Finding Text
CRITERIA Recipients of federal grants are required by federal regulations to maintain documentation demonstrating that cash receipts correspond to drawdowns based on actual, allowable costs incurred. Drawdowns for Federal awards should be properly supported with relevant forms and reports to substantiate the costs incurred and evidence management review and approval. CONDITION AND CONTEXT For certain grants within the Research and Development (R&D) cluster, funds were received in advance of expenditures. Of the total $1,700,112 in expenditures for the R&D cluster, $1,082,381 was received as advance drawdowns. For these advance drawdowns, UHU was unable to provide documentation supporting the estimates used to determine the amounts requested or evidence that the cash receipts were supported by eligible grant expenditures incurred, as required by the terms of the awards. The available documentation only substantiates the receipt of cash; there was no documentation supporting the basis or methodology for the estimates used to determine the amounts requested in advance drawdowns. CAUSE This deficiency resulted from the lack of procedures to ensure that advance drawdown amounts were determined based on documented estimates, and to maintain adequate records supporting both the methodology for those estimates and their connection to eligible expenditures incurred under the federal awards. EFFECT OR POTENTIAL EFFECT We were unable to determine whether the federal funds received in advance and recorded as cash receipts during the year were based on allowable costs incurred. As a result, there is a risk that federal funds may have been drawn down prior to, or in excess of, eligible expenditures. This could result in noncompliance with federal regulations regarding advance funding and may lead to a potential misstatement of federal expenditures and the accuracy of the SEFA. RECOMMENDATION We recommend that UHU establish and implement procedures to ensure that all advance drawdowns are supported by documented estimates that clearly outline the methodology used and are tied to allowable costs anticipated to be incurred under the federal programs. Additionally, management should maintain records that demonstrate the connection between amounts requested and qualifying expenditures and ensure that all drawdown requests and related estimates are subject to appropriate review and approval prior to submission. This will help ensure compliance with federal regulations and improve the accuracy of the SEFA.