Finding Text
Condition and criteria: According to 2 CFR section 200.305(b)(1), advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient 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 recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. 2 CFR section 200.305(b)(11) further states that the recipient or subrecipient must generally maintain advance payments of federal funds in interest-bearing accounts. It was noted during the audit that the University received an advance payment of $1,483,500 to be used for student scholarships in a future fiscal year and such advance payment was deposited into a noninterest-bearing account. Context: The funds were advanced to the University in April 2024 and had not been expended as of June 30, 2024. Such funds were still deposited in the noninterest-bearing account as of June 30, 2024. Effect: The University was not in compliance with federal cash management regulations for a portion of the current fiscal year. Cause: University personnel indicate that they were advised by ED that it was permissible to draw down the funds in advance and hold them in a noninterest-bearing account until needed. Auditor’s Recommendation: At a minimum, the University should transfer the advanced funds to an interest-bearing account. Interest earned on federal advance payments in excess of $500 should be remitted annually to the US Department of Health and Human Services using the instructions contained in the enclosures to the original grant award notification. The University should also contact appropriate ED officials to ensure that it is in compliance with 2 CFR section 200.305(b)(1).