Finding Text
Allowable Activities – Advanced Grant Payments Used for Interfund Borrowing – Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria – 31 CFR Part 35 codified the guidance from the Department of Treasury COVID-19 State and Local Fiscal Recovery Funds Interim Final Rule that was published on May 17, 2021, with amendments. Such regulations provide guidance on the allowable uses of the Department of Treasury COVID-19 State and Local Fiscal Recovery Funds (SLFRF). Although the regulations allow broad use of funds under the revenue loss calculation for the provision of government services, such uses should be for costs incurred (i.e., expenditures) beginning on or after March 3, 2021. Condition and context – The Tribe received $30,842,698 of State and Local Fiscal Recovery Funds and expended $13,878,875 (cumulatively) on allowable activities, which should have resulted in the Tribe having $16,963,824 of cash available to expend on future award activities and included in the financial statements as unearned revenues. The Tribes’ unexpended advance payments (unearned revenues) for all grants were $24,598,026 as of December 31, 2022. Also, as of December 31, 2022, the Tribes’ grants fund had total pooled cash and investments of only $19,321,293, resulting in insufficient cash or investments to cover unexpended advanced payments. The Tribes effectively used advanced payments from SLFRF funds to provide interfund loans to cover expenses of other grants funded on a reimbursement basis and the general fund. Such loans to other funds were not determined to be an allowable use of funds. We believe that such interfund borrowing was not tied to a cost that had been incurred and therefore have determined such use was not an allowable activity under the program. Such interfund borrowing is properly not reported as an expenditure in the Tribe’s schedule of expenditures of federal awards. Questioned costs – The Tribes had insufficient cash and investments to cover unexpended advanced payments. Because the Tribe pools its cash accounts, we are unable to specifically determine the portion of cash loaned from the Department of the Treasury SLFRF funds. Cause – The Tribe failed to implement procedures to disallow interfund borrowing from unexpended advanced payments (unearned revenues). Effect – The advanced payments for awards pursuant to the SLFRF were used for interfund borrowing to the Tribes other grant programs and the general fund. Repeat finding – This is not a repeat finding from the prior year. Recommendation – We recommend that the Tribes review their cash flow projection and monitoring processes and perform the following activities: • Obtain external funding (line of credit, debt, additional funds from Tribal businesses) to meet the cash needs of the Tribes general fund and reimbursement-type grants and reimburse advance-funded grants for all interfund borrowing incurred. • Evaluate general fund budgets to ensure sufficient cash is available to cover proposed expenditures. • Improve timeliness of billing and collection of reimbursement grants. Views of responsible officials and planned corrective action: The Tribes, in collaboration with the Interim CFO, will review cash flow projection and monitoring processes to strengthen the management of operating and grant funds. They will obtain external funding as needed to meet general fund and reimbursement grant cash requirements and to reimburse advance-funded grants for any interfund borrowing incurred. General fund budgets will be evaluated to ensure sufficient cash is available for planned expenditures, and procedures will be enhanced to improve the timeliness of billing and collection for reimbursement-based grants.