Finding Text
2024-007 - Lack of Separate Bank Account for Restricted Federal Cash Finding Type: Material noncompliance Federal Program: 10.760 Water and Waste Disposal Systems for Rural Communities Compliance Requirement: Allowable Costs/Cost Principles Condition/Finding: The Village did not maintain a separate bank account for restricted federal loan proceeds. These funds were commingled with other Village monies, and no formal ledger-based tracking or reconciliation procedures were in place to isolate federal cash activity. The Village also lacked internal policies or procedures to guide compliance with federal cash management requirements. Criteria: In accordance with 2 CFR §200.305(b), non-federal entities must maintain effective control over, and accountability for, all federal funds. This includes safeguarding assets and ensuring that federal cash is used only for authorized purposes. While physical separation of funds is not explicitly required, entities must have controls in place—such as distinct accounts or ledger tracking—to clearly account for restricted cash in accordance with award terms. Cause: The Village did not establish policies or procedures related to federal cash management and therefore did not implement practices to ensure separation or traceability of restricted federal cash. Effect: The lack of internal policies and procedures, combined with the absence of account-level or ledger-based segregation of restricted federal cash, resulted in noncompliance with federal cash management standards. This condition represents noncompliance that is material in relation to the applicable compliance requirements due to the increased risk of improper use of federal funds and the inability to demonstrate appropriate stewardship over federal cash. Recommendation: We recommend that the Village establish formal procedures addressing the handling of restricted federal cash. This may include either maintaining a separate bank account for federal loan proceeds or implementing a structured ledger system with regular reconciliation to ensure proper tracking and compliance. View of Responsible Officials: Management’s response and planned corrective action can be found in the accompanying Corrective Action Plan.