Finding Text
Finding 2022-006 Lack of Internal Control Over Special Test and Provisions – Investment and Deposit of Advance Funds Federal Agency: U.S. Department of the Interior, passed through Bureau of Indian Affairs Federal Program: Aid to Tribal Government Assistance Listing Number: 15.020 Award Numbers: A20AV00507 Award Year: 2020 Type of Finding: Material weaknesses in internal control over compliance and noncompliance. Criteria: A tribal organization receiving advance payments under the ISDEAA (Indian Self-Determination and Education Assistance Act) may invest advance payments before such funds are expended for the purposes of the grant, contract, or funding agreement, so long as such funds are (1) invested only in obligations of the United States or in obligations or securities that are guaranteed or insured by the United States, or mutual funds registered with the Securities and Exchange Commission and which only invest in obligations of the United States or securities that are guaranteed or insured by the United States; or (2) deposited only in accounts that are insured by an agency or instrumentality of the United States, or are fully collateralized to ensure protection of the advance funds, even in the event of a bank failure (25 USC 450e-3). Condition and Context: As of fiscal year-end, the Council maintained approximately $2,575,597 in a local financial institution, of that amount $1,413,986 was advanced under its Aid to Tribal Government Program. Approximately $2,397,416 of the total bank balance was not covered by FDIC insurance and was not otherwise collateralized, placing those federal funds at risk of loss. Cause: The Council did not have formal procedures to monitor bank balances against insured limits or require collateral agreements for federal funds held in excess of FDIC coverage. Effect: This practice exposes federal funds to custodial credit risk and does not comply with the federal requirements under 25 U.S.C. § 450e–3 and Uniform Guidance. If the financial institution were to fail, the Council could suffer a loss of federal program funds. Questioned Costs: None. Repeat Finding: This is a repeat finding of 2021-005 and considered a systemic issue. Recommendation: We recommend the Council implement procedures to review bank balances on a regular basis and compare them to FDIC insurance limits. The Council should arrange for a collateral agreement with its financial institution to ensure full protection of all federal funds in accordance with 25 U.S.C. § 450e–3. A written cash management policy should be developed to document these requirements. Management Response: Management concurs with this finding. See Corrective Action Plan.