Finding 2023-003 – Cash Collateralization
Criteria:
Uniform Guidance 2 CFR, Part §200.305(b)(7) requires advance payments of Federal funds to
be deposited and maintained in insured accounts whenever possible.
Condition:
During our review of the Coalition’s cash, it was noted that as of September 30,...
Finding 2023-003 – Cash Collateralization
Criteria:
Uniform Guidance 2 CFR, Part §200.305(b)(7) requires advance payments of Federal funds to
be deposited and maintained in insured accounts whenever possible.
Condition:
During our review of the Coalition’s cash, it was noted that as of September 30, 2023, they have.
not collateralized cash balances in excess of the amounts insured by the Federal Despot
Insurance Corporation. Cash balances of $10,608,222 were uninsured at September 30, 2023.
Unearned revenue was reported at approximately $5,389,532 which includes advance payments
of Federal funds. Questioned Costs:
None
Cause:
The Coalition has not entered into a cash collateralization agreement with their financial
institution.
Effect:
The Coalition is not in compliance with Uniform Guidance 2 CFR, Part §200.305(b)(7) as not all
cash balances received in advance from the funding agency were adequately insured or
collateralized and were exposed to custodial credit risk in the event of a bank failure.
Recommendation:
We recommend the Coalition enter into a cash collateralization agreement with their financial
institution to ensure that all amounts related to grant agreements and awards received in advance
are not exposed to custodial credit risk in the event of a bank failure.
Views of Responsible Officials:
See the corrective action plan that accompanies the schedule of findings and questioned costs.
Responsible Officials; Dr. Donna L. Polk CEO, Carlett Gregory CFO, Anne Steinhoff Board Treasurer.
Corrective Action: In response to the finding regarding the lack of collateralization for cash balances in excess of the amounts insured by the Federal Deposit Insurance Corporation (FDIC). NUIHC will get clarification from I.H.S. and our financial institution to address the best way to resolve this issue. Possible options are using the CDARS program or finding a local DIF member institution. The Coalition will take the following corrective actions:
1. Establish Cash Collateralization Agreement:
o The Coalition will promptly enter into a cash collateralization agreement with our financial institution. This agreement will ensure that all cash balances, including those received in advance from federal funding agencies, are adequately insured or collateralized.
2. Review of Cash Management Policies:
o We will review and update our cash management policies to ensure compliance with Uniform Guidance 2 CFR, Part §200.305(b)(7). This review will include assessing our current banking arrangements and making necessary adjustments to mitigate custodial credit risk.
3. Monitoring and Compliance:
o The Coalition will implement a monitoring system to regularly review cash balances and ensure that they do not exceed insured limits without proper collateralization. This system will involve periodic checks and coordination with our financial institution to maintain compliance.
4. Training and Education:
o We will provide training to our financial and accounting staff on the importance of cash collateralization and the requirements of Uniform Guidance 2 CFR, Part §200.305(b)(7). This training will ensure that all relevant personnel are aware of the new procedures and the need to maintain insured or collateralized cash balances.
Timeline for Implementation: The corrective actions outlined above will be implemented within the next 30 days. The cash collateralization agreement will be established immediately, and updates to cash management policies will be completed within this period. Training sessions for relevant staff will be conducted promptly following the implementation of these changes.