Audit 402108

Significant Deficiency, Nonmaterial Non-Compliance North Carolina Department of Public Safety Program name: Community Development Block Grant/State’s Program and Non-Entitlement Grants in Hawaii (CDBG) AL Number: 14.228 Grant Number: 21-C-4010(NR) Criteria: In accordance with 2 CFR 200.305, the Town is required to maintain an adequate system of internal controls to ensure compliance with cash management requirements. Management must minimize the time elapsing between the transfer of funds form the agency and the disbursement of those funds by the recipient. Condition: The Town did not have adequate internal controls in place to ensure cash management compliance requirements. Our testing identified that reimbursement request #4 was drawn down and received in August; however, the related disbursement to the vendor was not made until September. As a result, fund were not disbursed within the required three-day timeframe. Context: Of the 43 expenditures totaling $755,482, we tested 24 transactions (19 ISI valued at $666,643 and five additional valued at $33,628) We noted that one transaction, valued at $6,563, did not meet the cash management requirements. Effect: The lack of effective internal controls over cash management increases the risk that errors to irregularities may occur and go undetected and may result in non-compliance with the grant requirements. Cause: This condition occurred because the Town did not disburse funds to the vendor within three business days of receipt. Questioned Costs: In accordance with 2 CFR 200, auditors are required to report known questioned costs when likely questioned costs exceed $25,000. Likely questioned costs do not exceed $25,000. Recommendation: Management should strengthen the internal controls over cash management of grant funds to ensure that the requirements are met. Views of Responsible Officials and Planned Corrective Action: The Town agrees with this finding. Please refer to the Corrective Action Plan section of this report. 106