2025-001 The District did not have adequate internal controls for ensuring compliance with federal cash management requirements. Assistance Listing Number and Title: 15.517 – Fish and Wildlife Coordination Act Federal Grantor Name: U.S. Department of the Interior Federal Award/Contract Number: N/A Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: N/A Prior Year Audit Finding: N/A Background The objective of the Fish and Wildlife Coordination Act is to provide financial assistance, through grants or cooperative agreements, to public or private organizations for the improvement of fish and wildlife habitat associated with water systems or water supplies affected by Bureau of Reclamation projects. During fiscal year 2025, the District spent $9,877,712 in Fish and Wildlife Coordination Act program funds. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The District’s grant agreement allowed it to receive award funds as cash advances or reimbursements for allowable program costs. For cash advances, federal regulations and the grant agreement require recipients to: • Maintain written procedures that minimize the time between receiving federal funds from the grantor and disbursing them to contractors providing goods and services • Limit its cash advance requests to its immediate needs and disburse the award funding as soon as possible after it is received • Track interest earned on cash advances and remit interest earnings exceeding $500 to the Department of Health and Human Services Payment Management System Description of Condition Our audit found the District did not have adequate internal controls for ensuring compliance with federal cash advance requirements. Specifically, the District did not have written cash advance procedures and, although the District tracked interest on cash advances, it did not remit interest earned that was more than $500 to the grantor as required. We consider this internal control deficiency to be a significant deficiency. Cause of Condition District staff were unaware of the federal cash advance requirements and did not know they needed written cash advance procedures. Although staff tracked and calculated interest earned on cash advances, they were unaware that they needed to remit interest more than $500 to the grantor. Effect of Condition Without written policies and procedures that conform to federal cash advance standards, the District is at an increased risk of not complying with cash advance requirements when using federal funds. The District received cash advances totaling $6,283,096 in 2025, resulting in $4,482 of interest earned. The District did not remit $3,982 in interest earrings to the federal government as required. The District subsequently returned the excess interest during the audit. Recommendation We recommend the District: • Establish and maintain written policies and procedures for cash advances that ensure it minimizes the time between receiving and disbursing federal funds, tracks interest earned on cash advances and remits interest earnings exceeding $500 • Remit interest earned more than $500 to the grantor as required by federal regulations District’s Response The District acknowledges the auditor’s finding regarding the use of a cash advance during extreme and time sensitive circumstances. While cash advances are not part of the District’s normal financial practice, the situation required immediate action to ensure continuity of services funded by the federal granting agency. The District takes this recommendation very seriously. Throughout the period in which the cash advance remained unexpended, the District maintained complete documentation of all interest accrued, consistent with federal requirements. As soon as the auditors provided direction to remit interest exceeding the allowable $500 threshold, the District immediately issued a reimbursement check to the U.S. Department of Health and Human Services. This action was completed promptly to ensure full compliance with federal grant regulations. To prevent similar issues in the future, the District has formally adopted a written Cash Advance Policy. This policy establishes that cash advances are not standard procedure and may only be used under exceptional circumstances. It further requires monthly monitoring of any interest earned and mandates annual repayment of interest exceeding $500 to the granting agency. The policy ensures that any future need for a cash advance will be managed with clear controls, documented oversight, and strict adherence to federal guidelines. The District is committed to maintaining strong internal controls, complying with all federal grant requirements, and implementing corrective measures that strengthen financial stewardship moving forward. Auditor’s Remarks We thank the District for its cooperation and assistance during the audit and acknowledge its commitment to improving the condition described. We will review the corrective action taken during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 CFR Part 200, Uniform Guidance, section 305, Federal payment, establishes requirements for the method of reimbursement and disbursement of Federal funds by non-Federal entities. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.