Finding Text
2023-005 Inadequate Cash Management Procedures and Noncompliance with Drawdown Requirements
Program Name/ Assistance Listing Number: 93. 959 Block Grants for Prevention and Treatment of Substance Abuse
Federal Agency: Department of Health and Human Services
Federal Award Identification: Unknown
Type of Finding: Material Weakness
Compliance Requirement: Cash Management
Criteria: Per 2 CFR §200.305(b), non-Federal entities must minimize the time elapsing between the transfer of funds from the U.S. Treasury and the disbursement of those funds for program purposes. Furthermore, entities must have written procedures that clearly outline the timing and methods for drawing down federal funds in accordance with cash management requirements. These procedures should be documented, reviewed, approved, and periodically revised to ensure ongoing compliance.
Condition: During our testing of cash management procedures, we noted that Cleveland UMADAOP's written procedures lacked crucial information, including when the policies were prepared, approved, implemented, reviewed, and revised. Additionally, the organization's current drawdown procedure, which involves dividing the total award amount into four equal quarterly drawdowns, may not comply with the cash management requirements. This method does not necessarily align with the requirement the Cleveland UMADAOP needs to drawdown only the amount that they need and minimize the time elapsing from the receipt of federal funds and the disbursement for program expenditures. Cause of Condition: Cleveland UMADAOP may not have fully understood the compliance requirements related to cash management, specifically the need to align drawdowns with actual cash needs rather than on a predetermined quarterly basis. The lack of detailed documentation and approval processes for cash management policies indicates potential gaps in internal controls and oversight.
Effect: The use of a predetermined drawdown schedule that is not based on actual cash needs could lead to excess federal funds being held unnecessarily, increasing the risk of non-compliance with cash management requirements. Additionally, the absence of comprehensive documentation for cash management procedures could result in inconsistencies in implementation, a lack of accountability, and difficulties in ensuring that policies remain current and effective.
Questioned Cost: Not quantifiable.
Recommendation: Cleveland UMADAOP should revise its cash management procedures to ensure they are in full compliance with federal requirements. Cleveland UMADAOP should adopt a drawdown process that is based on actual cash needs, minimizing the time elapsing between the drawdown of federal funds and their disbursement for program expenditures. Additionally, the organization should update its written procedures to include documentation of when the policies were prepared, approved, implemented, reviewed, and revised. This will help ensure that cash management practices are transparent, consistent, and compliant with applicable regulations. Finally, the organization should consider training relevant staff on the updated procedures and the importance of compliance with cash management requirements.
Description of the Nature and Extent of Issues Reported: We consider the following materiality for consideration of material noncompliance for the major program 93.959 at 5% of the total awards expended amounting to $51,253.
View of Responsible Official: Management agrees with the finding and will implement corrective action.