Finding Text
The Uniform Guidance in 2 CFR section 200.305(b)(3) requires that program costs must be paid by non-federal entity funds before submitting a payment request for reimbursement.
Based on testing performed over cash management, we noted that for the first nine months of the fiscal year ended June 30, 2023, management requested funds for an amount that was different and often more than actual expenditures for the given month. Specifically, during November 2021, the grant team noted that the budgeted fringe rates differed from actuals. This was brought to the attention of the finance department who was unable to explain the discrepancy. Rather than requesting reimbursement based on actual expenditures, the team kept track of the discrepancy and requested reimbursement based on the budgeted amounts. Upon investigating further, it was deemed that the difference was due to the grant team miscalculating the fringe benefit due to pre-tax contributions, and therefore, the Organization requested reimbursement for an amount more than what was actually expended. Management corrected the issue beginning in March 2023, and made a correction on their November 2023 draw in the amount of $4,446.75.
In addition, auditor noted differences of $3,425.55, between the balance approved on the February 2023 drawdown and the total amount requested and ultimately transferred. Auditor notes that there were indirect costs of $3,425.55 for the month of February 2023 that inadvertently did not get paid and post until March 2023, therefore they were requested for reimbursement in March 2023. As the February 2023 drawdown was based on budgeted and not actual, the drawdown included these same indirect costs as well. Management identified the issue and performed an analysis over indirect costs that were not getting posted correctly during year 2 of the grant. Management noted two other months in which the same issue occurred which was in January 2023 and December 2022, however for these months, the indirect costs did not get requested for reimbursement at all, resulting in an understatement of expenditures. Management made a correction for these on their November 2023 draw in the amount of $76,950.97.
Although program management has controls in place for the grant analyst to perform a reconciliation between the budgeted amounts and actual expenditures each month prior to requesting for reimbursement, discrepancies noted are not fully investigated prior to requesting funds for reimbursement. In addition, the error related to unintentionally miscalculating fringe benefits occurred during the period of time when the Organization’s CFO had resigned. Once a new CFO was in place, the error was identified and resolved. The error related to indirect costs resulted from issues within the payroll system where retirement and other costs were not posting until the following month.
Without adequate controls in place to ensure that discrepancies between budget to actual expenditures are being fully investigated and resolved prior to requests for reimbursements being made, noncompliance with cash management requirements could occur and not be detected by management.
Management should strengthen the Organization’s internal controls to ensure that program staff are timely investigating and resolving all differences noted in the monthly reconciliations between budget and actual expenditures and only requesting reimbursement for those costs that have been expended during the month.