Finding Text
2024-002 Drawdown Tracking
Compliance Requirement Cash Management
Finding Type Significant Deficiency in Internal Controls and Noncompliance
Federal Agency US Department of Education
ALN 84.031
Federal Program Higher Education Institutional Aid
ALN 84.042A
Federal Program TRIO Cluster Program
Criteria
2 CFR § 200.305 (b) – Federal Payment
.....
Payments for recipients and subrecipients other than States. 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.
Condition
Higher Education Institutional Aid
From a sample of sixty-six disbursements selected to test the three-day rule time elapsing between the transfer of funds from the Federal agency and the disbursement of funds, we identified the following:
Twenty-four instances where the three-day rule was exceeded.
Five instances where the specific drawdown related to the disbursement could not be identified.
TRIO Cluster Programs
From a sample of thirty-seven disbursements selected to test the three-day rule time elapsing between the transfer of funds from the Federal agency and the disbursement of funds, we identified the following:
Fourteen instances where the three-day rule was exceeded.
Three instances where the specific drawdown related to the disbursement could not be identified.
Cause
Lack of policies to control the number of days elapsed between the transfer of Federal funds and the date of the disbursement. The University is not completing and retaining the G5 Cash Summary Form or equivalent document for each drawdown.
Effect
Misuse of funds, failure to demonstrate timely use of funds, and inadequate cash flow management. These issues could lead to loss of federal funding eligibility, placement on Heightened Cash Monitoring Methods, and penalties. Additionally, there is a risk of overspending or duplicating payments, as well as difficulty detecting errors or fraud. This can lead to financial penalties, resulting in disallowed costs that are not reimbursed by federal funds. Furthermore, federal awards could be suspended or terminated, impacting the University's ability to fund its programs and operations. Increased scrutiny in future audits may lead to greater administrative burdens and oversight. In severe cases, the University may face suspension or debarment from receiving future federal funding.
Questioned Costs
None.
Recommendation
We recommend to enhance documentation practices by implementing a system that ensures all disbursements are clearly linked to their corresponding drawdowns. This will help accurately track the time elapsed between fund transfer and disbursement. Utilizing automated financial management systems can further reduce human error and improve compliance by efficiently tracking and linking drawdowns to disbursements. Regular internal audits should be scheduled to review compliance with the three-day rule and other cash management requirements, promptly identifying and correcting discrepancies. Finally, updating cash management policies to include specific procedures for associating drawdowns with disbursements and ensuring these policies are communicated and enforced across the organization will help maintain compliance and enhance overall cash management practices.
Views of responsible official
Refer to Corrective Action Plan (Unaudited)