Finding Text
Interest Earned on Federal Funds. Criteria: 2 CFR 200.303 provides that non-federal entities must establish and maintain effective internal controls to provide reasonable assurance of compliance with Uniform Guidance. 2 CFR Section 200.305 sets forth the requirements for the return of interest earned on federal funds. Recipients of federal grants are required to establish internal controls to minimize the time that elapses between the receipt of federal funds from the grantor, and the payment of those funds to vendors who provide goods or services. Interest earnings that exceed $500 per year from excess cash balances must be paid to the federal grantor. Condition: CASIS did not calculate interest earnings on the federal cash balance to determine if any earnings should be repaid to the grantor. Cause: CASIS does not have a policy to monitor federal cash balances for cash management requirements, including the calculation of interest earnings. Effect: CASIS did not take steps to reduce the time elapsing from the date it received federal funds to the date it spent the funds on program costs. The lapse resulted in interest earned on federal funds. Questioned Costs: Fontana calculated that CASIS earned approximately $17,000 of interest on the federal funds balance for the fiscal year ended September 30, 2025. Interest earnings on federal funds of more than $500 must be returned to the grantor. Perspective: Interest was not calculated or returned to the grantor for fiscal year ended September 30, 2025. Recommendation: Fontana recommends that CASIS: o Implement controls to minimize the time between receipt of funds from the granting agency and disbursement of those funds. o Compute interest earned on advance funds and remit amounts in excess of $500 to the grantor when required.