Finding Text
Cash Management Criteria or specific requirement: 2 CFR § 200.305 Federal payment stipulates a non-federal entity 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 non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. 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. The timing and amount of advance payments must be as close as is 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. Interest earned amounts up to $500 per year may be retained by the non-Federal entity for administrative expense. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services. Condition and Context: The Title IIIB funds drawn in advance were not limited to immediate cash requirements. Cause: Due to the improper reconciliation of deferred revenue liability, although the college was drawing for immediate current payments, some of the construction related payments included in the current drawdowns had previously been obligated and included in the computation of the previous year’s expenditures and earned revenue. Effect: The School has drawn down funds above its immediate cash requirements. Questioned costs: None Recommendation The Institution follow controls to properly ensure that funds drawn have been used before drawing additional funds in order to minimize the time between receipt of funds from the granting agency and disbursement of those funds. The institution also needs to compute interest earned on advance funds and remit it to the grantor when required.