024, the timing differences related to when expenses were incurred and when funds were drawn down was fully resolved. Questioned costs: $83,375. The expenses drawn down prematurely, were offset in subsequent quarters. However, as funds were only drawn down on a quarterly basis, the initial advance drawdown was inconsistent with compliance requirements. Lastly, by the audit period ending May 31, 2024, total life-to-date expenses were $513,529, while total cash drawn down was $470,530, indicating the grant was underdrawn as of May 31, 2024 by $42,999. Recommendation: We recommend that management strengthen internal controls over the review of draw down requests, specifically ensuring expenditures are incurred prior to the draw down request in accordance with Uniform Guidance and the OMB Compliance Supplement. Management should consider implementing enhanced management review controls to ensure expenditures are incurred prior to the associated draw down requests. View of Responsible Official and Planned Corrective Action: See Corrective Action Plan.