Finding Text
#2022-005 - Major Federal Award Finding - Cash Management
Nature of Finding: Compliance Finding - Cash Management and Material Weakness in Internal Controls Over Compliance
This finding is issued in conjunction with #2022-004 above, with the questioned costs indicated below being the result of both errors (amounts were excluded from questioned costs in the previous finding to avoid duplication).
Criteria/Condition: 2 CFR 200.305 requires that non-federal entities must minimize the time elapsing between the transfer of federal funds to the non-federal entity and the disbursement of the funds by the non-federal entity for program costs. The Organization did not have proper controls in place to verify that specific vendor invoices were paid within a reasonable amount of time of requesting reimbursement for the expenditures.
Questioned Costs: $30,000
Identification of How Questioned Costs Were Computed: The issues of noncompliance related to cash management in this circumstance were related to one vendor that was not paid within a reasonable amount of time of the Organization being reimbursed for the costs. Questioned costs include the one invoice that was charged to the grant for this vendor during the year ended December 31, 2022 and was not paid to the vendor within a reasonable amount of time of being reimbursed for the expenditures.
Cause/Context: The Organization issued a check to vendor, but the vendor did not receive or cash the check. The replacement check was not issued until months later, during the next fiscal (and grant) year. Controls were not in place to ensure expenditures were paid to the vendor prior to requesting reimbursement. Controls were also not in place to detect this significant check that remained outstanding for a considerable length of time. This particular circumstance was likely an isolated incident due to the unique circumstance of this one payment. However, the lack of controls does not appear to be isolated.
Effect: Grant funds were received well in advance of the payment of the invoice identified above. The lack of controls could continue to result in requests for reimbursement being submitted for unpaid expenditures.
Recommendation: We recommend procedures be established that incorporate controls to review expenditures for payment prior to submitting requests for reimbursement, and that outstanding checks (and other reconciling items) be resolved within a reasonable period of time. Evidence of control activities including review should be documented and maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to establish procedures that incorporate controls to review expenditures for payment prior to submitting request for reimbursement, and that the outstanding checks (and other reconciling items) be resolved in a reasonable period of time. Such evidence of control activities including review will be documented and maintained.