Audit 414243

Finding 2025-003: Federal Cash Advance Management and Liquidity Monitoring Federal Programs: Marine Sanctuary Program, Congressional Identified Awards and Projects, Office for Coastal Management, Marine Debris Program Assistance Listing Numbers: 11.429, 11.469, 11.473, 11.999 Federal Agency: U.S. Department of Commerce. Compliance Requirement: Cash Management Type of Finding: Significant Deficiency over Internal Controls over Compliance and Noncompliance Criteria: Under 2 CFR 200.305(b), payment methods for recipients and subrecipients (other than states) must minimize the time elapsing between the transfer of Federal funds and the recipient’s disbursement of those funds. Advance payments must be limited to the minimum amounts needed and must be timed to correspond with the recipient’s actual, immediate cash requirements in carrying out the purposes of the approved program or project.Condition: At December 31, 2025, the Foundation reported approximately $7.75 million of refundable advances attributable to Federal awards. Total cash and cash equivalents and investments available to satisfy these obligations totaled approximately $6 million. Accordingly, approximately $1 million of Federal cash advances was no longer available to fund the applicable Federal programs or to be returned to the Federal awarding agencies or pass-through entities. Accordingly, our procedures determined that the Foundation drew Federal funds in advance of actual, immediate program cash requirements and used approximately $1.75 million of those funds to finance expenditures not attributable to the applicable Federal awards. Cause: During 2025, the Foundation experienced increased financial pressure resulting from rising operating costs, constraints on unrestricted resources, and uncertainty regarding the timing and continued availability of Federal and other funding. These conditions placed additional strain on the Foundation’s liquidity and contributed to operating cash-flow shortfalls. As these pressures developed, management’s liquidity-monitoring processes were not sufficiently robust to identify the extent of the developing shortfall and facilitate timely corrective action. The Foundation's pooled cash management practices resulted in available cash balances falling below refundable advance obligations associated with certain Federal awards. While no questioned costs were identified and program expenditures were not charged improperly, the Foundation was not in a position to demonstrate that cash balances equal to outstanding Federal advance obligations were maintained as of year-end. Effect or Potential Effect: The deficiency creates a risk that the Foundation would be unable to satisfy grant-related obligations or return excess Federal advances when required. Questioned Costs: None, as charges to the specific programs have not occurred. Context: The amounts described above were determined by evaluating the total population of Federal grants for which cumulative cash draws exceeded cumulative expenditures as of December 31, 2025; accordingly, the results were not based on a sample. Collectively, these grants had approximately $7.75 million in refundable advances, compared with total cash and cash equivalents and investments of approximately $6 million. The resulting $1.75 million shortfall represents the amount by which the Foundation’s total cash and cash equivalents and investments were insufficient to satisfy the refundable advances. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend that management, with appropriate Board oversight, strengthen its budgeting, cash-flow forecasting, and liquidity-monitoring processes to provide timely and reliable information regarding the Foundation’s ability to meet its operating and grant-related obligations. Management should evaluate the appropriate measures necessary to address the deficiency in funds available to satisfy refundable advances and establish controls that provide for effective monitoring of Federal award activity, refundable advances, available financial assets, and overall liquidity. These processes should be designed to enable management and the Board to identify and respond to emerging cash-flow concerns, evaluate potential repayment exposures, and appropriately consider the related financial-statement presentation and disclosures, including liquidity and going-concern considerations.