Finding Text
AL 93.354 – Material Weakness - Cash Management Criteria: Per 2 CFR 200.305(b), non-Federal entities must minimize the time elapsing between the transfer of funds from the pass-through entity and disbursement for program purposes. Funds under this grant should only be requested to reimburse expenditures for services that have already been provided. Condition: During our testing, we noted the Kentucky Health Departments Association (KHDA) drew down federal funds in excess of actual expenditures under the grant during the year ended June 30, 2025. As of June 30, 2025, cumulative drawdowns exceeded cumulative allowable expenditures by approximately $98,989. Cause: KDHA did not have adequate internal control procedures in place to ensure drawdowns were limited to expenditures for services that had already been provided. Effect: KHDA was not in compliance with federal cash management requirements. KHDA must spend the excess reimbursements on allowable grant expenses prior to the end of the grant’s period of performance, or KHDA may be required to return those funds to the grantor. Recommendation: We recommend KHDA implement procedures to ensure drawdowns are limited to immediate cash needs and are supported by actual expenditures incurred prior to the date of the drawdown. Management should periodically reconcile cumulative drawdowns to expenditures. Management’s Response: Staff have been trained on the federal requirements, and the organization has updated internal policies to reflect the compliance requirements. A Finance Committee has been formed to oversee federal compliance issues.