Audit 414331

Finding number: 2025-001 Federal Agency: U.S. Department of Agriculture Federal program: 10.727 – Inflation Reduction Act Urban & Community Forestry Program Compliance requirements: C. Cash Management; L. Reporting Type of finding: Cash Management - Instance of Noncompliance; Reporting - Significant deficiency Criteria: Cash Management: 2 CFR 200.305(b) requires that advance payments to a non-Federal entity be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. Section E of the award agreement (Advance and Reimbursable Payments) states: "Advance payments must not exceed the minimum amount needed or no more than is needed for a 30-day period, whichever is less. If the Recipient receives an advance payment and subsequently requests an advance or reimbursement payment, then the request must clearly demonstrate that the previously advanced funds have been fully expended…" Reporting: 2 CFR 200.328 and the terms of the award require the submission of periodic financial reports. 2 CFR 200.302(b) requires the non-Federal Organization financial management system to provide for accurate, current, and complete disclosure of the financial results of each Federal award in accordance with the reporting requirements. Condition: Cash Management: The Entity submitted a Request for Advance or Reimbursement (SF-270) for $91,453, the total remaining balance of certain lease agreements charged to the award. Lease payments to the lessors continued on a monthly basis. Of the amount received: • $5,175, three monthly payments, fell within the 30-day cash needs allowed under the award. • $86,278 exceeded the Organization immediate cash needs. • During the year, $34,635 of the excess was used to cover eight monthly lease payments made after the 30-day period. • As of December 31, 2025, $51,643 remained unexpended and was recorded as deferred revenues. Reporting: The semiannual financial reports submitted to the Federal agency for the periods ended December 31, 2025 reported the $91,453 received as cash disbursed, rather than the actual disbursements. As a result, reported cash disbursements were overstated by $51,643. Context: During the year ended December 31, 2025, the Entity submitted 18 payment requests totaling $1,347,437. We selected a nonstatistical sample of 4 payment requests (2 reimbursements and 2 advances) totaling $458,699. The sample was not intended to be, and was not, a statistically valid sample. Cash Management: The condition was noted in 1 of the 4 payment requests tested. The exception was in 1 of the 2 reimbursement requests tested, which included $91,453 for lease payments that had not been made at the time of the request. After receiving these funds, the Entity did not request additional funds for the vehicle leases and has applied the advanced funds to the monthly lease payments. Reporting: We examined the 2 semiannual financial reports submitted during the year. The condition was noted in 2 of the 2 reports examined. Cause: The Organization requested the full amount of a valid lease obligation in advance due to uncertainty surrounding the potential termination or interruption of the federally funded program. The advance exceeded the Organization's immediate cash requirements. Additionally, in its semiannual expenditure report, the Organization reported the full lease amount as cash disbursed although only the periodic lease payments had actually been made. The reporting process did not include an adequate reconciliation of reported cash disbursements to actual payments. Cash Management: The Organization payment request process does not include a review to verify that costs included in reimbursement requests have been paid, that advances are limited to 30-day cash needs, and that prior advances have been fully expended before additional funds are requested. Reporting: The Organization's financial reporting process relies on drawdown records rather than on actual disbursements recorded in the accounting records, and reports are not reconciled to the general ledger before submission. Effect: The Organization held Federal funds in excess of its immediate cash needs for most of the year, contrary to 2 CFR 200.305(b) and the terms of the award, which limited the Federal government's use of those funds. The semiannual financial reports provided the Federal agency with inaccurate information on award disbursements, affecting its ability to monitor the award. Questioned cost: None Identification as a repeat finding: Not applicable Recommendation: We recommend that the Organization: 1. Contact the Forest Service to determine whether the unexpended advanced funds may be returned or may be applied to future cash needs and document the determination. 2. Establish a review and approval procedure, performed before each SF-270 is submitted, to verify that the amount requested does not exceed 30-day cash needs and that previously advanced funds have been fully expended. 3. Correct the affected semiannual financial reports and prepare future reports based on actual disbursements recorded in the accounting records, with an independent review before submission. Views of responsible officials and planned corrective action: Management concurs with the findings. See Corrective Action Plan.