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2025-001 - Cash Management - Interest Earned on Federal Advances Not Calculated, Remitted, or Accrued Federal Agency: U.S. Department of State Program: Office of Weapons Removal and Abatement - Direct Programs, Weapons Removal and Abatement Assistance Listing Number: 19.800 Federal Award Identification Numbers: See Schedule of Expenditures of Federal Awards Compliance Requirement: Cash Management Type of Finding: Significant deficiency in internal control over compliance and instance of noncompliance Repeat Finding: No Criteria 2 CFR 200.305 requires recipients and subrecipients other than states to minimize the time elapsing between the transfer of Federal funds and disbursement by the recipient or subrecipient. Advance payments must be limited to the minimum amounts needed and timed as close as administratively feasible to actual, immediate cash requirements. Recipients are also required to maintain advance payments of Federal funds in interest-bearing accounts unless an exception applies. Recipients may retain up to $500 per year of interest earned on Federal funds for administrative expenses; interest earned in excess of $500 per year must be returned annually to the Department of Health and Human Services Payment Management System, regardless of whether the recipient was paid through that system. 2 CFR 200.516 requires audit findings to include the Federal program identification, criteria, condition, cause, effect, questioned costs when applicable, perspective, repeat finding status, recommendation, and views of responsible officials. Condition During our testing of cash management for Assistance Listing 19.800, we noted that the Foundation received Federal advance payments and maintained Federal funds in interest-bearing accounts during the year ended December 31, 2025. However, the Foundation did not calculate the amount of interest earned on Federal advance balances, did not determine the amount required to be remitted to the Federal government, and did not accrue an interest payable as of December 31, 2025. As a result, the Foundation did not have controls in place to ensure that interest earned on Federal advance payments was identified, calculated, recorded, and remitted in accordance with Uniform Guidance requirements. 2025-001 - Cash Management - Interest Earned on Federal Advances Not Calculated, Remitted, or Accrued (Continued) Context The Foundation reported Federal expenditures of $2,389,325 under Assistance Listing 19.800 for the year ended December 31, 2025. The condition was identified during cash management testing for the major program when reconciling total cash drawdowns to total expenditures. The exception applied to the Foundation’s overall process for calculating and remitting interest earned on Federal advances. Cause The Foundation did not have a formal process or assigned control owner to periodically identify Federal advance balances, calculate interest earned on those balances, compare the interest earned to the annual $500 retention allowance, record any required payable, and remit excess interest to the Federal government. Effect The Foundation did not comply with the cash management requirements applicable to Federal advance payments. Interest earned on Federal funds in excess of the annual amount permitted to be retained may not have been timely returned to the Federal government. In addition, because the Foundation did not calculate the interest required to be remitted, the Foundation did not record an interest payable as of December 31, 2025, which could result in liabilities being understated and net assets being overstated. Known Questioned Costs Interest and Dividends earned on Federal funds totaled $51,526. Recommendation We recommend that the Foundation establish and implement written cash management procedures to ensure compliance with Uniform Guidance requirements for Federal advances. The procedures should include: 1. Identifying Federal advance balances by award and bank or investment account. 2. Calculating interest earned on Federal advance balances at least annually, and more frequently if advance balances are significant. 3. Comparing annual interest earned on Federal funds to the $500 retention allowance. 4. Recording interest payable for amounts required to be remitted as of year-end. 5. Remitting excess interest annually through the required Federal payment system. 6. Assigning review and approval responsibility to an individual independent of the preparer. Views of Responsible Officials Management agrees with the finding. The Foundation will implement written cash management procedures to calculate interest earned on Federal advance balances, record any required payable at year-end, and remit amounts due to the Federal government in accordance with Uniform Guidance requirements..