Finding Text
Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Continuum of Care Assistance Listing Number: 14.267 Federal Award Identification Number and Year: PA0433L3T002312 - FY25, PA0433L3T002413 - FY25, PA0504L3T002211 - FY25, PA0504L3T002312 - FY25, PA0010L3T002316 - FY25, PA0004L3T002310 - FY25, PA0004L3T002411 - FY25, PA0681L3T002209 - FY25, PA0681L3T002310 - FY25, PA0911L3T002204 - FY25, PA0911L3T002305 - FY25, PA1067L3T002200 - FY25, PA1067L3T002301 - FY25 Award Period: July 1, 2024 through June 30, 2025 Type of Finding: - Material Weakness in Internal Controls over Cash Management - Noncompliance Criteria or specific requirement: Per the Uniform Guidance (2 CFR §200.305), nonfederal entities must minimize the time between the transfer of funds from the U.S. Treasury and the disbursement of program purposes. Drawdowns must be based on immediate cash needs and supported by incurred expenses. Condition: The entity drew down federal funds in excess of the amounts incurred for allowable expenses. Specifically, cash management procedures did not ensure that funds drawn down were limited to actual expenditures incurred, resulting in excess cash balances held temporarily beyond the allowable timeframe. Questioned Costs: Known: $3,547,358 Context: Through discussions with management and other required audit procedures, we noted that Pathways had drawn down $3,547,358 of advanced funding due to uncertainty of access to these funds in the future. The excess of these funds was subsequently returned to the funder. Cause: Due to pending changes in federal funding, the entity was concerned about its access to funding for contracts that were already executed. Effect: This deficiency resulted in noncompliance with federal cash management requirements and exposed to entity to potential interest liabilities and reputational risk. It also indicates a reasonable possibility that material noncompliance with federal requirements may not be prevented or detected and corrected on a timely basis. Repeat Finding: No Recommendation: We recommend that management ensure drawdowns are strictly aligned with incurred and allowable expense. This should include: - Pre-drawdown verification of expense documentation - Monthly reconciliations of drawdown activity to actual expenditures - Training for staff involved in federal fund management on Uniform Guidance. Views of responsible officials: There is no disagreement with the audit finding. See Corrective Action Plan.