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 drawn down to meet immediate cash needs. Condition: During our testing, we noted the Kentucky Health Departments Association (KHDA) drew down federal funds without minimizing the amount of time between when those funds were received, and when they were disbursed for program purposes. During the year ended June 30, 2025, we noted approximately $163,690 of drawdowns that were not disbursed within thirty days of when the transfer of funds was received from the pass-through entity, which is the period of time KHDA determined be administratively feasible. Cause: KDHA did not have adequate internal control procedures in place to ensure drawdowns were limited to immediate cash needs and that disbursements for program purposes limited the time elapsing from when funds were received from the pass-through entity. Effect: KHDA was not in compliance with federal cash management requirements. These practices may subject KHDA to financial sanctions, repayment of excess funds, or increased oversight by the pass-through entity. Recommendation: We recommend KHDA implement procedures to ensure drawdowns are limited to immediate cash needs and that all program disbursements are scheduled to minimize the time elapsing between the transfer of funds from the pass-through entity and disbursement for program purposes. 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.