Audit 414940

Criteria - Non-federal entities must minimize the time elapsing between the transfer of funds from the US Treasury or pass-through entity and disbursement by the non-federal entity for direct program or project costs and the proportionate share of allowable indirect costs, whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Citation - 2 CFR 200.305(b) Condition - During our test, we noted that the Organization drew down a significant portion of the remaining available budget on each of the federal contracts during February 2025 totaling $1,892,108 for GUSNIP and $1,536,701 for GUSCRR prior to incurring any allowable program expenditures. The full drawdown was not supported by a documented cash need assessment, and there was no evidence of prior written approval from the awarding agency authorizing an advance of the full award amount ahead of need, as required under the award's specific terms and conditions. Cause - Management drew down a significant portion of the remaining available budget on each award based on an informal understanding of the grant timeline rather than the entity's documented cash management procedures. The entity lacked a formal policy requiring drawdown requests to be limited to immediate cash needs, and no one was assigned responsibility for confirming agency pre-approval before requesting funds outside the normal reimbursement cycle. Effect - The Organization held federal funds in excess of immediate cash needs for an extended period, in noncompliance with the cash management standards of 2 CFR 200.305(b). This condition resulted from management's override of the entity's cash management procedures when requesting the February 2025 drawdown, without a documented cash need assessment or confirmation of agency pre-approval, notwithstanding board authorization of the drawdown amount. Board approval addressed governance authorization of the funding request but did not substitute for the entity's control requiring drawdowns to be limited to immediate cash needs. As a result, the advance earned interest of $20,163 on federal funds held in excess of need, which the Organization subsequently identified, segregated, and remitted to the agency on August 12, 2026, net of the $500 per year/award administrative retention allowed under 2 CFR 200.305(b)(12). The entity also remains exposed to the risk that the awarding agency disallows or requires return of the advance if it determines the drawdown was inconsistent with award terms or 200.407(f) prior-approval requirements. Questioned Costs - None. Repeat Finding - No. Recommendation - We recommend that the Organization establish a process to identify and obtain any required prior written agency approval before requesting funds outside the normal, need-based drawdown cycle, per the compliance requirement and the specific award terms, as well as consult with the awarding/pass-through agency regarding the appropriate resolution of the drawdown already received, including whether any portion must be returned. Views of Responsible Officials - See Corrective Action Plan.