Finding Text
Improper Timing of MTW Capital Fund Program (CFP) Drawdowns (ALN 14.881) Condition: During testing of the Capital Fund Program (CFP) component of the Moving to Work (MTW) Demonstration Program, we determined that the Authority drew down CFP funds in advance of need. As of September 30, 2025, $1,891,326 of CFP funds drawn during the fiscal year remained unearned (undisbursed) and were carried as restricted/unearned amounts at year end. The drawdowns were not aligned with immediate, allowable obligations or expenditures at the time the funds were requested. This condition is a repeat of prior year finding 2024-002. Criteria: Under 2 CFR §200.305(b), non-Federal entities (other than states) must minimize the time elapsing between the transfer of funds from HUD and their disbursement; funds may be drawn only when needed for immediate disbursement (HUD’s “just-in-time” funding requirement). 2 CFR §200.302(b)(6) requires written procedures for payment consistent with §200.305. Under the MTW Demonstration Program (ALN 14.881), the Authority is subject to the financial management and cash management requirements applicable to non-MTW agencies; the 2025 Compliance Supplement (4-14.881) states that “No flexibility under the MTW demonstration permits an agency to waive any requirements regarding cash management” and that MTW agencies “are subject to the same cash management requirements as non-MTW agencies.” HUD controlled-disbursement and eLOCCS drawdown requirements apply (Notice PIH 2017-06). Cause: The Authority lacked effective internal controls to ensure CFP drawdowns were tied to immediate, documented, and allowable obligations and expenditures at the time of request, and did not reconcile amounts drawn to amounts earned and expended during the year. Effect: Federal cash was drawn in advance of need, contrary to the cash management standards of 2 CFR §200.305(b), resulting in $1,891,326 of undisbursed federal funds held by the Authority at year end. Holding undisbursed federal funds increases the risk of improper use, may give rise to an interest-remittance obligation under 2 CFR §200.305(b)(9) to the extent interest earned exceeds the $500 de minimis, and exposes the Authority to recapture or repayment. Questioned Costs: None. Recommendation: The Authority should (1) implement written drawdown procedures requiring each CFP request to be supported by immediate, documented, and eligible obligations or expenditures in accordance with HUD’s “just-in-time”/eLOCCS requirements; (2) perform periodic reconciliations of amounts drawn to amounts earned and expended, and promptly return or properly apply funds drawn but not needed; (3) monitor and remit any interest earned on undisbursed federal cash above the de minimis; and (4) provide staff training on federal cash management requirements under 2 CFR Part 200 and HUD guidance. Reply and Corrective Action Plan: The Authority concurs with the finding and acknowledges it is a repeat of finding 2024-002 involving cash management and drawdown procedures. Revise cash management procedures; require documented support and approval for drawdowns; perform monthly reconciliations; monitor interest earned on undisbursed federal cash; provide staff training; and report compliance status to the Board of Commissioners.