Finding Text
Condition:
For the year ended December 31, 2022, the auditee received $2,300,000 in ERA program funds but only
spent $2,112,889, consisting of:
$1,675,129 in direct expenses,
$240,685 in furniture, fixtures, equipment, and leasehold improvements utilized for
administering the program, and
$197,075 in indirect cost allocations.
This resulted in $187,111 unobligated funds for the ERA program that were not refunded to the grantor.
Additionally, the organization spent $327,316 out of $337,290 in TANF grant funds received during the
same year, which resulted in $9,974 in unobligated funds that were also not returned to the grantor.
The failure to have a process to monitor and return unspent or unobligated funds highlights weaknesses
in the organization’s cash and financial management processes and an apparent lack of awareness of
the obligation to monitor and return unobligated funds to the grantor agency.
Criteria:
2 CFR 200.308(e): Requires non‐federal entities to maintain a comparison of actual expenditures
with the approved budget and explain any significant variances.
2 CFR 200.344(d): Requires unobligated balances of federal funds to be returned to the
awarding agency unless specifically authorized to retain them.
2 CFR 200.303: Requires entities to establish internal controls over cash management to ensure
proper use and reporting of federal funds.
Cause:
The organization’s failure to perform regular budget‐to‐actual comparisons and establish adequate cash
management controls contributed to unspent funds remaining unreturned. Additionally, the
Organization did not have an internal control process to monitor the performance period of grants
which resulted in management being under the impression it could spend funds beyond the
performance period in the grant contract. Effect:
The lack of budget monitoring and cash management controls:
1. Increased the risk of noncompliance with federal requirements for unobligated funds.
2. Resulted in the failure to detect and return unobligated balances of $197,085 ($187,111 for the
ERA program, $9,974 for the TANF program).
3. Raised concerns about the organization’s oversight and financial management capabilities.
Recommendation:
1. Establish and implement procedures for preparing budget‐to‐actual comparisons for all grant
programs to monitor variances regularly.
2. Develop cash management controls to ensure timely identification and return of unobligated
funds, unless otherwise authorized by the grantor.
3. Strengthen financial oversight to avoid recurrence of these issues and ensure compliance with
federal grant requirements.
Questioned Costs: $187,111 (ERA Program).
Management’s Response:
Management agrees with the findings and has already initiated corrective actions. Moving forward,
budget‐to‐actual comparisons will be prepared monthly, and any discrepancies will be addressed
promptly.
The organization will work closely with the cognizant agency to arrange for the return of any
unobligated funds or, if applicable, seek authorization to retain the funds for use in other similar
programs. This process will ensure proper financial management and compliance.