(2025-040) Title: Internal control over PDG subrecipient cash management needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Every Student Succeeds Act/Preschool Development Grants Assistance Listing Number: 93.434 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized. Condition: The Every Student Succeeds Act/Preschool Development Grants (PDG) program assists states in helping low-income and disadvantaged children enter kindergarten prepared and ready to succeed in school and helps improve the transitions from the early care and education setting to elementary school. PDG is administered by the Department of Health and Human Services’ Office of Child and Family Services (OCFS). The Department makes equal advance monthly payments to subrecipients and then reconciles those amounts to quarterly financial reports submitted by the subrecipient. This procedure does not take into consideration the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes, and OCFS’ subrecipient monitoring procedures do not include review of subrecipient compliance with cash management requirements. As a result, OCFS procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Context: OCFS provided approximately $910,000 from a total of $11.5 million to PDG program subrecipients during fiscal year 2025. Cause: • Lack of adequate subrecipient monitoring procedures • Lack of centralized oversight of subrecipient monitoring Effect: • Noncompliance with Federal regulations • Federal programs may not be effectively and efficiently administered. • The Federal government may require the implementation of more stringent subrecipient cash management procedures. Recommendation: We recommend that OCFS implement monitoring procedures over subrecipient cash management requirements to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized for the PDG program. Corrective Action Plan: See F-22 Management’s Response: The Department disagrees with this finding. The Department is in compliance with the requirement for minimizing the time between payments to our subrecipients and the disbursement of the funds. Payments are made as close as is administratively feasible. The Compliance Supplement suggested audit procedures for Cash Management for pass-through entities refers to 200.305(b)(1) ...that same paragraph states that the timing and amount of advance payments must be as close as is administratively feasible. Contact: Tara Williams, Associate Director of Early Care & Education, OCFS, DHHS, 207-557-2342 Auditor’s Concluding Remarks: The Department’s interpretation of the applicable Federal regulation emphasizes a single sentence from the broader paragraph, omitting context that informs the regulation’s full intent. According to the 2025 Compliance Supplement, pass-through entities must monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the transfer of Federal funds to the subrecipient and their disbursement for program purposes is minimized as required by the applicable cash management requirements in the Federal award to the recipient (2 CFR 200.305(b)(1)). 2 CFR 200.305(b)(1) states that the recipient or subrecipient must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. The recipient or subrecipient must make timely payments to contractors in accordance with the contract provisions. The Department references the phrase “as close as is administratively feasible” to justify their current process; however, this phrase is part of a broader requirement that establishes specific conditions for advance payments. The regulation requires that the timing between when the subrecipient receives Federal funds from the State and when the subrecipient disburses those funds is closely monitored to ensure that disbursements align with actual, immediate cash needs. The Department could not provide evidence to demonstrate that they adequately monitored subrecipient cash drawdowns to ensure alignment with actual, immediate cash needs. Furthermore, in finding 2025-036, Internal control over PDG subrecipient monitoring procedures needs improvement, the Office of the State Auditor identified that 1 PDG subrecipient received equal advance monthly payments that significantly outpaced the subrecipient’s spending of PDG funds throughout fiscal year 2025. Payments to the subrecipient were withheld after April 2025 for the subrecipient’s inability to meet performance goals, not due to the Department’s monitoring of subrecipient cash management, and OCFS allowed the subrecipient to retain the excess PDG funds. This exception corroborates that controls are not in place over subrecipient cash management. The finding remains as stated. (State Number: 25-1122-03)
(2025-053) Title: Internal control over CCDF subrecipient cash management needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: CCDF Cluster Assistance Listing Number: 93.489, 93.575, 93.596 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Cash management Subrecipient monitoring Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.305 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department is required to monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized. Condition: The Child Care and Development Fund (CCDF) program is administered by the Office of Child and Family Services (OCFS) and provides funding to increase the availability, affordability, and quality of childcare services in the State. The Department makes equal advance monthly payments to subrecipients and then reconciles those amounts to quarterly financial reports submitted by the subrecipient. This procedure does not consider the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes, and OCFS’ subrecipient monitoring procedures do not include a review of subrecipient compliance with cash management requirements. As a result, OCFS procedures do not support that subrecipient cash management is properly monitored as required by Federal regulations. Context: OCFS provided $2.8 million from a total of $45.1 million to CCDF program subrecipients during fiscal year 2025. Cause: • Lack of adequate subrecipient monitoring procedures • Lack of centralized oversight of subrecipient monitoring Effect: • Noncompliance with Federal regulations • Federal programs may not be effectively and efficiently administered. • The Federal government may require the implementation of more stringent subrecipient cash management procedures. Recommendation: We recommend that OCFS implement monitoring procedures over subrecipient cash management requirements to ensure that the time elapsing between the payment of Federal funds to the subrecipient and the subrecipient’s actual disbursement for program purposes is minimized for the CCDF program. Corrective Action Plan: See F-27 Management’s Response: The Department disagrees with this finding. The Department is in compliance with the requirement for minimizing the time between payments to our subrecipients and the disbursement of the funds. Payments are made as close as is administratively feasible. The Compliance Supplement suggested audit procedures for Cash Management for pass-through entities refers to 200.305(b)(1) ...that same paragraph states that the timing and amount of advance payments must be as close as is administratively feasible. Contact: Tara Williams, Associate Director of Early Care & Education, OCFS, DHHS, 207-557-2342 Auditor’s Concluding Remarks: The Department’s interpretation of the applicable Federal regulation emphasizes a single sentence from the broader paragraph, omitting context that informs the regulation’s full intent. According to the 2025 Compliance Supplement, pass-through entities must monitor cash drawdowns by their subrecipients to ensure that the time elapsing between the transfer of Federal funds to the subrecipient and their disbursement for program purposes is minimized as required by the applicable cash management requirements in the Federal award to the recipient (2 CFR 200.305(b)(1)). 2 CFR 200.305(b)(1) states that the recipient or subrecipient must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. The recipient or subrecipient must make timely payments to contractors in accordance with the contract provisions. The Department references the phrase “as close as is administratively feasible” to justify their current process; however, this phrase is part of a broader requirement that establishes specific conditions for advance payments. The regulation requires that the timing between when the subrecipient receives Federal funds from the State and when the subrecipient disburses those funds is closely monitored to ensure that disbursements align with actual, immediate cash needs. The Department could not provide evidence to demonstrate that they adequately monitored subrecipient cash drawdowns to ensure alignment with actual, immediate cash needs. The finding remains as stated. (State Number: 25-1114-04)
Finding 2025-011 – C. Cash Management Information on Federal Program(s) – Research and Development Cluster (ALN 43.009, ALN 93.859) Criteria or Specific Requirement - 2 CFR §200.305(b)(1) indicates that advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. Condition – The University was not able to provide reconciliations of funds drawn to expenditures incurred for certain funds drawn down during the current year that reconciled the amounts properly. Additionally, as formal draw down to expenditure reconciliations were not properly performed for certain draw dawns, instances were identified in which the University drew down funds twice for the same expenditure. The combination of the above also resulted in the University not minimizing the time between the date of drawdowns and the date the funds were used. Cause - Administrative oversight and insufficient internal controls. Effect or Potential Effect – The University was not in compliance with cash management requirements. Questioned Costs – None. Context – For 9 of 28 cash draws, the University did not properly perform formal reconciliations of funds drawn to expenditures. Additionally, 3 of 28 cash draws included certain expenditures for which funds were previously drawn, resulting in duplicative cash draws for the same expenditures. The above resulted in excess cash being drawn during the year ended June 30, 2025. Indication of Repeat Finding – No similar finding identified in the prior year. Recommendation – We recommend that the University enhance its procedures and internal controls over compliance to ensure that cash draws are properly reconciled to expenditures, that cash draws are only made once for each expenditure, and that time is minimized between cash draws and payment of expenditures incurred. Views of Responsible Officials – The University acknowledges that the internal controls surrounding the cash draws during fiscal year 2025 were lacking and needed to be reinforced for future fiscal years. With the hire of the new CFO and Senior Accountant post June 30, 2025 – these enhanced controls and processes have been put in place.
Finding 2025-001 Cash Management Identification of the federal program: U.S. Department of Health and Human Services National Institutes of Health Research and Development Cluster Assistance Listing No. Federal Program Title 43.014 Congressionally Directed Programs 47.049 Mathematical and Physical Sciences 93.172 Human Genome Research 93.393 Cancer Cause and Prevention Research 93.396 Cancer Biology Research 93.837 Cardiovascular Diseases Research 93.847 Diabetes, Digestive, and Kidney Diseases Extramural Research 93.853 Extramural Research Programs in the Neurosciences and Neurological Disorders 93.865 Child Health and Human Development Extramural Research Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR 200.303(a) requires that a non-federal entity must “(a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR 200.305(b)(3) requires that when the reimbursement method is used, the Federal agency or pass-through entity must make payment within 30 calendar days after receipt of the payment request unless the Federal agency or pass-through entity reasonably believes the request to be improper. Condition: The College did not provide evidence of effectively designed internal controls to ensure subrecipients are paid by the College within 30 days of requests for reimbursements received by the College. Cause: The College did not ensure that its established internal control processes were operating effectively to verify that invoices from subrecipients were paid within the required 30‑day period from the date the payment request was received. Effect or potential effect: The College did not comply with the cash management requirements of Uniform Guidance to pay subrecipients within 30 days of their requests for reimbursements. Questioned costs: None. Context: EY selected and tested a sample of 44 payments to subrecipients with expenditures totaling $5,843,778 from a population of $56,294,523 during the year ended June 30, 2025. Of the 44 samples selected for testing, 12 payments to subrecipients totaling $3,490,135 were made outside the required 30‑day payment window. Identification as a repeat finding, if applicable: Not a repeat finding. Recommendation: The College should strengthen its disbursement controls by ensuring that invoices received from subrecipients are promptly identified, logged, and tracked against the 30‑day payment requirement. Views of responsible officials: Management agrees with the finding and has developed a plan to ensure subrecipients are paid within 30 days of their requests for reimbursement.
Federal Agency: U.S. Department of Agriculture and U.S. Department of Health and Human Services Federal Program Name: Research and Development Assistance Listing Number: 10.215 and 93.433 Federal Award Identification Number and Year: 90RTEM0009 - 2025, 20213864034724 - 2025, 90RTST0002 - 2025 Award Period: July 1, 2024 to June 30, 2025 Type of Finding: - Significant Deficiency in Internal Control over Compliance - Other Matters Criteria or specific requirement: The Federal Government requires that when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper (2 CFR section 200.305(b)(3)). Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: The University did not make payments to subrecipients within 30 days after receipt of invoices. Questioned costs: None. Context: During our testing we identified 4 out of 14 subrecipient payments that did not process payment requests from the subrecipients timely. Cause: The University did not have an effective control in place to ensure subrecipient payments were paid timely. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Repeat Finding: Yes, 2024-001 Recommendation: We recommend the University review and update policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Federal Agency: Department of Agriculture Assistance Listing Number: 10.310 Program Expenditures: $1,328,494 Program Name: Oilseed Pennycress: A New Cash Cover-Crop for the Midwest Award Number(s): 2019-69012-29851 Questioned Costs: None CONDITION: Western Illinois University (University) did not have adequate procedures in place to complete a timely disbursement of requested pass-through funds to subrecipients within the required time period. During our testing of payments made on requests from subrecipients, there were 2 out of 8 (25%) tested instances of the University not disbursing funds within 30 days of the payment request, as required. For the samples mentioned, the funds were sent 32 days and 120 days after the request. The sample was not a statistically valid sample. CRITERIA: Uniform Guidance (2 CFR 200.305(b)(3)) states that when the reimbursement method is used, the Federal agency or pass-through entity must make payment within 30 calendar days after receipt of the payment request unless the Federal agency or pass-through entity reasonably believes the request to be improper. Uniform Guidance (2 CFR 200.303(a)) requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure the timely disbursement of funds to subrecipients. CAUSE AND EFFECT: The University did not have adequate procedures in place to ensure all payments to subrecipients were made within the 30 day requirement. Without sufficient controls around return over subrecipient payments and overall cash management, there is a greater risk that the school will miss a payment to be passed through to the subrecipient, thus understating expenditures on the Schedule of Expenditures of Federal Awards. (Finding Code No. 2025-003) RECOMMENDATION: We recommend the University implement controls to ensure that all payments to be passed through to subrecipients are identified and paid within the required time frame. UNIVERSITY RESPONSE: The University agrees with the finding. The University is committed to developing a comprehensive plan to ensure compliance with payment of pass-through funds policies and procedures.
2025-008. FINDING - Noncompliance with Reimbursements to Subrecipients Federal Agency: National Science Foundation Assistance Listing Numbers: 47.070 Program Names and Award Numbers: Research and Development Cluster: CISE-MSI: RPEP: S&CC: Information Systems meet Cultural Competencies; CISE-MSI: DP: IIS-III: ACOSUS: An AI-driven counseling System for Underrepresented Transfer Students Award Numbers: 2131291 – 2021; 2219623 – 2022 Questioned Costs: None Northeastern Illinois University (University) did not pay reimbursements within 30 days for certain subrecipients in the Research and Development Cluster. CONDITIONS FOUND & CRITERIA: For three of 10 (30%) subrecipient invoices selected for testing in the Research and Development Cluster, the University made payments in a time period greater than 30 days. The sample was not intended to be, and was not, a statistically valid sample. Uniform Guidance (2 CFR 200.305(b)(3)) requires, for recipients and subrecipients other than states, payment methods must minimize the time elapsing between the transfer of funds from the federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient, regardless of whether the payment is made by electronic funds transfer or by other means. Further, when the reimbursement method is used for payment, organizations must make a payment within 30 calendar days after receipt of the billing unless the federal awarding agency or pass-through entity reasonably believes the request to be improper. CAUSE: University officials stated the department did not timely enter invoices into the Accounts Payable system which resulted in delayed processing by Accounts Payable, thus the payment was not made in accordance with the Uniform Guidance. EFFECT: Failure to meet subrecipients payment requirements is noncompliance with federal regulations and could result in loss of grant funding in future years. (Finding Code No. 2025-008) RECOMMENDATION: We recommend the University implements processes and controls to ensure that payments to subrecipients are made in accordance with the Uniform Guidance. UNIVERSITY RESPONSE: The University agrees with the recommendation. This issue was due to one department’s oversight in maintaining and providing appropriate documentation. The department was sent a reminder of the expectation of timely filing all required documentation to ensure payments to subrecipients are made in accordance with the Uniform Guidance.
Federal agency: U.S. Small Business Administration Federal program name: Congressional Grants Inclusive Ventures Small Business Program Assistance listing number: 59.059 Pass-through agency: Anne Arundel County, Maryland Pass-through number: SBAHQ23I0140 Award Period: September 1,2023 through August 31, 2028 Compliance Requirement: Cash Management/Program Income Type of Findings: Material Weakness in Internal Control over Compliance, Material Noncompliance (Modified Opinion) Criteria or specific requirement: Compliance: 2 CFR 200.305(b)(8) requires that non-Federal entities must maintain advance payments in interest-bearing accounts and must remit interest earned on Federal advances in excess of $500 annually to the Federal agency. 2 CFR 200.80 defines program income as gross income earned that is directly generated by a supported activity or earned as a result of the Federal award. 2 CFR 200.307(e) requires program income to be properly accounted for, used, and reported in accordance with the terms and conditions of the Federal award. 2 CFR 200.302(b)(3) requires entities to maintain records that identify the source and application of funds, including program income. Condition The Corporation did not track, record, or report program income generated from interest earned on Federal funds received in advance. Interest accumulated in the bank account holding Federal advances was not segregated, monitored, or reported to the Federal awarding agency. As a result, the Corporation could not determine whether interest exceeded the $500 annual threshold requiring remittance. Questioned Costs Total program income identified during the audit was $61,226. Context The Corporation received Federal funds in advance for program activities but did not implement procedures to track interest earned on those funds. Cause The Corporation has not historically received federal funding so tracking program income earned from funds received in advance was not deemed necessary. Effect The Corporation may have retained Federal interest income that should have been remitted to the awarding agency. The Federal awarding agency was not informed of program income generated. Repeat Finding No Recommendation We recommend that management develop and implement written procedures to track, record, and report program income, including interest earned on Federal advances. Views of Responsible Officials Management agrees with finding. See corrective action plan for additional information.
Federal Agency: National Science Foundation, U.S. Department of Transportation, U.S. Department of Energy, U.S. Department of Commerce Federal Program Name: Research & Development Assistance Listing Number: 11.469, 20.000, 47.083 and 81.089 Federal Award Identification Number and Year: 1946093 - 2025, 692Ml5-20-T-00029 - 2025, DEFE0031776 - 2025, NA23NWS4690009 – 2025 Pass-Through Agency: Iowa State University Pass-Through Number: 692M15-20-T-00029 PASS THRU 023063C Award Period: July 1, 2024 to June 30, 2025 Type of Finding: - Significant Deficiency in Internal Control over Compliance - Other Matters Criteria or specific requirement: Uniform Grant Guidance (2 CFR Section 200.305(b)(3)) requires that when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: Oklahoma State University Stillwater (OSU STW) did not make payments to subrecipients within 30 days after receipt of invoices. Questioned costs: None. Context: During our testing we identified 7 subrecipient payments from OSU STW out of 40 payments that did not process payment requests from the subrecipients timely. Cause: OSU STW did not process payment requests from the subrecipient timely. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Repeat Finding: No Recommendation: We recommend OSU STW review and update policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.
Criteria: The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) allow non-Federal entities to request advance payments, provided that the timing and amount of such advances are limited to the entity’s immediate cash needs and that funds are expended only for allowable costs incurred within the approved period of performance. Under cash management requirements, advance payments must be limited to the minimum amounts needed and timed to align with the actual, immediate cash requirements of the non-Federal entity (2 CFR §200.305(b)(1); 2025 OMB Compliance Supplement, Cash Management). Additionally, regarding the period of performance, federal awards may only be charged for obligations incurred during the approved period of performance stated in the Notice of Award, and costs incurred outside that period are considered unallowable unless specifically authorized by the federal awarding agency (2 CFR §200.309; 2025 OMB Compliance Supplement, Period of Performance). Condition: During the fiscal year ended June 30, 2025, NeoMed Center requested and received advance payments through the Payment Management System (PMS) under the Health Center Program (93.224). The advances included funds related to a grant budget period running from May 2025 through April 2026; however, management intended to use a portion of these funds to support operations in the subsequent fiscal year (July 1, 2025 through June 30, 2026). As of June 30, 2025, a portion of the advanced federal funds had not been expended for allowable costs incurred within the applicable period of performance. While advance payments are permitted under federal regulations, the timing of the drawdowns exceeded NeoMed Center Inc.’s immediate cash needs for allowable expenditures incurred during the approved period of performance. Effect: As a result of this condition, federal funds were drawn earlier than necessary relative to allowable expenditures as of and for the yar ended June 30, 2025 and were held to be expended and recorded as revenues in the next fiscal year ending June 30, 2026. This situation exposed NMCI to an increased risk of noncompliance with federal cash management and allowability requirements. Additionally, cash balances as of June 30, 2025, included federal funds that were not eligible to be recognized as expenditures as of that date. Cause: Management stated that the advance payments were requested as a preventive measure in response to uncertainty related to federal funding disruptions during calendar year 2025. However, lack of internal controls to ensure that advance drawdowns were limited only to immediate cash needs and aligned with the applicable grant period of performance permitted excess drawdown with no support. Recommendations: We recommend that the Institution implement the following corrective actions: 1. Strengthen internal controls over federal cash management and grant expenditure monitoring to ensure compliance with Uniform Guidance requirements. 2. Revise policies and procedures manuals and Implement procedures to ensure that advance drawdowns from the Payment Management System (PMS) are limited to the entity’s immediate cash needs. 3. Ensure that federal funds are drawn only for allowable expenditures expected to be incurred within the approved period of performance. 4. Provide training to relevant personnel on federal cash management requirements and the proper administration of advance payments.
Criteria: In accordance with 2 CFR § 200.305(b)(12), a recipient or subrecipient may retain up to $500 per year in interest earned on Federal funds for administrative expenses. Any interest earned in excess of $500 per year must be remitted annually to the Department of Health and Human Services (HHS) through the Payment Management System (PMS) via the Automated Clearing House (ACH) network or Fedwire Funds Service. This requirement applies regardless of whether the recipient or subrecipient was paid through PMS. Condition: For the fiscal year ended June 30, 2025, the entity earned interest on Federal funds in excess of the $500 allowable retention limit. The entity did not remit the excess interest to the Payment Management System (PMS) within the required timeframe. The amount of excess interest retained and not remitted totaled $1,417.45. Effect: Noncompliance with 2 CFR § 200.305(b)(12) may result in several consequences, including questioned costs, required reimbursement of federal funds, findings or enforcement actions by the federal awarding agency, and potential sanctions or the imposition of additional compliance requirements. Cause: The entity did not have adequate internal controls or formal procedures in place to periodically monitor interest earned on federal funds, identify when interest exceeded the $500 allowable threshold, and timely remit excess interest to HHS through the Payment Management System (PMS). Recommendations: We recommend that the Institution implement the following corrective actions: 1. Develop and implement formal written policies and procedures for monitoring interest earned on federal funds in accordance with 2 CFR § 200.305(b)(12). 2. Establish internal controls to periodically calculate and track interest earned on federal cash balances throughout the fiscal year. 3. Implement a process to identify when interest earned exceeds the allowable $500 annual retention threshold. 4. Assign responsibility to designated personnel for reviewing interest calculations and ensuring compliance with federal requirements. 5. Provide training to relevant staff on federal cash management requirements related to interest earned on federal funds.
Federal Agency: 11 – Department of Commerce, 12 – Department of Defense, 15 – Department of the Interior, 16 – Department of Justice, 43 – National Aeronautics and Space Administration, 47 – National Science Foundation, 81 – Department of Energy, 84 – Department of Education, 93 – Department of Health and Human Services Federal Program Title: R&D Cluster, Child Care Access Means Parents in School, TRIO Cluster, and Higher Education Institutional Aid Assistance Listing Number: R&D, 84.335, 84.TRIO, and 84.031 Award Period: July 1, 2024, through June 30, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or Specific Requirement: In accordance with 2 CFR §200.305(b), when using the reimbursement method, Federal drawdowns must be limited to allowable costs that have been incurred and supported. Additionally, 2 CFR §200.302(a) requires non Federal entities to maintain financial management systems that provide for accurate, current, and complete disclosure of the financial results of each Federal award. Condition/Context: During our testing of Cash Management, we selected a sample of 85 reimbursement requests, consisting of 40 R&D Cluster samples, 12 Child Care Access Means Parents in School samples, 23 TRIO Cluster samples, and 10 Higher Education Institutional Aid. The following exceptions were noted: R&D Cluster, TRIO Cluster, and Higher Education Institutional Aid: For 4 of the 40 R&D samples tested, 9 of the 23 TRIO samples tested, and 1 of the 10 Higher Education Institutional Aid samples tested, instances of noncompliance were identified. • For 4 of the 4 R&D samples, 8 of the 9 TRIO samples, and 1 of the 1 Higher Education Institutional Aid samples with instances of noncompliance noted, a portion of the reimbursement drawn down during fiscal year 2025 related to expenses incurred outside to the current fiscal year. Additionally, 1 of the 4 R&D samples included expenses incurred as far back as October 2020. • For 1 of the 9 TRIO samples with instances of noncompliance noted, supporting documentation (such as invoice support, indirect cost recalculations, or payroll registers) was not provided for a portion of the expenses included in the reimbursement requests. As a result, we were unable to determine the period to which the funds drawn down related. Child Care Access Means Parents in School (Control Finding Only): • For 1 of the 12 samples tested, the UEC was ultimately in compliance with cash management requirements; however, internal controls did not operate effectively. Specifically, there was an approximate six‑month delay between the incurrence of program costs and the submission of the reimbursement request. Questioned Costs: $68,759 Effect: Reimbursement requests that include costs incurred outside the applicable fiscal period or costs that are not supported increase the risk that Federal expenditures are not recorded in the proper accounting period and that Federal financial reporting is not accurate. Additionally, delays in submitting reimbursement requests increase the risk that expenditures are not timely reported in accordance with Federal requirements. Cause: The UEC’s internal controls were not designed or implemented to consistently ensure that costs included in reimbursement requests are recorded in the appropriate fiscal period, supported by adequate documentation, and submitted timely in accordance with Federal cash management and financial reporting requirements. Repeat Finding: No. Recommendation: We recommend the UEC strengthen its cash management and financial reporting procedures to ensure reimbursement requests include only costs incurred in the appropriate fiscal period, are supported by adequate documentation, and are submitted timely. The UEC should also enhance review controls to verify proper period recognition of costs prior to submission of reimbursement requests. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Further, 2 CFR §200.303 requires non Federal entities to establish and maintain effective internal control over Federal awards to ensure transactions are recorded in the proper accounting period and in accordance with applicable Federal requirements.
Finding No: 2025-001 Cash Management Federal Agency: U.S. Department of Health and Human Services Pass-Through Entities: N/A Assistance Listing Number: 93.493 Federal Program: Congressional Directives Federal Award Year: September 30, 2023 – September 29, 2026 Per section 2 CFR 200.305, non-federal entities must minimize the time elapsing between the transfer of funds from the US Treasury and disbursement by the non-federal entity for direct program or project costs. Interest earned on Federal funds must be returned annually to the Department of Health and Human Services Payment Management System (PMS). Expenditures must be incurred prior to the date of the reimbursement request. Per section 2 CFR 200.303, non-Federal entities must establish, document and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition Found The System entity did not minimize the time elapsing between the transfer of funds and disbursement and did not remit interest earned on advances to the designated federal agency. The System requested reimbursement of federal grant funds of $1,042,278 over 350 days in advance of incurring the related expenditures for the St. Francis Medical Center Community Project Funding Congressionally Directed Spending – Construction award (ALN 93.493) and did not perform the required interest calculation or remit interest timely, representing a departure from the Uniform Guidance cash management requirements. We tested 100% of the expenditures and related cash draw activity for this award during the audit period; therefore, no sampling was used and no extrapolation was necessary. Possible Cause and Asserted Effect The System's internal controls did not ensure the federal funds requested for the program were either already expended or encumbered to be expended timely and did not implement the process steps and control to periodically identify and calculate the resulting accumulated interest earned on federal cash balances drawn in advance related to this program. Failing to minimize the time between the transfer and disbursement of funds, as well as failing to remit interest earned on advances, constitutes noncompliance with the Uniform Guidance.Questioned Cost Interest earned of $44,750 Statistical Validity The sample was not intended to be, and was not, a statistically valid sample. Identification of Whether the Audit Finding is a Repeat of a Finding in the Immediately Prior Audit No. Recommendation We recommend that the System strengthen its internal controls over cash management controls to ensure that all federal fund drawdowns are based on incurred expenditures and documented immediate cash needs, and that a process is implemented to periodically calculate and remit any interest earned on advance balances as required by the Uniform Guidance. View of Responsible Officials Management concurs with this finding. The System is implementing a management review control through periodic inquiry and review of advance fundings to ensure drawdowns are supported by incurred expenditures or are for immediate cash needs and any interest calculations to ensure timely compliance with the Uniform Guidance. Corrective Action Plan In the event that the System receives federal cash advances prior to the cash expenditures, the System will perform an additional financial review of any advanced payments compared to the related expenditures. Should accounting identify advances not yet spent, they will inquire with the grant administrator responsible for the grant to review their advance fundings, any potential resulting interest calculations. Anticipated Completion Date June 30, 2026 Name of Contact Person for Corrective Action Amanda Hymel, Corporate Controller
Finding No: 2025-003– Internal control deficiencies over accounting and identification of federal funds received from the Federal Emergency Management Agency (FEMA) that should be included on SEFA Federal Programs ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) Name of Federal Agency U.S. Department of Homeland Security (Pass-through program from The Central Office of Recovery, Reconstruction and Resiliency) Category Internal Control; Compliance. Compliance Requirement Activities Allowed/Unallowed, Allowable Costs/Cost Principles, Period of Performance, Project Accounting. Criteria 2 CFR Part 200 Subpart D Subsection 200.302 states the following: The recipient's and subrecipient's financial management system must provide for the following: 1. Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. 2. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. 3. Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. 4. Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. 5. Comparison of expenditures with budget amounts for each Federal award. 6. Written procedures to implement the requirements of § 200.305. 7. Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. Condition During our procedures concerning the Administration’s funds received from FEMA we noticed that the reimbursement funds received from FEMA were not recognized as income during the year ended June 30, 2025. Cause The Administration recognized the reimbursement as an accrual and not as income during the year ended June 30, 2025. They have recognized only the amount that they disbursed during the year at their discretion. This accounting is correct when the funds received are capital advances. Effect This can result in amounts not to be included in the Schedule of Expenditures and Federal Awards in the correct period and understate SEFA. Also, the Administration could be subject to penalties or sanctions from the Federal Grantor. Context The Administration identified $6,543 as federal expenditures from prior years capital advances of FEMA awards but did not identify as expended the amount of $11,063 from advances. In addition, the Administration received reimbursements of $1,413,451 in the fiscal year, however management did not identify this amount as federal expenditures until the audit procedures was performed. Identification of repeat finding None. Questioned costs None, as adjustments were made during the audit to correct the misstatement. Recommendation We recommend validating, with the staff in charge of Engineering, the type of funds received from FEMA, if they are reimbursements or capital advances. When the funds received are reimbursements they should be recognized as income in the year received. If the funds are capital advances they should be recognized as unearned revenue and as income in the year in which they are disbursed. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See further details regarding this matter within the Corrective Action Plan.
Finding Number - 2025-005 Rebates Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Allowable Costs / Activities Cash Management Reporting Type of Finding Internal Control over Compliance / Compliance Category Significant Deficiency Criteria Pursuant to Section 1927 of the Social Security Act (42 U.S.C. § 1396r-8) and implementing regulations at 42 C.F.R. Part 447, Subpart I, states must: ✓ Report quarterly drug utilization data to manufacturers within 60 days after the end of each quarter; and ✓ Ensure that manufacturers remit rebate payments within 30 days after receipt of utilization data; and ✓ Properly identify, record, and credit rebate collections to the Medicaid program in a timely manner. Department of Health of the Commonwealth of Puerto Rico Schedule of Findings and Questioned Costs – (Continued) For the Fiscal Year Ended June 30, 2025 - 47 - Section III- Findings and Questioned Costs Relating to Federal Awards– (continued) Finding Number - 2025-005 Rebates – (continued) Criteria – (continued) In addition, 2 C.F.R. § 200.302 (Financial Management) requires non-federal entities to maintain effective financial management systems that provide accurate, current, and complete disclosure of financial results and ensure proper accounting for program income and federal funds. Further, 2 C.F.R. § 200.305 (Payment) requires that federal funds be minimized between drawdown and disbursement and that program income and recoveries be properly accounted for and applied. Condition During our audit, we identified that the Medicaid Cluster Program (the Program) returned Medicaid drug rebates outside of the federally required timeframes established under the Medicaid Drug Rebate Program. Specifically, rebates received from pharmaceutical manufacturers were not identified, recorded, and returned to the Medicaid program in accordance with the regulatory deadlines prescribed by federal law and regulation. As a result, federal Medicaid funds were not reconciled and credited in a timely manner, and program expenditures were overstated for the applicable reporting periods. Quarter End period Due date Remmitance date Late Q1 FFY2024 3/31/2024 6/29/2024 9/20/2024 83 Q1 FFY2024 3/31/2024 6/29/2024 12/5/2024 159 Q1 FFY2024 3/31/2024 6/29/2024 4/25/2025 300 Q2 FFY2023 6/30/2023 9/28/2023 9/20/2024 358 Q2 FFY2023 6/30/2023 9/28/2023 12/5/2024 434 Q2 FFY2023 6/30/2023 9/28/2023 4/25/2025 575 Q2 FFY2024 6/30/2024 9/28/2024 12/5/2024 68 Q2 FFY2024 6/30/2024 9/28/2024 4/25/2025 209 Q3 FFY2023 9/30/2023 12/29/2023 9/20/2024 266 Q3 FFY2023 9/30/2023 12/29/2023 12/5/2024 342 Q3 FFY2023 9/30/2023 12/29/2023 4/25/2025 483 Q3 FFY2024 9/30/2024 12/29/2024 4/25/2025 117 Q4 FFY2023 12/31/2023 3/30/2024 9/20/2024 174 Q4 FFY2023 12/31/2023 3/30/2024 12/5/2024 250 Q4 FFY2023 12/31/2023 3/30/2024 4/25/2025 391 Cause The Program relies on information provided by the actuaries of Puerto Rico Health Insurance Administration (PRHIA) to identify and calculate Medicaid drug rebates. PRHIA is responsible for compiling and providing the necessary rebate data to the Program. Based on the information received from PRHIA, management processes the corresponding reimbursements once the data is received. However, the Program does not maintain independent monitoring procedures to verify the completeness and timeliness of the information provided by PRHIA, nor does it perform periodic reconciliations between rebate information received and program expenditures to ensure that all applicable rebates are properly identified and credited to the Medicaid program in accordance with federal requirements. Effect As a result of this condition: ✓ The Program was not in compliance with federal Medicaid Drug Rebate Program requirements and Uniform Guidance financial management standards; and ✓ There is an increased risk of questioned costs and federal disallowances. Questioned Costs Indeterminable Perspective Information Under the program, state Medicaid agencies are required to submit quarterly drug utilization data to participating manufacturers. Based on this data, manufacturers calculate and remit rebate payments to the state. These rebate revenues constitute program income and must be applied to reduce Medicaid expenditures in accordance with federal law and Uniform Guidance. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management establish formal monitoring and reconciliation procedures to ensure that all Medicaid drug rebate information received from PRHIA is complete and accurately recorded. This should include periodic reconciliations between rebate data provided by PRHIA, rebate receipts, and related Medicaid program expenditures. Also, management should implement a formal follow-up process with PRHIA to periodically confirm that all applicable rebate information has been provided and processed in a timely manner. We also recommend that management: ✓ Implement written policies and procedures governing the identification, recording, reconciliation, and return of Medicaid drug rebates; ✓ Establish periodic reconciliation controls to ensure rebate receipts are timely credited to the Medicaid program; ✓ Strengthen oversight and monitoring of rebate activity to ensure compliance with Section 1927 of the Social Security Act and 42 C.F.R. Part 447; and ✓ Provide training to financial and program staff regarding federal rebate compliance requirements. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.
Finding Number - 2025-006 Late vendor credits Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Cost Principles Type of Finding Internal Control over Compliance / Compliance Category Other Criteria In accordance with the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2 CFR §200.305(b)(1) requires that pass-through entities ensure payments to subrecipients are made in a timely manner, generally within a reasonable period after receipt of a valid request for payment. Federal guidance and established administrative practice interpret a reasonable period for purposes of cash management compliance to mean no later than 30 calendar days following receipt of a proper payment request, unless the pass-through entity reasonably determines the request to be improper. This requirement applies regardless of whether the federal award operates on a reimbursement basis and is intended to ensure compliance with federal cash management standards and minimize the time between disbursement of funds and federal reimbursement. Criteria – (continued) For Medicaid program (Assistance Listing 93.778), CMS regulations further require that expenditures claimed for Federal Financial Participation (FFP) be based on actual, incurred, and properly documented costs in accordance with 42 CFR §433.32 and applicable CMS financial management guidance. CMS oversight emphasizes timely payment and proper cash management practices to ensure that expenditures are valid and that federal funds are drawn only for allowable and properly incurred costs. Additionally, 2 CFR §200.332(a) requires pass-through entities to monitor subrecipients and ensure compliance with applicable federal requirements, including adherence to cash management provisions. Condition During testing of subrecipient disbursements, it was noted that six (6) payments included in the sample of 178 were made more than 30 calendar days after the pass-through entity received a valid request for payment from the subrecipient. The delays ranged from 46 to 150 days beyond the regulatory requirement. Item No. Check Date (Voucher id) Invoice Date Audited Amount 1 1/24/2025 00536685 12/4/2024 $ 1,458 2 5/23/2025 00553562 12/23/2024 $ (1,321,563) 3 5/23/2025 00553519 12/23/2024 $ 2,111 4 5/23/2025 00553562 4/1/2025 $ (220,261) 5 7/23/2024 00515301 6/7/2024 $ 5,876 6 7/23/2024 00515303 6/7/2024 $ 8,911 Also, we identified two (2) instances in which vendor credits related to previously issued invoices were not applied to the corresponding invoices until approximately one (1) to three (3) months after the original drawdown was requested. Item No. Invoice number Invoice date Credit amount Drawdown not including credit Date credit return Days 1 RF VITAL 25-003 12/27/2024 $ (1,321,563) 1/13/2025 6/3/2025 -141 2 RF VITAL 25-006 4/10/2025 $ (220,261) 4/28/2025 6/3/2025 -36 Cause The delays in payment were primarily attributable to internal cash management and administrative practices, including the practice of awaiting the receipt of federal funds or internal approvals prior to issuing payment to the subrecipient. These practices were not aligned with the timing requirements established under Uniform Guidance. Management indicated that the Program waits until sufficient positive fund balances are available before processing the return of outstanding credits. As a result, certain credit balances may remain pending until adequate funds are available to complete the reimbursement. This practice may delay the timely return of funds in accordance with applicable requirements. Effect Failure to remit payment to subrecipients within the required 30-day timeframe. Continued noncompliance may increase the risk of: a) Audit findings under the Uniform Guidance, b) Increased federal oversight, c) Potential questioned costs, and d) Strained financial operations for subrecipients due to delayed reimbursement. The delayed application of credits resulted in temporary overstatements of expenditures used to support Federal drawdowns. Although the credits were eventually applied, the timing difference may result in noncompliance with cash management requirements under 2 CFR §200.305, as Federal funds may have been drawn in excess of immediate cash needs. Questioned Costs None Perspective Information This finding was identified during the audit of the Medicaid program (Assistance Listing 93.778) for the fiscal year ended 2025. The payments tested related to expenditures incurred and invoiced by a state agency acting as a subrecipient under an interagency agreement. Although both the pass-through entity and the subrecipient are agencies within the same state government, federal regulations treat them as distinct entities for purposes of cash management compliance. Prior Year Audit Finding This is not a prior year finding Recommendation It is recommended that the pass-through entity strengthens internal controls over subrecipient payments to ensure that all valid requests for payment are processed and paid within the 30-calendar-day timeframe required by 2 CFR §200.305(b)(1). Management should also ensure that payment procedures are not contingent upon the timing of federal drawdowns and that any delays are adequately documented and communicated to the subrecipient. We recommend that management strengthen internal controls over the drawdown process by implementing a formal review procedure to verify that all outstanding vendor credits have been identified and applied prior to submitting a Federal draw request. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.
Finding Number: 2025-013 State/Educational Agency(s): Arkansas Department of Commerce – Arkansas Economic Development Commission Pass-Through Entity: Not applicable AL Number(s) and Program Title(s): 21.029 – Coronavirus Capital Project Funds Federal Awarding Agency: U.S. Department of the Treasury Federal Award Number(s): CPFFN0186 Federal Award Year(s): 2022 Compliance Requirement(s) Affected: Cash Management Type of Finding: Noncompliance Repeat Finding: Not applicable Criteria: Pursuant to 31 CFR § 205.33, state recipients are required to minimize the time elapsing between drawdowns of award funds and outlays of award funds. Arkansas State Broadband Office (ASBO) procedures indicate the Agency should disburse funds within 15 days of drawdown from the U.S. Department of the Treasury. Condition and Context: ALA reviewed drawdowns from the U.S. Department of the Treasury to determine the funds were disbursed timely. Of 34 drawdowns, 19 exceeded the 15-day maximum processing time for disbursements. Statistically Valid Sample: Not a statistically valid sample Questioned Costs: None Cause: ASBO management did not ensure funds drawn down from the U.S. Department of the Treasury were paid to the subrecipient in accordance with Agency procedures. Effect: Failure to comply with federal regulations for minimizing time between the drawdown of funds from the U.S. Department of the Treasury and disbursement to the subrecipient may result in the denial of future requests for funds, suspension or termination of the federal award, or pursuit of other legal remedies. Recommendation: ALA staff recommend the Agency ensure drawdown of funds from the U.S. Department of the Treasury are disbursed to subrecipients within the 15-day maximum processing time in accordance with Agency procedures. Views of Responsible Officials and Planned Corrective Action: ASBO acknowledges the auditor’s observation regarding the timing of disbursements following drawdowns from the U.S. Department of the Treasury. ASBO procedures include a 15-day internal processing target intended to promote efficient payment processing. While 19 of 34 drawdowns exceeded this internal benchmark, the applicable federal standard under 31 CFR § 205.33 requires recipients to minimize the time between drawdown and disbursement. Additionally, under 2 CFR § 200.305(b)(3), when the reimbursement method is used, payment must be made within 30 calendar days after receipt of a proper payment request. ASBO recognizes the importance of maintaining strong cash management controls and ensuring timely payment to subrecipients. The State of Arkansas is enhancing tracking, reconciliation, and workflow controls within its financial management processes to better monitor drawdown-to-disbursement timing. These measures are intended to strengthen timeliness and prevent recurrence. Anticipated Completion Date: June 30, 2026 Contact Person: Glen Howie State Broadband Director Arkansas State Broadband Office 1 Commerce Way Little Rock, AR 72202 (501) 683-6000 broadband@arkansas.gov
Finding 2025-002 - U.S. Department of Education (USD), Title IV Student Financial Aid Programs (significant deficiency): Information on the federal program – Federal Pell Grant Program, FAL No. 84.063, June 30, 2025; Federal Work-Study Program, FAL No. 84.033, June 30, 2025; Federal Supplemental Opportunity Grant Program, FAL No. 84.007, June 30, 2025; Federal Direct Student Loan Program, FAL No. 84.268, June 30, 2025; Teachers Education Assistance for College (TEACH),FAL No. 84.379, June 30, 2025. Criteria – Under 2 CFR 200.305 and the U.S. Department of Education’s cash management requirements at 34 CFR 668.162, institutions must draw down Title IV funds only for expenditures that have already been incurred and must maintain supporting documentation on file at the time of each drawdown request to demonstrate: 1. The existence of actual, allowable expenditures equal to or exceeding the amount drawn; and 2. That such expenditures were incurred before requesting Federal funds. These regulations require contemporaneous records to support that drawdowns reflect immediate cash needs for allowable program costs. Condition – During our testing of cash drawdowns, we noted In four (4) of the eight (8) drawdowns tested, the College did not maintain adequate supporting documentation to substantiate that allowable expenditures had been incurred at the time of the drawdowns. Additionally, although drawdowns exceeded recorded expenditures at certain points during the year, the College did not have Federal cash on hand at year-end. Cause – The condition resulted from insufficient internal controls over the drawdown and documentation retention processes, including the absence of a timely reconciliation between recorded expenditures and drawdown requests. Effect – Requesting Federal funds without maintaining adequate documentation of actual expenditures increases the risk of noncompliance with Federal cash management requirements and may result in temporary use of Federal funds for unallowable purposes. As a result, questioned costs totaling $58,270 were identified. Questioned Costs – $58,270 Program Title FAL No. Questioned Costs Federal Work Study Program 84.033 $ 8,882 Federal Direct Loans 84.268 49,388 Total Questioned Costs $ 58,270 Auditor’s Perspective – While the College did not have Federal cash on hand at year-end, the lack of documentation and proper reconciliation at the time of drawdown represents a compliance deviation under Uniform Guidance. These conditions increase the risk that future drawdowns may not align with actual cash needs or allowable expenditures. Repeat Finding – No. Auditor's Recommendation – We recommend the College strengthen controls over the cash drawdown process by: • Ensuring that reimbursement requests are supported by complete and readily available documentation at the time of submission; and • Requiring contemporaneous reconciliations between expenditures and drawdown requests; • Implementing improved supervisory review procedures prior to requesting funds. View of Responsible Officials – The College now requires all drawdowns to include supporting documentation of the funds requested from G5, along with sign-offs on preparation and approval. Supporting documents are stored securely on the College's accounting drive for easy access. This procedure took effect as of July 31, 2025.
Finding 2025-003 - U.S. Department of Education (USD), TRIO Programs (Significant Deficiencies): Information on the federal program – Student Support Services, FAL No. 84.042A, June 30, 2025; Ronald McNair Program, FAL No. 84.217A, June 30, 2025. a) Cash Management/Drawdown Supporting Documentation and Recordkeeping Criteria – Under 2 CFR 200.305, non-Federal entities must request Federal funds only for allowable program costs that have been incurred, and must maintain contemporaneous supporting documentation demonstrating: 1. Actual, allowable expenditures existed at the time Federal funds were drawn; and 2. Records supporting the nature and timing of those expenditures were on file and readily available. These requirements ensure that drawdowns reflect immediate cash needs supported by verifiable program expenditures. Condition – During our testing of cash drawdowns, we noted in four (3) of the four (4) drawdowns tested, the College did not maintain adequate supporting documentation to substantiate that allowable expenditures had been incurred at the time of the drawdowns. Additionally, although drawdowns exceeded recorded expenditures at certain points during the year, the College did not have Federal cash on hand at year-end. Additionally, two (2) of these four (4) unsupported transactions lacked evidence of required approval, such as documented review or authorization prior to requesting Federal funds. Cause – The condition resulted from insufficient internal controls over the drawdown and documentation retention processes, including the absence of a timely reconciliation between recorded expenditures and drawdown requests. Effect – Requesting Federal funds without maintaining adequate documentation of actual expenditures increases the risk of noncompliance with Federal cash management requirements and may result in temporary use of Federal funds for unallowable purposes. As a result, questioned costs totaling $52,159 were identified. Questioned Costs – $52,159 Program Title FAL No. Questioned Costs Ronald McNair Program 84.217A $ 32,684 Student Support Services 84.042A 19,475 Total Questioned Costs $ 52,159 Auditor’s Perspective – Although no Federal cash was on hand at year-end and funds were ultimately applied to allowable TRIO costs, the absence of adequate support at the time of the drawdowns constitutes a compliance deviation. Without contemporaneous documentation, the accuracy and allowability of drawdown requests cannot be assured. Repeat Finding – No. Auditor's Recommendation – We recommend the College strengthen controls over the cash drawdown process by: • Ensuring that reimbursement requests are supported by complete and readily available documentation at the time of submission; and Requiring contemporaneous reconciliations between expenditures and drawdown requests; • Implementing improved supervisory review procedures prior to requesting funds. View of Responsible Officials – The College now mandates that G5 drawdown requests include approved documentation stored on the accounting drive, effective July 31, 2025. b) Time and Effort Reporting & Grant Salary Accuracy Criteria – (Compensation – Personnel Services Documentation Requirements): Under 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, and such records must: • Be supported by a system of internal controls providing reasonable assurance that the charges are accurate, allowable, and properly allocated; • Reflect 100% of the employee’s compensated activities, both Federal and non-Federal; • Be incorporated into the official records of the non-Federal entity; and • Be completed and documented in a timely and consistent manner. For TRIO programs, personnel costs must be supported by complete and accurate documentation demonstrating the portion of time dedicated to allowable TRIO activities Condition – During our testing of time and effort reporting and salaries charged to the TRIO programs, we identified the following exceptions: 1. Incorrect Salary Charge – For one (1) of the nine (9) time and effort reports tested, the salary expense charged to the McNair grant did not agree with the employee’s documented distribution of time. As a result, $24,947 of personnel costs charged to the grant were not supported by the corresponding time and effort report. 2. Incomplete Time and Effort Reports – Two (2) of the nine (9) reports tested, (both were for the same employee noted in the error above), were incomplete and did not reflect the employee’s full allocation of time across both restricted (grant-funded) and unrestricted activities. These omissions resulted in incomplete documentation to support the distribution of payroll costs. The College corrected the documentation after our inquiry; however, the corrections were not in place at the time of testing. Cause – The condition resulted from inconsistent application of time and effort reporting procedures and insufficient review controls to verify the completeness and accuracy of time distribution records prior to charging payroll costs to TRIO programs. Effect – Charging salaries without accurate, complete, and timely time and effort documentation increases the risk of unallowable personnel costs being charged to the program. As a result, questioned costs totaling $24,947 were identified for unsupported salary charges. Additionally, incomplete reports undermine the reliability of payroll allocations used to support Federal expenditures. Questioned Costs – Ronald McNair Program, FAL No. 84.217A: $24,947. Auditor’s Perspective – Although the College corrected the incomplete reports after our inquiry, corrections made after the fact do not demonstrate compliance at the time costs were charged. Accurate and complete time and effort reporting is essential to ensuring that salary costs charged to TRIO programs are allowable and properly supported. Repeat Finding – No. Auditor’s Recommendation – We recommend the College strengthen internal controls over time and effort reporting for TRIO programs by: • Ensuring all reports reflect 100% of compensated activities for each employee; • Implementing a supervisory review process to confirm accuracy before payroll is allocated to the grant; • Providing refresher training to staff responsible for preparing and approving time and effort documentation; and • Maintaining documentation that is complete, accurate, and contemporaneous with the period of performance. Views of Responsible Officials – Time and Effort reports must be submitted monthly with supervisor sign-off before reaching the Office of Sponsor Programs, showing 100% time allocation. Any changes will require a Personnel Action Form and administrative signatures of approval.
Finding 2025-003 - U.S. Department of Education (ED), Title III Programs (material weakness) Information on the Federal Programs – Title III, FAL No. 84.031, June 30, 2025 Criteria – Federal regulations require recipients of federal awards to minimize the time elapsing between the transfer of funds from the U.S. Department of Education and the disbursement of those funds. Specifically, 2 CFR §200.305(b) requires non-federal entities to maintain effective cash management procedures to ensure that federal funds are drawn only to meet immediate cash needs for program expenditures. Condition – The institution maintained excess federal cash balances for Title III programs at year-end of $1,320,114. Federal funds were drawn down in advance of actual program expenditures and were not disbursed within a reasonable period, resulting in excess cash balances that exceeded immediate program needs. Cause – The excess cash balances resulted from inadequate cash management procedures, including: a) lack of timely reconciliation between federal drawdowns and actual expenditures; b) drawdown practices not aligned with immediate cash needs; c) insufficient monitoring and oversight of grant cash balances and d) failure to adjust drawdown amounts based on current spending patterns. Effect – As a result of these deficiencies: a) federal cash was not managed in accordance with 2 CFR §200.305; b) the College was exposed to potential disallowances and increased federal oversight; c) there is an increased risk of questioned costs and repayment of excess funds and d) continued noncompliance may jeopardize future federal funding. Auditor’s Perspective – From the auditor’s perspective, the magnitude of excess cash, particularly within the Title III program, combined with the repeat nature of the finding, indicates a material weakness in internal control over compliance. Effective cash management controls are fundamental to federal grant compliance, and failure to correct this issue increases the risk of misuse or mismanagement of federal funds. Questioned Costs – $1,320,114. However, the excess cash balances represent noncompliance with federal cash management requirements and may be subject to further review or repayment if not promptly resolved. Repeat Finding – Yes. This finding was reported in a prior audit and corrective actions were not sufficient to prevent recurrence. Auditor’s Recommendation – We recommend that management: a) Establish and implement formal cash management procedures to ensure federal funds are drawn only to meet immediate cash needs; b) perform regular and timely reconciliations between drawdowns and actual expenditures for each federal program; c) strengthen oversight and monitoring of grant cash balances at both the program and central finance levels; d) provide training to staff responsible for federal drawdowns on federal cash management requirements and e) periodically review spending trends and adjust drawdown practices accordingly. Management should also develop and implement a corrective action plan to address the repeat nature of this finding and ensure sustained compliance with federal regulations. View of Responsible Officials – The College is aware of the findings and has hired additional staff to ensure that past behavior changes through a better understanding of the process. In addition, the College will send additional individuals to Title III Training. The college will ensure that every expenditure has a clear audit trail and that reconciliation is performed monthly. Progress will be tracked on each activity.
Finding 2025-004 - U.S. Department of Education (ED), TRIO Programs (material weakness) Information on the Federal Programs –TRIO Upward Bound, FAL No. 84.047A, June 30, 2025 and TRIO Student Support Services, FAL No. 84.042A, June 30, 2025 Criteria – Federal regulations require recipients of federal awards to minimize the time elapsing between the transfer of funds from the U.S. Department of Education and the disbursement of those funds. Specifically, 2 CFR §200.305(b) requires non-federal entities to maintain effective cash management procedures to ensure that federal funds are drawn only to meet immediate cash needs for program expenditures. Condition – The institution maintained excess federal cash balances for multiple federal programs at year-end, as follows: TRIO Upward Bound: $95,989 TRIO Student Support Services: $211,218 Federal funds were drawn down in advance of actual program expenditures and were not disbursed within a reasonable period, resulting in excess cash balances that exceeded immediate program needs. Cause – The excess cash balances resulted from inadequate cash management procedures, including: a) lack of timely reconciliation between federal drawdowns and actual expenditures; b) drawdown practices not aligned with immediate cash needs; c) insufficient monitoring and oversight of grant cash balances and d) failure to adjust drawdown amounts based on current spending patterns. Effect – As a result of these deficiencies: a) federal cash was not managed in accordance with 2 CFR §200.305; b) the College was exposed to potential disallowances and increased federal oversight; c) there is an increased risk of questioned costs and repayment of excess funds and d) continued noncompliance may jeopardize future federal funding. Auditor’s Perspective – From the auditor’s perspective, the magnitude of excess cash, particularly within the TRIO program, combined with the repeat nature of the finding, indicates a material weakness in internal control over compliance. Effective cash management controls are fundamental to federal grant compliance, and failure to correct this issue increases the risk of misuse or mismanagement of federal funds. Questioned Costs – $307,207. However, the excess cash balances represent noncompliance with federal cash management requirements and may be subject to further review or repayment if not promptly resolved. Repeat Finding – Yes. This finding was reported in a prior audit and corrective actions were not sufficient to prevent recurrence. Auditor’s Recommendation – We recommend that management: a) Establish and implement formal cash management procedures to ensure federal funds are drawn only to meet immediate cash needs; b) perform regular and timely reconciliations between drawdowns and actual expenditures for each federal program; c) strengthen oversight and monitoring of grant cash balances at both the program and central finance levels; d) provide training to staff responsible for federal drawdowns on federal cash management requirements and e) periodically review spending trends and adjust drawdown practices accordingly. Management should also develop and implement a corrective action plan to address the repeat nature of this finding and ensure sustained compliance with federal regulations. View of Responsible Officials – The College is aware of the past breakdown in Internal controls under the previous Administration and is working closely with the directors to ensure that we do not have any repeat findings in this area. The main tasks that are being performed are hiring of additional staff, constant communication, and timely reconciliation.
Finding 2025-002 – Indirect Cost Reimbursement Noncompliance with Federal Requirement Program: ALN # 84.282M Charter Schools Program Criteria or Specific Requirements In accordance with: •2 CFR §200.403, costs charged to federal awards must be allowable and based on actual activity; •2 CFR §200.414, indirect costs must be calculated by applying the approved rate to actual direct costs incurred; and •2 CFR §200.305(b), under the reimbursement method, federal funds must be drawn only for costs incurred. Condition The Organization requested and received $130,000 of indirect cost reimbursement during the fiscal year ended June 30, 2025. However, only $44,575 was supported by actual allowable direct costs incurred during the eligible period April 1, 2025 to June 30, 2025. The excess amount of $85,425 relates to expenditures applicable to a subsequent period. During the audit, management recorded this amount as a grant advance (liability) and did not recognize it as revenue or expense in the current year. Cause Use of budgeted amounts and lack of review controls. Effect Reimbursement requests exceeded allowable costs incurred during the period, resulting in noncompliance. Questioned Costs None, the excess was adjusted to a liability account. Context This exception was noted in 1 of 1 sample selected of indirect cost claims during the period. Recommendation We recommend that the Organization design and implement controls to ensure reimbursements are reviewed and based on actual costs. Views of Responsible Officials and Corrective Action Plan iLearn Schools, Inc. notes that the excess reimbursement of $85,425 was identified, properly recorded as a grant advance liability, and not recognized as revenue or expense in the current year. Going forward, all reimbursement requests will be based on actual allowable direct costs incurred. Management will establish written procedures for indirect cost recovery, implement a formal review and reconciliation process prior to submission, and provide staff training on Uniform Guidance requirements. These corrective actions will be in place for the fiscal year ending June 30, 2026.
Cash Management Federal Program and Specific Federal Award Identification CFDA Title and Number 84.031 Higher Education Institution Aid Federal Award Year June 30, 2025 Federal Agencies U. S. Department of Education Pass-Through Entity Not applicable Criteria Pursuant to Uniform Guidance § 200.305, institutions must maintain documentation supporting cash drawdowns and ensure that federal funds are drawn only for immediate cash needs and are supported by underlying expenditures. Conditions and Contexts During my testing, I noted twenty-five (25) transactions out of twenty-five (25) tested in which the University did not provide documentation to support the related drawdown requests. Cause The University did not maintain or provide adequate documentation to support drawdown activity. Questioned Costs For the purposes of this condition, I have not questioned any costs. Effect Without supporting documentation, there is no assurance that drawdowns were made in accordance with federal requirements, increasing the risk of excess cash on hand or unsupported use of federal funds. Repeat Finding No. Recommendation The University should implement procedures to ensure that all drawdowns are properly supported by detailed expenditure records and that documentation is retained and available for audit. Management should also perform periodic reviews of drawdown activity for compliance. Management’s Response The University acknowledges the finding related to missing documentation supporting cash drawdowns for the Higher Education Institutional Aid program. We recognize that federal regulations require all drawdown requests to be supported by underlying expenditures and appropriate supporting records. Corrective Actions 1. Implementation of Required Documentation Procedures The University has established a formal process requiring that all drawdown requests be supported by detailed expenditure reports before funds are drawn. Supporting documentation must be uploaded and retained in a shared electronic repository. 2. Enhanced Review and Approval Controls: Drawdown requests must now undergo a two step review process by Grants Management and the Controller’s Office to ensure compliance with cash management requirements prior to submission. 3. Staff Training: Relevant staff is updating training on Uniform Guidance §200.305 requirements and on maintaining complete documentation to support each drawdown. 4. Ongoing Monitoring: Periodic internal reviews will be conducted to confirm that all future drawdowns are documented, properly supported, and compliant with federal cash management standards. The University believes these actions will strengthen internal controls over cash drawdowns and ensure compliance with federal regulations moving forward.
U.S. DEPARTMENT OF JUSTICE PUBLIC SAFETY PARTNERSHIP AND COMMUNITY POLICING GRANT- AL NUMBER 16.710 AUDIT PERIOD - YEAR ENDED JUNE 30, 2025 2025-001. Cash Management Criteria or specific requirement: Advance payments must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the recipient, as specified in 2 CFR § 200.305(b)(1). The 2024 COPS Office School Violence Prevention Program (SVPP) Award Owner's Manual states the period allowed for advance payments is 10 days, and any interest earned on federal advance payments deposited in interest-bearing accounts that is in excess of $500 per year must be remitted annually to the Department of Health and Human Services Payment Management System. Condition: The District requested and received a federal drawdown of $400,352 from their COPS School Violence Prevention Program (Program) award on December 3, 2024. The Program allows for a 10-day period for federal advance payments. Following the allowable 10-day period, the District had $344,102 of excess federal award funds on hand. The remaining funds were spent from January 28, 2025 to February 11, 2025. Cause: Lack of internal controls over the timing of the drawdown and disbursement of award costs. Effect or potential effect: The failure to properly monitor drawdowns and limit the time between drawdown and disbursement could result in program noncompliance and loss of program funds. In addition, excess drawdowns can lead to interest earned on federal advance payments, which must be returned in excess of $500 per year. Questioned costs: None Context: In November 2024, the District requested a drawdown of the entire COPS grant award in the amount of $400,352, with $56,250 being expended prior to the request. The drawdown was received by the District on December 3, 2024. The remaining $344,102 was disbursed by the District from January 28, 2025 through February 11, 2025. Identification as a repeat finding: No Recommendation: The District should implement procedures to ensure drawdowns are timed with the District's immediate cash requirements and consult with the Department of Justice COPS Office. Views of responsible officials: The District will implement procedures to ensure drawdowns are timed with the District's immediate cash requirements.
Criteria or Specific Requirement – Cash Management – Non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. 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 (2 CFR 200.305(b)). Condition – The University drew funds in advance that were not disbursed as soon as administratively possible. Cause – The internal controls did not ensure that disbursements were reconciled prior to drawing funds. Questioned Costs – ALN 84.047A – $18,355 calculated as the amount of cumulative draws in excess of cumulative expenditures not disbursed as soon as administratively possible. Context – Out of the population of 137 draws made during the year, a sample of 14 was selected for testing. Our sampling method was not, and was not intended to be, statistically valid. One draw was not fully expended as soon as administratively possible. Effect or Potential Effect – Funds were drawn in advance and not fully disbursed as soon as administratively possible. Identification as a Repeat Finding, if applicable – Not applicable Recommendation – The University should update their controls to ensure the time is minimized between the transfer of funds from US Treasury and disbursement by the non-federal entity. Views of Responsible Officials and Planned Corrective Actions – Management acknowledges the finding related to cash management requirements and the timing of federal fund draws and disbursements. While the University maintains a robust, multi-layered review process, enhancements are necessary to ensure full alignment with federal requirements regarding the minimization of time between the receipt and disbursement of funds. The University currently utilizes several internal controls, including: • A two-person pre-draw validation process to ensure draws align with liquidated expenses • Programmatic oversight through detailed fiscal year draw reports and reconciliation to G5 activity • Periodic fiscal year and program year reviews to identify and correct discrepancies These controls enabled the University to identify and correct the instances noted in the audit. However, management recognizes that refinements are needed to further align the timing of draws with actual cash disbursement activity. To address this, the University will implement the following corrective actions: 1. Refinement of Draw Timing – Draw requests will be more closely aligned with immediate cash needs and anticipated disbursement activity. 2. Enhanced Pre-Draw Reconciliation – In addition to existing controls, a real-time reconciliation of outstanding obligations and pending disbursements will be required prior to each draw to ensure alignment with cash needs. 3. Standardized Draw Calendar Adjustments – The University will evaluate and adjust its draw schedule, where necessary, to better align with actual disbursement cycles, including payroll and purchase card activity. 4. Formalized Monitoring and Documentation – Documentation will be maintained to support the relationship between drawdowns and disbursements, and periodic internal reviews will be conducted to ensure ongoing compliance. 5. Training and Communication – Additional guidance will be provided to program and fiscal staff regarding federal cash management requirements and expectations for timing of draws. Management believes these enhancements, in combination with existing internal controls, will ensure compliance with federal cash management requirements and prevent recurrence of this issue.
U.S. DEPARTMENT OF EDUCATION MAGNET SCHOOLS ASSISTANCE - AL NUMBER 84.165A AUDIT PERIOD - YEAR ENDED JUNE 30, 2025 2025-001. Cash Management Criteria or specific requirement: 2 CFR § 200.305 requires that for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. In addition, interest earned on federal funds up to $500 per year may be retained by the non-Federal entity for administrative expenses. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be returned annually to the Department of Health and Human Services Payment Management System. Condition: On March 21, 2025, the District made a drawdown of Magnet Schools Assistance Program (MSAP) funds totaling $804,310, which consisted of reimbursements of $62,794 and advance payment of $741,516. From March 21, 2025 through June 30, 2025, the District incurred expenditures of $321,608 while also drawing down additional funds of $87,216 and $99,155 on April 30, 2025, and May 30, 2025, respectively. This resulted in significant time elapsing between the drawdown of funds and the disbursement of the funds by the District. At June 30, 2025, the District had $606,279 of excess federal award funds on hand. Cause: Lack of internal controls in place surrounding the drawdown of funds. Effect or potential effect: The failure to properly monitor drawdowns and limit the time between drawdown and disbursement can result in program non-compliance and loss of program funds. In addition, excess drawdowns can lead to interest earned on federal advance payments, which mut be returned in excess of $500 per year. Questioned costs: None Context: An examination of three of six cash drawdowns and supporting documentation revealed excess funds drawn, because the District did not adjust future draws or return excess funds. Identification as a repeat finding: No Recommendation: The District should implement internal control processes and monitoring for MSAP cash drawdowns and ensure drawdowns are timed with the District's immediate cash requirements. Views of responsible officials: The District has implemented an internal control process that requires the review and approval of detailed expenditure reports and G5 drawdown amounts prior to submission. The review process includes the Director of the Magnet Program, Finance Coordinator, Executive Director of School Leadership, and the Business Manager to ensure accuracy, compliance, and proper authorization before completion.
Finding No. 2025-079 Prior Year Finding: 2024-081 Federal Awarding Agency: U.S. National Science Foundation, U.S. Department of the Interior and U.S. Department of Agriculture (USDA) Impact: Significant Deficiency, Noncompliance AL Number and Title: 10.237 From Learning to Leading: Cultivating the Next Generation of Diverse Food and Agriculture Professionals 15.423, 47.050, 47.074, 47.078 Research and Development Cluster (RDC) Federal Award Number: 2040541-2025, 2224776-2025, 2322806-2025, M24AC00008-2025, 20237044040222-2025 Applicable Compliance Requirement: Cash Management Condition: The University did not make payments to subrecipients within 30 days after receipt of invoices. Context: During our testing we identified 11 out of 40 subrecipient payments related to four grants from the University of Alaska Fairbanks (UAF) under RDC, that did not process payment requests from the subrecipients timely. During our testing we identified two out of eight subrecipient payments related to one grant from UAF under the From Learning to Leading: Cultivating the Next Generation of Diverse Food and Agriculture Professionals Program, did not process payment requests from the subrecipients timely. Cause: UAF did not process payment requests from the subrecipients timely. Criteria: Uniform Grant Guidance (2 CFR section 200.305(b)(3)) requires that when the reimbursement method is used, the Federal awarding agency or pass-through entity must make payment within 30 calendar days after receipt of the billing, unless the Federal awarding agency or pass-through entity reasonably believes the request to be improper. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effect: Subrecipients on federal awards do not receive timely payment for federal contract work. Questioned Costs: None Recommendation: We recommend the University review and update policies and procedures to allow for more timely payment to subrecipients for work the University contracts them to perform. Views of Responsible Officials: Management agrees with this finding.
Program information: Child Nutrition Cluster, U.S. Department of Agriculture passed through the Michigan Department of Education, 10.553, 10.555, 10.559, 10.582 Criteria: Title 2 of the Code of Federal Regulations (CFR) Part 200.305 requires non‑Federal entities to request reimbursement for allowable expenditures in a timely manner and to maintain effective controls to ensure federal grant funds are properly claimed and received. Additionally, program regulations require participating school food authorities to submit monthly claims for reimbursement for meals served under the National School Lunch Program and School Breakfast Program in accordance with deadlines established by the Michigan Department of Education. Condition: The School did not submit meal reimbursement requests for the months of March 2025 and April 2025 through the Child Nutrition Cluster Federal Awards Program in a timely manner. As a result, allowable meal service expenditures incurred during those months were not requested for reimbursement from the USDA through the Michigan Department of Education, resulting in lost revenue of approximately $250,000 for March, and unavailable revenue being recorded for the April request for approximately $315,000. Questioned costs: None Cause and effect: Management did not have adequate internal controls in place to ensure monthly meal reimbursement claims were prepared, reviewed, and submitted in a timely manner. The lack of controls resulted from significant turnover in the districts business office. The School failed to claim federal reimbursement for allowable child nutrition expenditures for two reporting periods, resulting in the loss of available revenue. Recommendation: We recommend that management establish and implement formal internal controls to ensure all child nutrition cluster reimbursement requests are prepared and submitted timely. Controls should include documented monthly procedures, assignment of responsibility, supervisory review of claims prior to submission, and periodic monitoring to confirm that all eligible reimbursements have been requested. Views of responsible officials: Management agrees with the finding. Corrective action plan: See attached corrective action plan.
Criteria: Per 2 CFR Section 200.305(b)(9) and North Carolina Administrative Code, the portion of any sales tax refunds received that pertain to federal funds administered by the North Carolina Department of Public Instruction (NC DPI) must be refunded to the appropriate federal program that paid the sales tax. Condition: Sales tax refunds received were not refunded to the appropriate federal program that paid the sales tax. Cause: Internal controls were not adequately designed and implemented to ensure that sales tax refunds received were refunded to the appropriate federal program that paid the sales tax Effect: The Local Education Agency (LEA) may be required to reimburse the overpayment of federal funds to NC DPI. Questioned Costs: $189,016 - All sales tax refunds received which pertain to federal programs. Recommendation: Internal controls should be adequately designed and implemented to ensure that sales tax refunds are appropriately refunded to the program that paid the sales tax. Views of responsible officials: The Board agrees with this finding and has set forth a correcve acon pl an. Corrective Action: The Board will implement internal controls over sales tax refunds of federal programs to ensure any such amounts are appropriately applied to the program(s).
FINDING 2025-015 Federal Program Information: Research and Development Cluster (various ALN #’s) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): C. Cash Management - per 2 CFR Part 200.305(b)(3), when the reimbursement method is used, the Federal agency or pass-through entity must make payment within 30 calendar days after receipt of the payment request unless the federal agency or pass-through entity reasonably believes the request to be improper. M. Subrecipient Monitoring – per 2 CFR Part 200.332(e)(1), a pass-through entity must monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In monitoring a subrecipient, a pass-through entity must review financial and performance reports. Additionally, in accordance with 2 CFR 200.332(g), a pass-through entity must verify that a subrecipient is audited as required by Subpart F of Part 200. Condition: The University’s procedures failed to minimize the time elapsing between the transfer of federal funds to the subrecipient and the disbursement of such funds for program purposes by the subrecipient. The University was unable to provide documentation evidencing appropriate, annual review of its subrecipients’ Single Audit reports. Cause: Administrative oversight and insufficient internal controls. Effect or Potential Effect: The University was not in compliance with the requirements for pass-through entities. Questioned Costs: None. Context: • For 3 of 23 subrecipient payments tested, the University was unable to provide documentation evidencing appropriate review by the principal investigator. • For 6 of 23 subrecipients payments tested, payment was not made within the required timeframe. • For 7 of 7 subrecipients tested, the University was unable to evidence its verification of whether an audit had been performed. Identification as a Repeat Finding: This is a repeat of prior year finding 2024-013. Recommendation We recommend that the University enhance subrecipient monitoring controls by implementing documented invoice review protocols and enforcing annual audit verification procedures for all subrecipients. Management should define responsibilities for these reviews, document oversight activities performed, and implement monitoring controls to ensure compliance with federal subrecipient monitoring requirements. Views of Responsible Officials: In response to the auditor’s recommendation to enhance internal controls and ensure timely review of invoice protocols and subrecipient monitoring, Howard University is implementing the following: • The University is currently piloting a new Supplier Invoice Portal, launched jointly by the Sponsored Programs Office and the Office of Procurement, to improve invoicing efficiency and compliance. Under this new process, subrecipients will be required to submit invoices electronically in accordance with the terms and conditions of their subawards. The portal will support a streamlined review and approval process, with invoices routed through an automated workflow to ensure timely review and disbursement. • To support completion of the University’s annual audit verification requirements for subrecipients, oversight will occur at multiple stages throughout the subaward lifecycle. This includes reviewing audit reports at the proposal development stage, during which subrecipients are required to complete a Subrecipient Commitment Form (implemented September 2025) prior to proposal submission. • At the award stage, refreshed due diligence will be conducted, including a re-review of the subrecipient’s Single Audit and/or financial statements. Finally, the Post Award Compliance team will perform an annual review of subrecipients’ audit reports and complete audit follow up procedures as necessary.
FINDING 2025-018 Federal Program Information: USAID Foreign Assistance for Programs Overseas (ALN 98.001) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): C. Cash Management - 2 CFR §200.305(b)(1) indicates that advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. Condition: The University was unable to fully reconcile advance payments received from the sponsor to certain expenses incurred during the year. Cause: Administrative oversight and insufficient internal control. Effect or Potential Effect: The University was not in compliance with cash management requirements. Questioned Costs: None. Context: For 4 of 25 expenditures tested, the University was unable to reconcile the expenditure to the related sponsor payments received. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend that the University enhance its procedures and internal controls over compliance to ensure that cash draws are properly reconciled to expenditures. Views of Responsible Officials: The University receives advance payments from the sponsor, with the amount determined by the sponsor and adjusted as financial reports are submitted by the University. In response to the auditor’s recommendation to strengthen internal controls, Howard University will implement procedures to document and reconcile all cash payments received from sponsors on a quarterly basis to actual expenses incurred. This reconciliation process will help ensure that sponsor payments are fully accounted for and appropriately matched to related expenditures, thereby enabling the University to clearly demonstrate which expenses have been reconciled to payments received.
Finding 2025-002 – Cash Management (Reimbursement Request Error) Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Compliance Requirement: Cash Management Type of Finding: Significant Deficiency in Internal Control Over Compliance and Noncompliance Criteria Per 2 CFR §200.305(b)(1) and the terms of the subaward, the pass-through entity required the non-Federal entity to use the reimbursement method. Under this method, payment may be requested only for actual, allowable, and properly supported expenditures. Additionally, per 2 CFR §§200.302 and 200.303, the non-Federal entity must maintain financial management systems and internal controls sufficient to ensure reimbursement requests are accurate and supported by appropriate documentation. Condition The Town of Wheatland requested reimbursement totaling $74,113.15 in excess of actual, allowable, and supported expenditures due to an error in compiling reimbursement request amounts. As a result, the request was not fully supported by underlying documentation at the time of submission. The error was later identified by the Town and corrected through a subsequent reimbursement adjustment. Cause The condition resulted from insufficient review procedures over reimbursement requests, including a lack of detailed reconciliation between requested amounts and supporting expense documentation prior to submission. Effect The Town temporarily requested federal funds in excess of allowable and supported expenditures, resulting in noncompliance with cash management requirements. Questioned Costs None. Repeat Finding No. Recommendation We recommend the Town strengthen internal controls over reimbursement requests by implementing a secondary review of reimbursement calculations prior to submission, establishing a formal reconciliation process between requested amounts and supporting documentation, and using a standardized checklist to verify the completeness and accuracy of reimbursement requests. Views of Responsible Officials Management agrees with the finding and has corrected the identified error. Additional review procedures and reconciliations will be implemented to ensure reimbursement requests are accurate and fully supported prior to submission.
Significant Deficiency, Nonmaterial Non-Compliance North Carolina Department of Public Safety Program name: Community Development Block Grant/State’s Program and Non-Entitlement Grants in Hawaii (CDBG) AL Number: 14.228 Grant Number: 21-C-4010(NR) Criteria: In accordance with 2 CFR 200.305, the Town is required to maintain an adequate system of internal controls to ensure compliance with cash management requirements. Management must minimize the time elapsing between the transfer of funds form the agency and the disbursement of those funds by the recipient. Condition: The Town did not have adequate internal controls in place to ensure cash management compliance requirements. Our testing identified that reimbursement request #4 was drawn down and received in August; however, the related disbursement to the vendor was not made until September. As a result, fund were not disbursed within the required three-day timeframe. Context: Of the 43 expenditures totaling $755,482, we tested 24 transactions (19 ISI valued at $666,643 and five additional valued at $33,628) We noted that one transaction, valued at $6,563, did not meet the cash management requirements. Effect: The lack of effective internal controls over cash management increases the risk that errors to irregularities may occur and go undetected and may result in non-compliance with the grant requirements. Cause: This condition occurred because the Town did not disburse funds to the vendor within three business days of receipt. Questioned Costs: In accordance with 2 CFR 200, auditors are required to report known questioned costs when likely questioned costs exceed $25,000. Likely questioned costs do not exceed $25,000. Recommendation: Management should strengthen the internal controls over cash management of grant funds to ensure that the requirements are met. Views of Responsible Officials and Planned Corrective Action: The Town agrees with this finding. Please refer to the Corrective Action Plan section of this report. 106
U.S. Department of Health and Human Services Congressional Directives - 93.493 Award# CE152271 Criteria or Specific Requirement – Cash Management and Significant Deficiency Non-federal entities must minimize the time elapsing between the transfer of funds from the U.S. 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 (2 CFR Section 200.305(b)). Condition – During our test work over the Congressional Directive grant, we noted the Hospital received the grant funds in October 2023. The funds were placed in a restricted cash account and were not expended until January 2025, when the MRI equipment was invoiced and subsequently paid for. As such, grant funds were drawn in advance of the incurrence of allowable costs. Cause – Management indicated that, at the time the grant funds were drawn, a former Chief Financial Officer was responsible for grant administration. Management believes the funds were drawn early to demonstrate receipt of grant funding in order for construction on the MRI suite to proceed. However, management was unable to locate written authorization, correspondence, or other documentation from HRSA approving an advance drawdown. Effect or Potential Effect – The Hospital did not comply with federal cash management requirements, as grant funds were drawn in advance of the incurrence of allowable costs and without documented federal approval. Questioned Costs – None noted. Context – The MRI equipment could not be purchased until remodeling of the imaging suite was completed, patient safety concerns were addressed, and inspection was completed. The Hospital did maintain the grant proceeds in restricted cash and did not use the funds for other purposes. No documentation was provided evidencing HRSA approval to draw funds prior to expenditure. Identification as a Repeat Finding, if applicable – Not applicable. Recommendation – Management should strengthen controls to ensure federal grant funds are drawn only as allowable costs are incurred and in accordance with grant agreement terms. Controls should require documented evidence of incurred costs prior to drawdown and retention of any federal approvals authorizing advance funding. Views of Responsible Official and Planned Corrective Actions – Management agrees with finding. See corrective action plan.
Health Center Program Cluster – Assistance Listing Nos. 93.224 and 93.527 U.S Department of Health and Human Services Award No. 5 H80CS00681-23-07, June 1, 2024 – May 31, 2025 Award No. 6 H80CS00681-24-04, June 1, 2025 – May 31, 2026 Award No. 5 H8KCS49728-02-00, September 1, 2024 - August 3, 2025 Criteria or Specific Requirement – Cash Management – 2 CFR 200.305 Condition – The Organization’s internal controls over the cash drawdown process did not minimize the time elapsing between the transfer of funds to the Organization from the U.S. Treasury and the issuance of payments for program purposes by the Organization. Cause – The Organization did not comply with their federal cash drawdown policy or federal grant cash management requirements. Effect or potential effect– Grant funds were drawn down sooner than administratively necessary. Questioned Costs – None Context – The Organization did not follow their process of determining whether sufficient grant expenditures had been incurred and disbursed prior to drawing down grant funds. Grant funds were drawn down prior to disbursements of expenditures within the grant period for $707,934 for two out of eleven draws during the fiscal year ended June 30, 2025. Identification as a repeat finding, if applicable – Not a repeat finding. Recommendation – The Organization should ensure procedures are followed to prevent cash draws from being drawn down prior to disbursement of allowable expenditures. Views of Responsible Officials and Planned Corrective Actions – Management Response - Management concurs with the auditor's finding. The Organization acknowledges the cash drawdown process was not operating effectively to minimize the time lapsing between the transfer of funds to the Organization from the U.S. Treasury and the issuance of payments for program purposes to the Organization. Corrective Action Taken - Designated Crossing Healthcare staff will submit cash draw down requests no more than 5 business days prior to the anticipated pay date for the pay period claimed. Management has developed a dedicated schedule listing Organization pay periods, pay dates, appropriate fund draw dates, and funding draw amounts. Completion Date - Completed 5/7/2026 Responsible Contact Person - Julie Brilley, CEO
2025-004: Cash management - excess cash - ALN 93.568 Condition: The Organization maintained excess cash balances throughout the fiscal year. Monthly balances ranged from approximately $39,000 to $296,000, with consistently elevated balances observed during multiple months. These balances indicate that federal funds were drawn down in advance of immediate cash needs. Criteria: In accordance with 2 CFR §200.305(b), non-federal entities must minimize the time elapsing between the transfer of funds from the federal awarding agency and the disbursement of those funds. Cash management practices should ensure that drawdowns are limited to amounts needed for immediate disbursement of program costs. Cause: The condition appears to be the result of inadequate alignment between cash drawdowns and actual disbursement needs, as well as a lack of ongoing monitoring of program cash balances to ensure compliance with federal cash management requirements. Questioned Costs: N/A Effect: Maintaining excess federal funds on hand increases the risk of noncompliance with federal regulations and may result in the Agency being subject to interest liability on advanced funds. Additionally, it reflects weakened internal controls over cash management and increases the risk of inefficient use of federal resources. Recommendation: We recommend that the Agency strengthen its cash management procedures to ensure compliance with federal requirements by aligning cash drawdowns more closely with immediate disbursement needs. This should include developing and utilizing short-term cash forecasts to support draw requests, performing regular monitoring and review of program cash balances, and maintaining documentation that clearly demonstrates the timing and necessity of each draw. Additionally, management should ensure that personnel responsible for cash management are adequately trained on federal cash management requirements to prevent excess cash from being held going forward. Views of Responsible Officials: Management agrees with this finding and their response is included in the corrective action plan.
2025-002 Finding: Material Weakness in Internal Control Over Compliance and Material Non-Compliance Federal Agency: U.S. Department of Education Federal Programs: 84.063 Federal Pell Grant Program; 84.268 William D. Ford Federal Direct Loan Program Compliance Requirement: Cash Management Repeat Finding: No Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200.305 requires non-Federal entities using the advance payment method to minimize the time between the transfer of federal funds and their disbursement. Advance payments must be limited to the minimum amounts needed and aligned with the entity’s actual, immediate cash requirements. To use the advance payment method, entities must maintain written cash management procedures and financial management systems that provide effective control and accountability over federal funds. In addition, 2 CFR 200.302(b)(3) and (b)(6) require entities to maintain financial management systems and written procedures sufficient to permit the tracing of federal funds to underlying expenditures and to implement the cash management requirements of 2 CFR 200.305. 2 CFR 200.303 further requires entities to establish and maintain effective internal control over federal awards to provide reasonable assurance of compliance, including monitoring activities. For Title IV Student Financial Assistance programs, 34 CFR 668.162(b) requires institutions using the advance payment method to request funds only for amounts needed immediately for disbursements made or to be made to eligible students and to disburse those funds no later than three business days after receipt. Condition: The College did not have written procedures governing drawdowns, including draw calculations, timing, approvals, reconciliations, or the return of excess funds. Tested draws were not consistently supported by documentation evidencing the accuracy of the expenditures being reimbursed. In addition, the College did not perform or document reconciliations between underlying disbursement records and authorized draw requests and did not monitor cash balances to identify whether positive balances were carried forward from period to period. As a result, the College could not demonstrate that draw amounts consistently reflected only eligible expenditures incurred during the applicable period. Cause: Management had not established a formal, documented cash management control framework, and responsibilities for draw preparation, review, approval, reconciliation, and monitoring were not clearly defined. As a result, draw requests, supporting documentation, and reconciliations were prepared inconsistently or not retained, and controls were not in place to identify or prevent excess cash on hand. Effect: Because the College did not maintain written cash management procedures, retain consistent support for draw calculations, or perform and document reconciliations of draws to underlying student disbursements and cash balances, the College could not demonstrate that Title IV funds were drawn only for actual, immediate cash needs or that drawn funds were timely disbursed in accordance with advance payment requirements. This condition increases the risk that the College may draw excess cash or draw funds in advance of need, be unable to detect or prevent noncompliance due to inadequate internal controls, and be subject to the return of excess funds, administrative actions, or questioned costs if noncompliance could be quantified. Recommendation: The College should strengthen cash management controls over the SFA Cluster by implementing the following: 1. Adopting written cash management procedures addressing draw calculations, timing of draws, approvals and segregation of duties, required supporting documentation, reconciliation requirements, and the identification and return of excess cash. 2. Maintaining a standardized draw file for each draw that includes approval evidence, supporting disbursement detail, a reconciliation to student-level disbursements by award type, and documentation of cash balances before and after the draw. 3. Performing and retaining monthly reconciliations between student-level disbursement records and federal cash activity, including documented supervisory review. Auditor’s Note: The engagement team noted that the cash management control deficiencies described in this finding have a direct impact on the College’s ability to support other Title IV compliance requirements that rely on traceable federal cash activity, including Return of Title IV Funds (R2T4). Specifically, where the College does not retain draw or return support, does not perform reconciliations between underlying student transactions and authorized activity, and does not maintain a clear audit trail of federal cash balances, it may be unable to demonstrate that Title IV funds were returned to the Department when required and that such returns can be traced from student-level determinations through COD activity and ultimately to federal cash activity (e.g., G5). View of Responsible Officials: See Auditee’s Corrective Action Plan. Questioned Costs: $0, Unknown
Federal Agency: Major Program – U.S. Department of Health and Human Services. Other Program –U.S. Department of Justice Federal Program Name: Major Program – HIV Prevention Activities: Non-Governmental Organization Based. Other Program – Grants for Outreach and Services to Underserved Populations Assistance Listing Number: Major Program – 93.939. Other Program – 16.889 Federal Award Identification Number: Major Program – NU65PS923746. Other Program – 15JOVW-22-GG-00404-UNDE Award Period: Major Program – July 1, 2024 through June 30, 2025. Other Program – October 1, 2024 through September 30, 2025. Type of Finding: • Material Weakness in Internal Control over Compliance and Compliance – Cash Management. Criteria or Specific Requirement: Per the Uniform Guidance (2 CFR §200.305), non-federal entities must minimize the time between the transfer of funds from the U.S. Treasury and the disbursement for program purposes. Drawdowns must be based on immediate cash needs and supported by incurred expenses. Condition: During the audit of federal program compliance, it was identified that the entity drew down federal funds in excess of the amounts incurred for allowable expenses. Specifically, cash management procedures did not ensure that funds drawn down were limited to actual expenditures incurred, resulting in excess cash balances held temporarily beyond the allowable timeframe. Questioned Costs: Major Program – $339,859. Other Program – $110,783. Context: We noted through our testing of drawdowns and related expenses that as of June 30, 2025 Mazzoni Center had drawn down $339,859 more funds than it had expended on the contract for Assistance Listing No. 93.939 HIV Prevention Activities. It was also identified that $110,783 of funds were drawn down in excess of funds expended for Assistance Listing No. 16.889 Grants for Outreach and Services to Underserved Populations which was not deemed to be a major program. The individual drawing down funds from the federal agencies did not draw down funds based on the expenses incurred each month. Cause: The entity lacked effective internal controls to reconcile actual drawdowns with expenditures incurred. Effect: This deficiency resulted in noncompliance with federal cash management requirements and exposed the entity to potential interest liabilities and reputational risk. It also indicates a reasonable possibility that material noncompliance with federal requirements may not be prevented or detected and corrected on a timely basis. Repeat Finding: Yes Recommendation: We recommend that management ensure drawdowns are strictly aligned with incurred and allowable expenses. This should include: • Pre-drawdown verification of expense documentation. • Monthly reconciliations of drawdown activity to actual expenditures. • Training for staff involved in federal fund management on Uniform Guidance requirements. Views of Responsible Officials: There is no disagreement with the audit finding. See Corrective Action Plan.
Condition During our testing of cash draws, we noted the Education Alliance requested and received federal funds for certain expenditures from subrecipients prior to the related costs being incurred. Specifically, funds were requested based on subrecipient annual agreements rather than actual expenditures incurred as of the date of the draw request. Criteria In accordance with requirements set forth by 2 CFR section 200.305(b), non-federal entities are required to minimize the time elapsed between the transfer of federal funds from the awarding agency and the disbursement of those funds for programmatic purposes. Cause The Education Alliance did not have adequate controls in place to ensure that cash drawdowns for subrecipient activity aligned with the timing of actual expenditures incurred by subrecipients. Effect Federal funds were drawn in advance of allowable programmatic expenditures, resulting in noncompliance with federal cash management requirements and the accumulation of significant refundable advances at year-end. Questioned Costs No questioned costs were identified. Recommendation We recommend the Education Alliance implement procedures to ensure that cash drawdowns related to subrecipient agreements are supported by expected disbursement needs, including monitoring subrecipient expenditure activity and reimbursement status, to minimize the time between receipt and disbursement of federal funds. Management Response Management will review its cash management procedures to ensure that federal drawdowns are supported by actual or immediate cash needs based on expenditures incurred. Management will also closely monitor subrecipient expenditure activity and reimbursement timing to ensure compliance with 2 CFR 200.305(b) and minimize the time between receipt and disbursement of federal funds.
Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Federal Programs ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN 21.027, Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency ALN 21.027, Coronavirus State and Local Fiscal Recovery Funds Category U.S. Department of Treasury U.S. Department of Homeland Security Compliance Requirement Activities Allowed/Unallowed, Allowable Costs/Cost Principles, Period of Performance, Project Accounting. Criteria 2 CFR Part 200 Subpart D Subsection 200.302 states the following: The recipient's and subrecipient's financial management system must provide for the following: 1. Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. 2. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 102 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Criteria – (continued) 3. Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. 4. Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. 5. Comparison of expenditures with budget amounts for each Federal award. 6. Written procedures to implement the requirements of § 200.305. 7. Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. In addition, the 2 CFR Compliance Supplement states the following under Special Test and Provisions – Project Accounting: For large projects, the recipient is required to make an accounting to Federal Emergency Management Agency (FEMA) of eligible costs. Similarly, the subrecipient must make an accounting to the recipient. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project is in compliance with the provisions of the FEMA-State Agreement, all grant conditions were met, and that payments for that project were made in accordance with the applicable payment provisions. For improved and alternate projects, if the total cost of the projects does not equal or exceed the approved eligible costs, then the auditor should expect to see an adjustment to reduce eligible costs (44 CFR section 206.205). For Small Projects, FEMA does not adjust estimated costs to the actual incurred amount. The Subrecipient must certify that they completed the approved SOW, and the Recipient must certify that they made all payments in accordance with the FEMA-State/Territory/Tribe agreement. This is typically completed on a Small Project Completion Certification. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 103 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Condition During our procedures over the Authority’s funds received from FEMA we noticed the following: 1. Return of interest earned on FEMA-related funds totaling approximately $211,853 was not timely recorded in the general ledger and was subsequently recorded through a post-closing entry dated January 26, 2026. 2. Management initially misclassified approximately $6 million received under the Coronavirus State and Local Fiscal Recovery Funds as state funds rather than federal awards. As a result, the amount was originally excluded from the Schedule of Expenditures of Federal Awards (the Schedule). Cause The condition was caused by the Authority's lack of personnel on the federal funds management office which has been present during prior audit periods, the early retirement program established under Act No. 80 of August 3, 2020 – “Law for Incentivized Retirement Program and Justice for Our Servants” (Act No. 80), and the resignation of some personnel from their occupied position and left the Authority willingly as stated in finding 2025-004 are the main causes for the condition. Effect Inadequate accounting and controls over federal funds can cause incorrect revenue recognition as capital advances are recognized as revenue when used appropriately and not when received. In addition, this can cause amounts to be included on the Schedule incorrectly as some of the activities received as capital advances have not actually occurred. It also creates risk of allocating funds in the incorrect federal awards as some of these have similar uses and assistance listing numbers. Also, the Authority could be subject to penalties or sanctions from the Federal Grantor. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 104 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Context The Authority recognized as federal award revenue of $6 million approximately, as contributions from the Commonwealth of Puerto Rico and therefore were originally not included in the Schedule. Also, $211,853 on the bank accounts where FEMA funds were deposited had to be returned since the funds cannot be deposited in an interest-bearing account. Journal entry recognizing this return was subsequently recorded through a post-closing entry dated January 26, 2026. Identification of repeat finding This is a repeat finding from the immediate previous audit, Finding 2025-006 Questioned costs None as adjustments were made during the audit to correct the misstatement. Recommendation We recommend the Authority’s Federal Funds Management Office (FFMO) and finance department coordinate with the external consultant who handles federal funds received from FEMA to better identify and classify funds received. In addition, we recommend the Authority to address the FFMO personnel limitations by hiring additional personnel for the Authority, re-shifting task between current personnel or by relaying on outsourced third party providers. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See further details regarding this matter within the Corrective Action Plan provided on pages 108-114.
Finding No: 2025-007 – Lack of controls over minimizing the time elapsing between the transfer of funds from the pass-through entity and the disbursement of funds by the Authority . CFR Part 200 Subpart D Subsection 200.305 states the following: For recipients and subrecipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient regardless of whether the payment is made by electronic funds transfer or by other means. See § 200.302(b)(6). Except as noted in this part, the Federal agency must require recipients to use only OMB-approved, government-wide information collections to request payment. The recipient or subrecipient must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. The recipient or subrecipient must make timely payments to contractors in accordance with the contract provisions. Whenever possible, advance payment requests by the recipient or subrecipient must be consolidated to cover anticipated cash needs for all Federal awards received by the recipient from the awarding Federal agency or pass-through entity. During our audit procedures, we identified that most capital advances received during fiscal years 2025 and 2024 from FEMA were still unused on June 30, 2025, with no procedures to minimize the time elapsing between funds received and disbursed. In addition the Authority had to returned unused funds to the pass through entity since they remained unused for more than a year.
Finding 2025-003 – U.S. Department of Education (ED) – Federal Work-Study - Noncompliance With Cash Management (Material Weakness): Information on the federal program –Federal Work-Study, FAL No. 84.033, June 30, 2025. Criteria – The Uniform Guidance (§200.305(b)) requires non-Federal entities to minimize the time elapsing between the drawdown of federal funds and the disbursement of those funds for program purposes. For the Federal Work-Study Program, institutions are required to draw federal funds only as funds are needed to reimburse allowable student payroll costs and related employer share expenses and to promptly disburse or return excess federal funds. Condition – As of June 30, 2025, the College reported excess federal cash of $415,971 related to the Federal Work-Study Program. The excess cash represented cumulative federal funds drawn down through the federal payment system that were not disbursed for allowable Federal Work-Study payroll costs as of year-end. The excess cash balance included amounts related to prior award years that had not been fully liquidated through reimbursement of allowable student wage expenditures or returned to the U.S. Department of Education as of June 30, 2025. Cause – The excess cash condition resulted from insufficiently effective cash-management monitoring controls over the Federal Work-Study Program. While allowable payroll expenditures were incurred and supported, cumulative federal draw activity was not adjusted on a sufficiently timely basis to ensure ongoing compliance with 2 CFR §200.305(b). Effect - As a result, the College held federal funds for an extended period beyond immediate program needs, resulting in noncompliance with federal cash-management requirements. Holding excess federal cash increases the risk that federal funds are not administered in accordance with applicable regulations and oversight expectations. Questioned Costs – $415,971 Repeat Finding – Yes. Auditor’s Perspective – From the auditors’ perspective, the excess federal cash balance identified represents a material weakness in cash-management controls over the Federal Work-Study Program. Although the College incurred allowable and supported Federal Work-Study payroll expenditures, routine cash-management procedures did not sufficiently ensure that federal funds were drawn only as needed and promptly liquidated. Government Auditing Standards and the Uniform Guidance emphasize the importance of effective monitoring controls to prevent the accumulation of excess federal cash and to ensure compliance with cash-management requirements. Auditor’s Recommendations – The auditors recommend that the College implement and document routine cash-management reconciliation procedures for the Federal Work-Study Program. At a minimum, reconciliations should be performed regularly between federal drawdowns, allowable payroll expenditures, and amounts subject to liquidation or return. Management review and approval of these reconciliations should be documented to ensure ongoing compliance with 2 CFR §200.305(b). Views of Responsible Officials – The College requests drawdowns for the Federal Work- Study Program on a reimbursable basis, including review and approval procedures. Of the total amount identified, $26,466 related to FY 2025, with the balance relating to prior year(s) activity. The College will review its Federal Work-Study Program cost allocation procedures to ensure all eligible costs are properly identified and supported. The College has engaged two accounting firms to assist with staff training and bring all reconciliations current. In addition, standard month-end and year-end closing procedures will be implemented to address timely, accurate Federal Work-Study Program reconciliations and audit readiness going forward.
Finding 2025-004 – Various Federal Programs: Cash Management – Excess Federal Cash, Untimely Reconciliations (Material Weakness): Information on the federal program – Strengthening Historically Black Colleges and Universities (HBCUs), (Title III), FAL No. 84.031B, June 30, 2025; Historically Black Colleges and Universities (HBCU) (FUTURE ACT), FAL No. 84.031E, June 30, 2025; Minority Science and Engineering Improvement Program (MSEIP), FAL No. 84.120A, June 30, 2025; Science Consortium of Minority Schools, FAL No. 84.120A, June 30, 2025; Empowerment of Undergraduate STEM Majors through Scholarships and Strengthening STEM Identity, FAL No. 47.076, June 30, 2025; Tennessee Louis Stokes (TSLAMP), FAL No. 47.076, June 30, 2025. Criteria – 2 CFR §200.303 requires non-Federal entities to establish and maintain effective internal control over federal awards. 2 CFR §200.305(b) requires that payments be limited to the minimum amounts needed and timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity. 2 CFR §200.308 requires that expenditures remain within approved budget limits unless prior approvals are obtained. Condition – At June 30, 2025, the College maintained excess federal cash balances across multiple federal programs, indicating that cash drawdowns and/or payable balances were not aligned with immediate cash needs for allowable program expenditures. These balances represented federal funds drawn or recorded as payable to federal agencies that were not supported by actual and immediate allowable program expenditures at year-end. The following table summarizes excess federal cash balances identified by program as of June 30, 2025: "Minority Science and Engineering Improvement Program" 120,031 "Science Consortium of Minority Schools" 169,907 "NSF - Empowerment of Undergraduate STEM Majors" 94,801 "NSF - Tennessee Louis Stokes TSLAMP" 54,834 "Title 111" 455,679 "FUTURE" 188,215 "Total Identified Excess Cash" "$ 1,083,467" Condition – (Continued) The College did not adequately reconcile federal cash activity to underlying grant expenditures on a timely basis and did not ensure that drawdowns were limited to amounts necessary to meet immediate cash needs. In addition, the College lacked effective monitoring controls to identify and resolve excess cash positions across federal programs in a timely manner. Federal bank reconciliations were untimely and error-prone. Corrections occurred only after auditor inquiry. Federal accounts also earned excess interest. Cause – The College lacked sufficient policies, procedures, and supervisory review controls to ensure that federal cash drawdowns were based on actual expenditures, that federal cash and grant reconciliations were prepared timely and accurately. Additionally, monitoring controls over cash balances, interest tracking and remittance were not effectively designed or implemented across federal programs. Effect – The lack of effective controls over federal cash management resulted in excess cash being maintained beyond immediate program needs. These conditions increase the risk of noncompliance with federal requirements, including potential return of excess cash or disallowed costs, and increase the risk of material misstatement of federal expenditures and cash balances. Questioned Costs – $1,083,467 Repeat Finding – No Auditor’s Perspective – From a compliance perspective, maintaining excess federal cash balances indicates that the College’s internal control over compliance did not operate effectively during the audit period. The condition demonstrates that drawdowns were not consistently based on actual incurred costs and that monitoring over federal cash was not functioning as designed. Given the pervasiveness of these conditions across multiple programs, this represents a systemic control deficiency. In accordance with 2 CFR §200.303 and auditing standards, this condition constitutes a material weakness in internal control over compliance. Auditor’s Recommendation – We recommend that the College strengthen controls over federal cash management and budget monitoring by implementing procedures to ensure that drawdowns are based on actual allowable expenditures and limited to immediate cash needs. Management should establish and enforce timely grant and federal bank reconciliation processes, monitor interest earnings and federal cash balances, and implement supervisory review controls to ensure compliance with federal requirements across all programs. Views of Responsible Officials – The College requests drawdowns for Title III and FUTURE programs on a reimbursable basis, including review and approval procedures. Of the total amount identified for the Title III program, a $181,433 receivable related to FY2025. The balance related to prior year(s) activity. The College will review its Federal program cost allocation procedures to ensure all eligible costs are properly identified and supported. The College has engaged two accounting firms to assist with staff training and bring all reconciliations current. In addition, standard month-end and year-end closing procedures will be implemented to address timely, accurate Federal program reconciliations and audit readiness going forward. The College experienced significant staff turnover within the business office. In addition, the College is undergoing conversion to a new Enterprise Resource Planning (ERP) system which affected its ability to complete some functions within a timely manner.
AL 93.354 – Material Weakness - Cash Management Criteria: Per 2 CFR 200.305(b), non-Federal entities must minimize the time elapsing between the transfer of funds from the pass-through entity and disbursement for program purposes. Funds under this grant should only be requested to reimburse expenditures for services that have already been provided. Condition: During our testing, we noted the Kentucky Health Departments Association (KHDA) drew down federal funds in excess of actual expenditures under the grant during the year ended June 30, 2025. As of June 30, 2025, cumulative drawdowns exceeded cumulative allowable expenditures by approximately $98,989. Cause: KDHA did not have adequate internal control procedures in place to ensure drawdowns were limited to expenditures for services that had already been provided. Effect: KHDA was not in compliance with federal cash management requirements. KHDA must spend the excess reimbursements on allowable grant expenses prior to the end of the grant’s period of performance, or KHDA may be required to return those funds to the grantor. Recommendation: We recommend KHDA implement procedures to ensure drawdowns are limited to immediate cash needs and are supported by actual expenditures incurred prior to the date of the drawdown. Management should periodically reconcile cumulative drawdowns to expenditures. Management’s Response: Staff have been trained on the federal requirements, and the organization has updated internal policies to reflect the compliance requirements. A Finance Committee has been formed to oversee federal compliance issues.
AL 93.354 – Material Weakness - Cash Management Criteria: Per 2 CFR 200.305(b), non-Federal entities must minimize the time elapsing between the transfer of funds from the pass-through entity and disbursement for program purposes. Funds under this grant should only be drawn down to meet immediate cash needs. Condition: During our testing, we noted the Kentucky Health Departments Association (KHDA) drew down federal funds without minimizing the amount of time between when those funds were received, and when they were disbursed for program purposes. During the year ended June 30, 2025, we noted approximately $163,690 of drawdowns that were not disbursed within thirty days of when the transfer of funds was received from the pass-through entity, which is the period of time KHDA determined be administratively feasible. Cause: KDHA did not have adequate internal control procedures in place to ensure drawdowns were limited to immediate cash needs and that disbursements for program purposes limited the time elapsing from when funds were received from the pass-through entity. Effect: KHDA was not in compliance with federal cash management requirements. These practices may subject KHDA to financial sanctions, repayment of excess funds, or increased oversight by the pass-through entity. Recommendation: We recommend KHDA implement procedures to ensure drawdowns are limited to immediate cash needs and that all program disbursements are scheduled to minimize the time elapsing between the transfer of funds from the pass-through entity and disbursement for program purposes. Management’s Response: Staff have been trained on the federal requirements, and the organization has updated internal policies to reflect the compliance requirements. A Finance Committee has been formed to oversee federal compliance issues.
EPIDEMIOLOGY AND LABORATORY CAPACITY FOR INFECTIOUS DISEASES (ELC) – 93.323 Federal Awarding Agency: U.S. Department of Health and Human Services (HHS) Federal Award Fiscal Years: 2019 to 2027 Federal Award Number: NU50CK000519 Administered by: Rhode Island Department of Health (RIDOH) IMMUNIZATION COOPERATIVE AGREEMENTS – 93.268 Federal Awarding Agency: U.S. Department of Health and Human Services (HHS) Federal Award Fiscal Years: 2019 to 2025 Federal Award Number: NH23IP922618 Administered by: Rhode Island Department of Health (RIDOH) Compliance Requirement: Cash Management CONTROLS OVER CASH MANAGEMENT REQUIREMENTS RIDOH controls over cash management are lacking to ensure records and support are accurate, complete, and in compliance with federal requirements. RIDOH could not provide adequate supporting documentation for several drawdowns made during fiscal 2025. Background: RIDOH has constructed comprehensive workbooks, Uniform Grant Spreadsheets (UGS) / Monthly Federal Grants Tracking (MFGT), to assist in monitoring award activity throughout the period of performance. Agency staff populate the UGS/MFGT workbooks with transactional information (expenditures) from the State’s accounting system. Accounting details maintained in the UGS are utilized to reconcile and determine the amounts available for proper cash drawdowns. RIDOH has historically performed federal funding draws for the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) and Immunization Cooperative Agreements (Immunization) programs monthly. During fiscal 2025, RIDOH, on occasion, drew down funds during the month due to concerns over funding availability by the federal government to ensure that resources were available to sustain current program operations. Criteria: Federal regulation 2 CFR §200.305(b) requires recipients of federal awards to minimize the time elapsing between the transfer of federal funds from the federal government and the disbursement of those funds for program purposes. Reimbursement requests must be supported by allowable expenditures incurred under the federal award, and recipients are required to maintain adequate records to demonstrate compliance with federal cash management requirements. Condition: Internal control over cash management was insufficient to ensure compliance with federal regulations. Populating UGS spreadsheets is a manual process and lacks the required access, data integrity, and other monitoring controls necessary to ensure the accuracy of the recorded activity and subsequent calculations contained within. Additionally, these tracking tools are not designed to accurately track and record the required support for drawdowns outside the scheduled monthly payment requests. Cash drawdown records were not adequately maintained, limiting our ability to substantiate RIDOH’s drawdown requests through supporting documentation or the State’s accounting system. As part of our sample testing, we noted the following: • For the ELC program, 3 out of a sample of 13 (23%) lacked adequate support for drawdowns, 1 of which included a mid-month drawdown inclusive of future expenditures. • For the Immunization Cooperative Agreements program, 7 out of a sample of 12 (58%) lacked adequate support for drawdowns, 4 of which included mid-month drawdowns inclusive of future expenditures. Attempts to reconcile unsupported drawdown amounts with RIDOH were unsuccessful. While RIDOH was unable to specifically detail the expenditures incurred in support of a large percentage of draws, the supporting documentation for several draws indicated that projected future expenditures were included in some amounts drawn. Our audit results noted a significant percentage of drawdowns without adequate supporting documentation that we deemed to represent material noncompliance for both ELC and Immunization with federal requirements for cash management. In support of our finding that RIDOH drew down federal funds in advance of expenditure disbursement, the State’s monitoring in relation to the Cash Management Improvement Act also identified the ELC program as having drawn federal funds in excess of reported expenditures during the year. The State’s monitoring reported excess cash on hand for the ELC program collectively for 3 days during fiscal 2025. A review of the individual accounts in the State accounting system representing the various grants incorporated under the collective program noted a large number of individual grant awards where federal revenue far exceeded the expenditures reported for those accounts. The underlying accounting detail suggests that RIDOH was not reconciling its federal accounts in a timely manner to ensure that grants were not being overdrawn. Several federal accounts were reporting overdrawn funds at year-end in need of reconciliation. Cause: RIDOH did not establish and maintain adequate controls to ensure that federal reimbursement requests were supported by expenditures incurred at the time of the drawdown and that sufficient documentation was retained to support the amounts requested. Deficiencies in internal controls coupled with the use of estimates and spending projections, resulted in unsupported and excessive draws deemed noncompliance with federal cash management requirements. Personnel changes, in conjunction with a lack of documented policies and procedures, during fiscal 2025 contributed to cash management difficulties cited above. Effect: Noncompliance with federal requirements, specifically 2 CFR §200.305(b), for cash management going undetected by program management. Questioned Costs: None Valid Statistical Sample: Not Applicable RECOMMENDATIONS 2025-044a Document and implement formal policies and procedures over federal drawdowns to ensure compliance with federal regulations. 2025-044b Reconcile grant awards reporting excess cash drawdowns at June 30, 2025, and adjust amounts accordingly to ensure accurate grant award tracking for the ELC and Immunization programs.
Compliance Requirement C. Cash Management Finding Type Material Weakness in Internal Control Over Compliance and Compliance Finding Federal Agency U.S. Department of Health and Human Services Federal Program Title Administration for Children & Families - Head Start Assistance Listing Number 93.600 Criteria: The Organization receives federal assistance from the Department of Health and Human Services. The Organization requests draw down of grant funds based on actual expenditures incurred. The Organization is required to maintain adequate internal controls over financial reporting in order to ensure expenditures are properly supported, reported under the correct funding source, and within the correct grant period. 2 CFR 200.403 details the factors affecting the allowability of cost. Specifically, 2 CRF 200.403(e) provides that costs must be determined in accordance with generally accepted accounting principles (GAAP). GAAP provides that costs are not incurred until the services are performed or the product is received. In addition, Uniform Guidance 200.305(b)(1) states advance payments to a non-Federal entity must 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. Condition: During audit procedures, we noted total reimbursements received exceeded expenditures. The Organization requested reimbursements but could not provide supporting documentation as to how the amount requested for reimbursement of costs was determined. We consider this to be a material weakness. Cause: The Organization lacks established procedures which provide formal evidence that the accuracy and completeness of internal reports used to support reimbursement requests were verified, reviewed and approved before grant draw downs were requested. Effect: Without formal review controls in place, the Organization is more susceptible to reporting errors and/or noncompliance with federal requirements. Questioned Costs: $ 329,233 Identification as a Repeat Finding: This was reported as a finding in the prior audit report. Content: During the year ended June 30, 2024, the Organization received funds of $ 562,831 in excess of expenditures incurred. Subsequent to June 30, 2024, $ 346,944 of those funds were obligated and expended, leaving a remaining balance of $ 215,887. During the year ended June 30, 2025, the Organization requested and received reimbursements in excess of expenditures of $ 329,233. Recommendations: We recommend that the Organization implement a formal process for verifying the accuracy and completeness, and review of supporting documentation used to justify draw down requests. A reconciliation should be prepared of the expenditures recorded on the books and records to the amount submitted for reimbursement on a regular basis. All excess; unexpended funds should be returned to remain in compliance. All supporting documentation should be maintained for future reference. View of Responsible Officials: The Organization agrees with this audit finding.
Finding 2025-003 – U.S. Department of Education (ED) – Federal Work-Study - Noncompliance With Cash Management (Material Weakness): Information on the federal program –Federal Work-Study, FAL No. 84.033, June 30, 2025. Criteria – The Uniform Guidance (§200.305(b)) requires non-Federal entities to minimize the time elapsing between the drawdown of federal funds and the disbursement of those funds for program purposes. For the Federal Work-Study Program, institutions are required to draw federal funds only as funds are needed to reimburse allowable student payroll costs and related employer share expenses and to promptly disburse or return excess federal funds. Condition – As of June 30, 2025, the College reported excess federal cash of $415,971 related to the Federal Work-Study Program. The excess cash represented cumulative federal funds drawn down through the federal payment system that were not disbursed for allowable Federal Work-Study payroll costs as of year-end. The excess cash balance included amounts related to prior award years that had not been fully liquidated through reimbursement of allowable student wage expenditures or returned to the U.S. Department of Education as of June 30, 2025. Cause – The excess cash condition resulted from insufficiently effective cash-management monitoring controls over the Federal Work-Study Program. While allowable payroll expenditures were incurred and supported, cumulative federal draw activity was not adjusted on a sufficiently timely basis to ensure ongoing compliance with 2 CFR §200.305(b). Effect - As a result, the College held federal funds for an extended period beyond immediate program needs, resulting in noncompliance with federal cash-management requirements. Holding excess federal cash increases the risk that federal funds are not administered in accordance with applicable regulations and oversight expectations. Questioned Costs – $415,971 Repeat Finding – Yes. Auditor’s Perspective – From the auditors’ perspective, the excess federal cash balance identified represents a material weakness in cash-management controls over the Federal Work-Study Program. Although the College incurred allowable and supported Federal Work-Study payroll expenditures, routine cash-management procedures did not sufficiently ensure that federal funds were drawn only as needed and promptly liquidated. Government Auditing Standards and the Uniform Guidance emphasize the importance of effective monitoring controls to prevent the accumulation of excess federal cash and to ensure compliance with cash-management requirements. Auditor’s Recommendations – The auditors recommend that the College implement and document routine cash-management reconciliation procedures for the Federal Work-Study Program. At a minimum, reconciliations should be performed regularly between federal drawdowns, allowable payroll expenditures, and amounts subject to liquidation or return. Management review and approval of these reconciliations should be documented to ensure ongoing compliance with 2 CFR §200.305(b). Views of Responsible Officials – The College requests drawdowns for the Federal Work- Study Program on a reimbursable basis, including review and approval procedures. Of the total amount identified, $26,466 related to FY 2025, with the balance relating to prior year(s) activity. The College will review its Federal Work-Study Program cost allocation procedures to ensure all eligible costs are properly identified and supported. The College has engaged two accounting firms to assist with staff training and bring all reconciliations current. In addition, standard month-end and year-end closing procedures will be implemented to address timely, accurate Federal Work-Study Program reconciliations and audit readiness going forward.
Finding 2025-004 – Various Federal Programs: Cash Management – Excess Federal Cash, Untimely Reconciliations (Material Weakness): Information on the federal program – Strengthening Historically Black Colleges and Universities (HBCUs), (Title III), FAL No. 84.031B, June 30, 2025; Historically Black Colleges and Universities (HBCU) (FUTURE ACT), FAL No. 84.031E, June 30, 2025; Minority Science and Engineering Improvement Program (MSEIP), FAL No. 84.120A, June 30, 2025; Science Consortium of Minority Schools, FAL No. 84.120A, June 30, 2025; Empowerment of Undergraduate STEM Majors through Scholarships and Strengthening STEM Identity, FAL No. 47.076, June 30, 2025; Tennessee Louis Stokes (TSLAMP), FAL No. 47.076, June 30, 2025. Criteria – 2 CFR §200.303 requires non-Federal entities to establish and maintain effective internal control over federal awards. 2 CFR §200.305(b) requires that payments be limited to the minimum amounts needed and timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity. 2 CFR §200.308 requires that expenditures remain within approved budget limits unless prior approvals are obtained. Condition – At June 30, 2025, the College maintained excess federal cash balances across multiple federal programs, indicating that cash drawdowns and/or payable balances were not aligned with immediate cash needs for allowable program expenditures. These balances represented federal funds drawn or recorded as payable to federal agencies that were not supported by actual and immediate allowable program expenditures at year-end. The following table summarizes excess federal cash balances identified by program as of June 30, 2025: "Minority Science and Engineering Improvement Program" 120,031 "Science Consortium of Minority Schools" 169,907 "NSF - Empowerment of Undergraduate STEM Majors" 94,801 "NSF - Tennessee Louis Stokes TSLAMP" 54,834 "Title 111" 455,679 "FUTURE" 188,215 "Total Identified Excess Cash" "$ 1,083,467" Condition – (Continued) The College did not adequately reconcile federal cash activity to underlying grant expenditures on a timely basis and did not ensure that drawdowns were limited to amounts necessary to meet immediate cash needs. In addition, the College lacked effective monitoring controls to identify and resolve excess cash positions across federal programs in a timely manner. Federal bank reconciliations were untimely and error-prone. Corrections occurred only after auditor inquiry. Federal accounts also earned excess interest. Cause – The College lacked sufficient policies, procedures, and supervisory review controls to ensure that federal cash drawdowns were based on actual expenditures, that federal cash and grant reconciliations were prepared timely and accurately. Additionally, monitoring controls over cash balances, interest tracking and remittance were not effectively designed or implemented across federal programs. Effect – The lack of effective controls over federal cash management resulted in excess cash being maintained beyond immediate program needs. These conditions increase the risk of noncompliance with federal requirements, including potential return of excess cash or disallowed costs, and increase the risk of material misstatement of federal expenditures and cash balances. Questioned Costs – $1,083,467 Repeat Finding – No Auditor’s Perspective – From a compliance perspective, maintaining excess federal cash balances indicates that the College’s internal control over compliance did not operate effectively during the audit period. The condition demonstrates that drawdowns were not consistently based on actual incurred costs and that monitoring over federal cash was not functioning as designed. Given the pervasiveness of these conditions across multiple programs, this represents a systemic control deficiency. In accordance with 2 CFR §200.303 and auditing standards, this condition constitutes a material weakness in internal control over compliance. Auditor’s Recommendation – We recommend that the College strengthen controls over federal cash management and budget monitoring by implementing procedures to ensure that drawdowns are based on actual allowable expenditures and limited to immediate cash needs. Management should establish and enforce timely grant and federal bank reconciliation processes, monitor interest earnings and federal cash balances, and implement supervisory review controls to ensure compliance with federal requirements across all programs. Views of Responsible Officials – The College requests drawdowns for Title III and FUTURE programs on a reimbursable basis, including review and approval procedures. Of the total amount identified for the Title III program, a $181,433 receivable related to FY2025. The balance related to prior year(s) activity. The College will review its Federal program cost allocation procedures to ensure all eligible costs are properly identified and supported. The College has engaged two accounting firms to assist with staff training and bring all reconciliations current. In addition, standard month-end and year-end closing procedures will be implemented to address timely, accurate Federal program reconciliations and audit readiness going forward. The College experienced significant staff turnover within the business office. In addition, the College is undergoing conversion to a new Enterprise Resource Planning (ERP) system which affected its ability to complete some functions within a timely manner.
Finding 2025-003: Unallowable Costs / Cash Management (Material Weakness) Information on the Federal Programs: Assistance Listing Number 98.001 Criteria: According to Uniform Guidance (2 CFR 200.305(b)), internal controls over cash management should ensure that all drawdowns are approved by designated personnel to prevent improper or premature use of Federal funds. Condition: During our review of Federal grant drawdowns, it was noted that several drawdowns were processed without obtaining the required internal approvals as outlined in Astraea's cash management policies and procedures. Cause: Astraea’s cash management procedures were not consistently followed, leading to missed approvals for certain drawdowns. Effect: Drawdowns without proper internal approval increase the risk of non-compliance with Federal cash management requirements and could result in unauthorized or inaccurate fund usage. Questioned Costs: None noted. Identification as a Repeat Finding, if Applicable: Finding 2024-004 Recommendation: Astraea should reinforce cash management controls by ensuring all Federal drawdowns obtain the appropriate internal approvals before processing. This can be achieved by implementing a checklist or automated workflow to verify compliance with approval requirements.