Finding Text
Internal Control over Compliance and Compliance with Cash Management Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, 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. Specifically, §200.305(b)(1), Federal Payment, indicates: 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.
Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. 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 Payment Management System (PMS).
Condition: During our testing of compliance, we identified the following matters:
During our testing of advance payments received for awards AID-654-A-17-00003 and
72061220CA00003, management did not minimize the amount of time between the Federal advance
payments and the actual disbursements for direct program expenditures and related indirect costs.
For award AID-654-A-17-00003, PSI requested an advance payment in June 2024 of $1,291,991;
however $351,749 remained available from this advance in July 2024 exceeding the cash needs.
For award 72061220CA00003, PSI requested an advance payment in January 2024 of $463,615;
however $234,678 remained available from the prior cash advance. In February 2024, PSI returned
funding of $52,193 but an outstanding advance of $679,619 still remained on hand for this award
that exceeded the cash needs.
Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing
accounts. However PSI does not track the amount of interest earned on these advance payments.
After year-end PSI prepared a schedule to estimate what the amount of interest earned would have
been in order to remit interest earned in excess of $500 annually to the Department of Health and
Human Services Payment Management System. As PSI earned approximately $3,151.81 of interest
during the year ended December 31, 2024 on cash advances, PSI owed the United States Government
$2,651.81 of interest.
Questioned Costs: There are no questioned costs related to this finding.
Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.
Cause: For the advance payments, PSI’s programmatic and finance team did not adequately monitor
remaining budget and projected expenditures for any changes in spending levels to adequately
adjust the spending projection of the award resulting in PSI requesting and receiving funds that
were not able to be liquidated timely enough. Furthermore, the PSI management team did not have
a sufficient review process to calculate the interest earned on cash advances to remit to the U.S.
Government at the end of the year.
Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.
Repeat Finding: This is a repeat finding and was reported as finding 2023-003 in the 2023 schedule
of findings and questioned costs.
Recommendation: We recommend management review all deferred revenue balances monthly for
federal programs where advance funds are received in sufficient detail to determine whether
expenses will be available in the immediate near term to spend down federal advances. We also
recommend management ensure the compliance cash management policies that align to U.S.
Government funding requirements.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set
forth within and will refine its method for calculating drawdowns on federal awards. Refer to
management’s corrective action plan for additional information.