Finding Text
Cash Management
Finding Type:
Noncompliance and Material Weakness in Internal Control over
Compliance.
Programs:
United States Environmental Protection Agency
Capitalization Grants for Clean Water State Revolving Funds (ALN
#66.458) and Capitalization Grants for Drinking Water State Revolving
Funds (ALN #66.468)
Criteria:
For cost-reimbursement contracts under the Federal Acquisition Regulation
(“FAR”), reimbursement payment is the predominant method of funding.
Advance payments under FAR based contracts are rare. The FAR clause at
48 CFR section 52.216-7 applies to reimbursement payment. Paragraph
(b)(1) of that clause requires that the non-Federal entity request
reimbursement for (a) only allocable, allowable, and reasonable contract
costs that have already been paid, or (b) if the non-Federal entity is not
delinquent in paying costs of contract performance in the ordinary course
of business, costs incurred, but not necessarily paid. As defined in 48 CFR
section 52.216-7(b)(1), with relation to supplies and services purchased for
use on the contract, “ordinary course of business” would be in accordance
with the terms and conditions of a subcontract or invoice, and ordinarily
within 30 days of the request to the Federal Government for reimbursement.
Condition/Finding: During our audit procedures over the City’s cash management procedures,
we noted that the City paid contractors and vendors 30 days after receiving
the Federal reimbursement on two of the five federal reimbursements, with
vouchers totaling $212,541. The City does not have a process in place to
ensure contractors and vendors are paid in a timely manner.
Cause:
The City does not have a cash management policy which led to them
receiving and disbursing funds not in compliance with the Uniform
Guidance.
Effect:
Contractors and vendors were not paid timely and federal funds were held
for over thirty days prior to the disbursement of funds.
Questioned Costs:
No costs have been questioned as a result of this finding.
Recommendation:
The City should develop and implement a cash management policy and
procedures and if reimbursements are requested prior to paying the
contractors and vendors the contractors and vendors are paid within 30 days
of the request.