Finding 1148145 (2024-002)

Finding 2024-002: Overdrawn Federal Funding Compliance Requirements: Cash Management; Reporting Type: Material Weakness in Internal Control over Compliance and Material Noncompliance Federal Agency: Corporation for National and Community Service AL Numbers and Titles: 94.006 – AmeriCorps National Federal Award Number: 22NDHGA003 Questioned Costs: $748,053 Repeat Finding: No Criteria: Under 2 CFR § 200.305(b), federal funds must be drawn only as needed to meet the immediate cash requirements of the program. Recipients must minimize the time between the transfer of funds and disbursement. Per 2 CFR § 200.516(c), the auditor must report known questioned costs greater than $25,000 for a federal program, even if the program is not audited as a major program. Condition: As of September 30, 2024, NACDD has overdrawn a total of $748,053 in excess of expenditures to date in federal funds under the AmeriCorps grant. The overdrawn amount remained outstanding at year-end and had not been repaid or offset by additional allowable expenditures as of the date of this report. Cause: The overdrawn funds were caused by a failure in internal processes for reconciling drawdowns to actual expenditures. The drawdown analysis file used to request funds was corrupted, and no compensating control was in place to detect or prevent overdraws. Furthermore, NACDD did not implement timely corrective action after identifying the issue, and their internal control processes did not ensure compliance with federal cash management regulations. Additionally, Federal Financial Reports (FFRs) submitted by the organization did not accurately reflect actual allowable expenditures, and overstated cumulative grant activity. There was no timely reconciliation between the organization’s accounting records and amounts reported to the granting agency, as required. Effect: NACDD is in violation of federal cash management requirements, having drawn down $748,053 more in federal funds than expended as of year-end. This represents questioned costs and could result in a requirement to return funds to the granting agency. This issue exposes the organization to noncompliance risk and potential findings by federal oversight agencies. Additionally, incorrect reporting on the FFRs may have misled the grantor regarding the organization’s use of federal funds and the timing of expenditures. This constitutes a noncompliance with the Reporting requirement under 2 CFR 200.327–328, and calls into question the accuracy and completeness of required grantor submissions. Recommendation: We recommend that NACDD take immediate steps to address the overdrawn federal funds of $748,053 related to AmeriCorps grant by either remitting the excess to the granting agency or applying eligible FY25 expenditures, if allowable. To prevent recurrence, NACDD should implement formal monthly reconciliation procedures to ensure that all federal drawdowns are fully supported by actual expenditures recorded in the general ledger. Additionally, internal controls over financial reporting should be strengthened to ensure that amounts reported on the Federal Financial Reports (FFRs) and AmeriCorps’ eGrants system are accurate and agree to supporting records. Staff responsible for grant compliance should receive training on Uniform Guidance requirements, particularly those related to allowable costs, cash management, and reporting. Finally, NACDD should conduct a retrospective review of prior reports submitted to AmeriCorps for this project to assess whether corrections or disclosures are necessary and notify the grantor as appropriate. Views of Responsible Officials Corrective Actions: Management agrees with this finding. Please refer to the Corrective Action Plan.