Finding Text
Federal Transit Cluster – Cash Management
Noncompliance and Significant Deficiency in Internal Control
ALN’s 20.507 and 20.526
U.S. Department of Transportation – Federal Transit Administration
Criteria: In accordance with 2 CFR § 200.305(b), when advance payments are made, they must be limited to the minimum amounts needed and timed to the actual, immediate cash requirements of the recipient. The Federal Transit Administration (FTA) further clarifies that federal funds drawn in advance must be disbursed within three business days to comply with this requirement. This standard is intended to minimize the time elapsing between the transfer of funds and disbursement.
Condition: The Authority drew down federal funds in advance of allowable expenditures and did not disburse the federal funds within the required three business days.
Cause: The Authority did not have adequate internal controls in place to ensure that federal funds were drawn only after costs had been incurred or that disbursements occurred within the required timeframe.
Effect: As a result of the noncompliance, the Authority was required to repay $251,630 to the FTA.
Questioned Costs: $251,630 drawn down in excess of the immediate need.
Context: For one drawdown in a sample of seven, the Authority drew down funds to be used for preventative maintenance costs during the month during the preceding month. As a result, the Authority held the funds until there were sufficient qualifying expenditures, which was for a time period in excess of three business days.
Recommendation: We recommend that the Authority strengthen its internal controls over cash management to ensure that federal funds are drawn only after expenditures have been incurred or that disbursements are made within three business days of receipt if drawn in advance. Staff should be trained on federal cash management requirements, and drawdown procedures should be reviewed and updated accordingly.
Views of Responsible Officials: See Corrective Action Plan