Finding Text
Assistance Listing Number(s), Federal Agency and Program Name: 84.031F and 84.031C; United States Department of Education (ED) , and 47.076; National Science Foundation (NSF), Research and Development Cluster.
Finding Type: Noncompliance and significant deficiency in internal control over compliance relating to cash management.
Criteria: The Uniform Guidance requires the University to manage grant payments to minimize the time elapsing between the transfer of funds received from the federal government and disbursement by a recipient and/or to draw funds on an as-needed basis within three days before the funds are needed.
Statement of Condition: The University withdrew the current year budget amount for one grant for $176,615 before incurring allowable expenses and did not disburse the funds within three days. The University kept the funds in an insured account and used the funds on eligible expenses by June 30, 2023. The internal controls over cash management were not operating effectively.
Questioned Costs: Interest earned on the advanced funds during 2023 did not exceed an amount that was necessary to return to the funders.
Context: The internal controls over cash management did not prevent, or detect and correct, the University from drawing an advance on a federal award prior to incurring, or within three days of paying for, allowable expenses. There was one grant that had a draw of $176,615 that was not in compliance with the cash management requirement.
Cause: The University did not have the proper controls in place to ensure that cash advances were spent on allowable grant expenditures within a timely manner of the draw down of grant funds.
Effect: The University was not in compliance with cash management requirements. The University also could have earned interest on the advance that would be necessary to return to the funders.
Recommendation: We recommend management revisit its processes and controls over the preparation and review of draw downs to ensure the draw downs are supported by expenses prior to the draw down or funds are disbursed within 3 days of any advance draws.
Management’s Response: A desk review of ALN #47.076 National Science Foundation (NSF) occured in August 2023 and identified 17.76% of the current year annual budget amount had been drawn down in advance of expenditures incurred and not fully utilized as indicated in 2 CFR 200.305 Federal Payments. MMU has discontinued the practice of drawing down funds in advance based on the budgeted amount for each year of the project (as prior grants allowed). Instead, MMU will draw down funds based on immediate cash requirements each month of the project after expenditures are incurred, reflected in the general ledger system and reviewed by the Principal Investigator (PI)/Co Principal Investigator (Co-PI) and Senior Accountant. The Business Office has implemented a cash management control as follows: review financial requirements upon grant submission and again when awarded, adjust accounting controls according to grantor requirements, actively participate in monthly review of financial reporting to grantor and document all financial activities as required.