Finding Text
Finding 2025-004 – U.S. Department of Education (ED) – Title III Program-Noncompliance With Cash Management, (Significant Deficiencies): Information on the federal program – Strengthening Historically Black Colleges and Universities (HBCU), ALN 84.031B, June 30,2025. Criteria – Under 2 CFR § 200.305, non-Federal entities must request Federal funds only for allowable program costs that have been incurred and must maintain supporting documentation available at the time of the drawdown demonstrating: 1. Actual, allowable expenditures existed at the time Federal funds were drawn; and 2. Records supporting the nature and timing of those expenditures were maintained and readily available for review. These requirements ensure that drawdowns reflect immediate cash needs supported by verifiable program expenditures. Condition – One (1) of eight (8) drawdowns tested for the Title III program was not based on actual expenditures incurred at the time the drawdown was requested. Audit testing determined that the University drew down $30,568 to fund a future payroll cycle more than fifteen (15) days before payroll costs were earned and incurred. As a result, Federal funds were requested in advance of immediate cash needs and were not supported by allowable program expenditures existing at the time of the drawdown. Cause – The condition occurred because the University did not have adequate procedures to ensure payroll expenditures included in drawdown requests had been incurred prior to requesting Federal funds. Management review controls did not detect that the drawdown included future payroll costs that had not yet been earned by employees. Effect – The University held Federal funds in advance of actual program expenditures, which is not consistent with the requirement that advance payments be limited to immediate cash needs. This condition increased the risk of excess Federal cash on hand, questioned costs, and noncompliance with Federal cash management requirements. Questioned Costs – $0. Repeat Finding – No. Auditor’s Perspective – From the auditors' perspective, the University's controls over cash management were not operating effectively to ensure that Federal drawdowns were based on allowable expenditures incurred and immediate cash needs. Specifically, the University drew down $30,568 for a future payroll cycle more than fifteen (15) days before the related payroll costs were earned and incurred. The lack of procedures to verify that expenditures had been incurred prior to requesting Federal funds resulted in noncompliance with Federal cash management requirements. Because this exception was identified in one of eight drawdowns tested, the deficiency increased the risk that Federal funds could be drawn and held in advance of program needs without timely detection. Auditor's Recommendation – We recommend that the University strengthen its cash management procedures to ensure that Federal drawdown requests are based solely on allowable expenditures that have been incurred as of the drawdown date. Prior to submitting a draw request, grant and finance personnel should reconcile requested amounts to supporting payroll records, general ledger expenditures, or other documentation evidencing incurred costs. In addition, management should perform and document a review of all drawdown requests to verify that requested funds are limited to the program's immediate cash needs and do not include future payroll or other anticipated expenditures. View of Responsible Officials – Management agrees with the finding. See the accompanying Corrective Action Plan for the University's planned corrective actions, responsible officials, and implementation dates.