Finding Text
Identification of the Federal Program:
Assistance Listing Number: 20.507
Assistance Listing Title: Federal Transit Cluster
Federal Agency: U.S. Department of Transportation
Federal Award Identification Number: CA-2020-191; CA-2021-018; CA-2021-115; CA-2022-135; CA-2023-034
Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation):
In accordance Uniform Guidance, recipients of federal funds must establish and maintain effective internal controls over cash management to ensure that federal funds are properly drawn down, and expenditures are accurately recorded and reported. Cash drawdowns should be supported by accurate documentation, authorized by appropriate officials, and reconciled to grant expenditures. A strong internal control environment should include formal policies and procedures for cash management, clear communication between departments involved in grant management, and a system for tracking grant expenditures and drawdowns.
Condition:
During the audit of cash management procedures for the Federal Transit Cluster, we noted that one out of six drawdown submitted for reimbursement was not consistently reviewed or approved by the City Manager prior to submission. Additionally, three out of six drawdowns contained corrections to the amounts being charged to the grants due to errors identified after submission.
Cause:
The City lacks formal policies and procedures governing the review, approval, and reconciliation of cash management for federal grants. Furthermore, there is no formal process for tracking grant expenditures and drawdowns, and insufficient communication exists between the Transit Department and the Finance Department, leading to correction in drawdown requests.
Effect or Potential Effect:
The absence of formal cash management procedures and ineffective communication between departments increase the risk of inaccurate drawdowns, which may result in overdrawn funds, questioned costs, or noncompliance with federal requirements. Additionally, not properly reviewing and approving all drawdowns increases the risk of errors or unauthorized drawdowns.
Questioned Costs:
None noted.
Context:
See condition above for the context of the cash management finding.
Identification as a Repeat Finding, If Applicable:
Not applicable.
Recommendation:
We recommend the City develop and implement formal policies and procedures for cash management of federal grants, including establishing a clear process for preparing, reviewing, and approving grant drawdowns, ensuring that all drawdowns are reviewed and authorized by a designated official, such as the City Manager, prior to submission. Further, we recommend the City implement a tracking system for grant expenditures and drawdowns to ensure accuracy and compliance with grant requirements and enhance communication between the Transportation Department and Finance Department to ensure that all grant expenditures are accurately recorded and reported. We also recommend the City provide training to staff involved in grant management to ensure a
clear understanding of federal cash management requirements and internal control procedures.
Views of Responsible Officials:
Management concurs with the finding and agrees to implement necessary corrective procedures.