Audit 408314

Criteria – The U.S. Code of Federal Regulations at Title 2, Subtitle A, Chapter II, Part 200, Subpart D, Section 200.305(b) explains that federal award recipients and subrecipients must minimize the time elapsing between the transfer of federal funds and their actual disbursement. The regulations do not define “minimize the time elapsing” but the period is commonly considered by oversight agencies to be for immediate cash needs to be disbursed within three business days of the federal awardee’s receipt. Condition – Our audit procedures identified that the Sangamon Valley Public Water District (the District) drew down and received $1,203,229 federal loan cash on December 19, 2025 before making corresponding vendor payments on January 30, 2026 ($1,059,163) and February 10, 2026 ($144,066), leading to idle federal funds in the District’s bank accounts for over a month. Cause of Condition – The cause was identified as an administrative delay in processing vendor payments and inadequate secondary review to ensure prompt disbursement of cash from a federally funded loan. Effects of Conditions – By holding unspent federal funds, the District violated cash management compliance requirements. This increases the risk of fraud or improper use of federal funds, as well as potential interest liabilities and program restrictions imposed by the federal agency or pass-through entity. This finding has caused a qualified opinion on the District’s compliance with its major federal program requirements. Questioned Costs – None noted. Perspective Information – There were three federally funded loan draws in 2025 totaling $1,656,722. One draw was tested for $1,210,372, which consisted of three vendor invoices for the funded project. One invoice for $7,143 was paid prior to the loan draw. The other two invoices totaling $1,203,229 were paid over one month after the draw and cash receipt date of December 19, 2025. Identification of Repeat Finding – This finding does not repeat a prior finding. Recommendations - 1. Strengthen written cash management policies and procedures to require that cash drawdowns are requested as close as administratively feasible to actual cash outlays (e.g., cash outlays are within a few days of the cash drawdown receipt). 2. Establish formal monitoring procedures over cash management activities, including tracking the timing of federal fund receipts and related disbursements, performing periodic reviews of outstanding contractor invoices, and implementing follow-up procedures to ensure payments are made timely. Views of Responsible Officials - Management of the District will take measures to ensure compliance with the finding noted above.