Finding 396247 (2021-010)

Finding 2021-010 Program: Office for Coastal Management Federal Financial Assistance Listing: 11.473 Federal Grantor: U.S. Department of Commerce Passed-through: National Fish and Wildlife Foundation Award No. and Year: 0318.19.070225 (2020) Compliance Requirements: Cash Management / Subrecipient Monitoring Type of Finding: Material Non-Compliance/Material Weakness Criteria: 2 CFR 200.305 – establishes that payment methods must minimize the time elapsing between the transfer of funds from the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer or other means. The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. Whenever possible, advance payments must be consolidated to cover anticipated cash needs for all Federal awards made by the Federal awarding agency to the recipient. Non-Federal entities must be authorized to submit requests for advance payments and reimbursements at least monthly when electronic fund transfers are not used, and as often as they like when electronic transfers are used, in accordance with the provisions of the Electronic Fund Transfer Act. Reimbursement is the preferred method when the requirements above cannot be met. Condition: We identified the following: • For amounts advanced from granting agency to CFSC, we noted $559,110 of advances were not expended timely. The expenditures were incurred (or disbursed to subrecipients) between 21 and 50 days after advanced funds were received by CFSC. • For $733,637 of pass-through payments paid by CFSC, the timing of payment to subrecipients didn’t follow a reimbursement method. The agreements allowed for funds to be advanced, with a true-up required quarterly. Funds were frequently remitted to subrecipient more than 30 days in advance of the expenditure being incurred by the subrecipient. o For 5 transactions of 9 payments to subrecipients tested, funds were provided to subrecipients prior to eligible expenditures being incurred by the subrecipient. The number of days between date funds were advanced to subrecipient, and when an eligible expenditures were completely incurred by subrecipients were as follows:  8 days - $191,830 • Time between CFSC receipt of funds (from granting agency) and subsequent remittance to subrecipient was 59 days  34 days - $195,929 • Time between CFSC receipt of funds and subsequent remittance to subrecipient was 44 days  51 days - $100,000 • Time between CFSC receipt of funds and subsequent remittance to subrecipient was 59 days  79 days - $50,000 • time between CFSC receipt of funds and subsequent remittance to subrecipient was 107 days  86 days - $195,929 • time between CFSC receipt of funds and subsequent remittance to subrecipient was 121 days Questioned Costs: Advances received of $559,110 by CFSC, and subrecipient advances paid of $733,637, as detailed under the Condition above. Context/Sampling: Sampling was not used. For advances received, we tested 6 of 6 advances. We selected all three subrecipients for testing. The condition noted above was identified during our procedures over CFSC’s subrecipient monitoring provisions. Repeat Finding from Prior Year: Yes –2020-001 Effect: CFSC did not minimize the time elapsing between receiving advances and incurring eligible expenditures, including the timing of the subrecipients incurring the related eligible expenditures. Cause: CFSC’s procedures did not consistently ensure that subrecipient agreements followed the uniform guidance requirements related to advances, nor did their policies allow for appropriately minimizing the time elapsing on advances received. Recommendation: We recommend that CFSC modify and strengthen its current policies and procedures to ensure that cash management policies surrounding advances are in line with grant agreements and uniform guidance. Views of Responsible Officials and Planned Corrective Actions: See Separate Corrective Action Plan.