Finding Text
Criteria: In accordance with 2 CFR § 200.305(b)(12), a recipient or subrecipient may retain up to $500 per year in interest earned on Federal funds for administrative expenses. Any interest earned in excess of $500 per year must be remitted annually to the Department of Health and Human Services (HHS) through the Payment Management System (PMS) via the Automated Clearing House (ACH) network or Fedwire Funds Service. This requirement applies regardless of whether the recipient or subrecipient was paid through PMS. Condition: For the fiscal year ended June 30, 2025, the entity earned interest on Federal funds in excess of the $500 allowable retention limit. The entity did not remit the excess interest to the Payment Management System (PMS) within the required timeframe. The amount of excess interest retained and not remitted totaled $1,417.45. Effect: Noncompliance with 2 CFR § 200.305(b)(12) may result in several consequences, including questioned costs, required reimbursement of federal funds, findings or enforcement actions by the federal awarding agency, and potential sanctions or the imposition of additional compliance requirements. Cause: The entity did not have adequate internal controls or formal procedures in place to periodically monitor interest earned on federal funds, identify when interest exceeded the $500 allowable threshold, and timely remit excess interest to HHS through the Payment Management System (PMS). Recommendations: We recommend that the Institution implement the following corrective actions: 1. Develop and implement formal written policies and procedures for monitoring interest earned on federal funds in accordance with 2 CFR § 200.305(b)(12). 2. Establish internal controls to periodically calculate and track interest earned on federal cash balances throughout the fiscal year. 3. Implement a process to identify when interest earned exceeds the allowable $500 annual retention threshold. 4. Assign responsibility to designated personnel for reviewing interest calculations and ensuring compliance with federal requirements. 5. Provide training to relevant staff on federal cash management requirements related to interest earned on federal funds.