Finding Text
2023-011 Timely Grant Draws Material Weakness This is a repeat finding. The prior-year’s auditing finding number is 2022-011. Condition: Grant dollars were not drawn in a timely fashion during the year to cover current grant expenditures. The Housing Authority’s grant funded cost reimbursable program was carrying in excess of 60 days operating capital in grants receivable. Concurrently, the Housing Authority’s cash and cash equivalents were insufficient to cover its unearned revenue, which totaled $1,287,503. Had the grant draws been completed in a timely manner, the cash received would have been sufficient to cover the unearned revenue. Criteria: The Housing Authority does not have written policies to address the timeliness of grant draw procedures. Grant funds should be drawn as grant expenditures occur. Carrying anything in excess of 60 days operating capital in grants receivable is considered untimely and indicates that the expenditures carried within these grant funded cost reimbursable programs are being “floated” by other funds. 2 CFR section 200.305 of the Uniform Guidance states that “For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.” Cause: Lack of a written grant draw policy and procedures as well as a lack of staff “hands-on” training in those necessary areas. Effect: The untimely HUD grant draws have created a significant liquidity risk and forced the Housing Authority to use its unearned revenue funds from the Department of Treasury for purposes other than their intended use. This misapplication of funds places the Housing Authority at risk of failing to meet its financial obligations and jeopardizes compliance with terms of multiple grant awards. Recommendation: The Housing Authority should adopt written grant draw policies into its financial policies and procedures manual. Financials should be reviewed monthly, and drawdowns made as needed. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plan.