Finding 6905 (2023-004)

Finding 2023-004 Material weakness in internal control over compliance for cash management related to cash advances Federal Agency: United States Department of State Program Titles: Office of Global Women’s Issues Assistance Listing Number: 19.801 Pass-Through Entity: N/A Award Numbers: SLMAQM21CA3275 Award Periods: September 30, 2021 through September 30, 2025 Criteria Internal control requirements contained in Title 2 U.S. Code of Federal Regulations Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, Subpart D ‐ Post Federal Award Requirements, Section 200.305(b), Internal Controls, require that a non‐Federal entity minimize the time elapsing between the transfer of funds from the US Treasury or pass-through entity and disbursement by the non-federal entity for direct program or project costs and the proportionate share of allowable indirect costs, whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Advance payments to non-Federal entity must be limited to the minimum amounts needed and be time to be in accordance with the actual, immediate cash requirement 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 Federal Payment Management Services system payment program further clarifies that cash must be drawn solely to accommodate immediate needs on an “As Needed Basis Only” and must not be held in excess of three working days. Condition/Context Out of the cash drawdown of $792,012 requested on December 9, 2022, $565,193 was for forecasted costs through June of 2023. This draw was made in excess of three business days before disbursing the funds. Cause The Organization’s internal controls were not properly designed and implemented to ensure compliance with the cash management requirements. Effect Cash advances were drawn in excess of the immediate cash requirements of the Organization. Questioned Costs $565,193 Repeat Finding No. Recommendation We recommend the Organization implement a cash management policy to ensure that the time elapsing between the transfer of funds from US Treasury and disbursement for direct program is minimized. The time between draw and disbursement should be no longer than three business days. Views of Responsible Individual and Corrective Action Plan Management agrees with the finding and has provided the accompanying corrective action plan.