Audit 412905

Significant Deficiency in Internal Control and Compliance over Major Programs Funding Agency: Department of Defense ALN: 12.002 Criteria Per 2 CFR 200.305(b)(3), pass-through entities must reimburse their subrecipients within 30 calendar days after receipt of the payment request, unless they have reasonable belief that the request is improper. Condition During our testing of subrecipient reimbursement requests, we noted that the Organization did not consistently process and remit payments to subrecipients in a timely manner. Of the 7 reimbursement requests tested, 2 were paid 48 days after receipt of properly documented reimbursement requests and approval for payment from the subrecipients. These delays exceeded the Organization’s expected processing timeframe and resulted in federal funds not being provided to subrecipients in a manner that minimized the time between reimbursement request and issuing payment. Questioned costs Not determinable. Cause The Organization’s internal controls over cash management were not adequately designed to mitigate the time elapsed between subrecipient’s reimbursement requests, and processing the reimbursement for payment. The Organization experienced a delay in payments from its federal awarding agencies, that subsequently affected its ability to reimburse its subrecipients. Effect The Organization’s failure to make timely payments to subrecipients resulted in noncompliance with 2 CFR 200.305(b)(3). Delayed reimbursement may require subrecipients to use their own resources to support federally funded activities and increases the risk that federal funds are not administered in accordance with federal cash management requirements. Repeat Finding No. Recommendation We recommend the Organization strengthen internal controls over cash management by establishing formal payment processing timelines, implementing monitoring procedures to track outstanding reimbursement requests, and conducting supervisory reviews to ensure subrecipient payments are made promptly.