Finding Text
2025-004 Inadequate Cash Management Procedures and Noncompliance with Period of Performance Requirements Program Name/Assistance Listing Number: 93.788 Opioid STR Federal Agency: Department of Health and Human Services Type of Finding: Significant Deficiency Compliance Requirement: Cash Management Criteria: Per 2 CFR §200.305(b), non-Federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury and the disbursement of those funds for program purposes under the period of performance. Furthermore, entities must have written procedures that clearly outline the timing and methods for drawing down federal funds in accordance with cash management requirements. These procedures should be documented, reviewed, approved, and periodically revised to ensure ongoing compliance. Condition: During our testing of cash management procedures, we noted the following: 1. UMADAOP of Lucas’ written procedures lacked key information, including dates of preparation, approval, implementation, review, and revision. 2. For Grant ID 24001119 (budget period 9/30/2023–9/30/2024; NOSA received 5/22/2024), funds were drawn before the start of FY 2025: First drawdown: 6/6/2024 – $1,125,000 Second drawdown: 7/22/2024 – $375,000 Total expenditures as of 12/31/2024: $352,021 expended before FY 2025 start; $990,223 July–Sept 2024; $157,756 Oct–Dec 2024 The timing of these drawdowns did not fully align with the requirement to minimize the time elapsed between the receipt of federal funds and their disbursement for program expenditures, resulting in funds being held in advance of actual cash needs. Cause of Condition: Management has not developed formal policies and procedures for subrecipient monitoring or consistent documentation standards. Cause of Condition: Funds were drawn before the start of FY 2025 because the Notice of Subaward (NOSA) for Grant ID 24001119 was received on 5/22/2024, which was prior to the beginning of the fiscal year. UMADAOP of Lucas’ written procedures did not provide guidance on aligning drawdowns with actual cash needs, and there was no documented review or update of the procedures to ensure compliance with federal cash management requirements. As a result, funds were held in advance of actual program expenditures, reflecting a gap in internal controls over cash management. Potential Effect of Condition: The use of a predetermined drawdown schedule that is not based on actual cash needs could lead to excess federal funds being held unnecessarily, increasing the risk of non compliance with cash management requirements. Additionally, the absence of comprehensive documentation for cash management procedures could result in inconsistencies in implementation, a lack of accountability, and difficulties in ensuring that policies remain current and effective. Questioned Cost: Not quantifiable. Recommendation: UMADAOP of Lucas should revise its cash management procedures to ensure they are in full compliance with federal requirements. UMADAOP of Lucas should adopt a drawdown process that is based on actual cash needs, minimizing the time elapsing between the drawdown of federal funds and their disbursement for program expenditures. Additionally, the organization should update its written procedures to include documentation of when the policies were prepared, approved, implemented, reviewed, and revised. This will help ensure that cash management practices are transparent, consistent, and compliant with applicable regulations. Finally, the organization should consider training relevant staff on the updated procedures and the importance of compliance with cash management requirements. Description of the Nature and Extent of Issues Reported: Funds were drawn and held longer than necessary, and the organization lacks adequate cash management procedures, constituting noncompliance with 2 CFR §200.305. Management Response: Management concurred with the finding. The organization will revise its current draw-down procedures to reflect timing and methods for drawing down federal funds that are in compliance with cash management requirements.