Pathway's for the Future, Inc.

Finding 2020-002 - Cash Management Federal Programs: ACL Centers for Independent Living (CFDA# 93.432) U.S. Department of Health and Human Services MATERIAL WEAKNESS MATERIAL NONCOMPLIANCE Cash Management Criteria: The Organization must pay for program costs prior to request for reimbursement by the Federal Government when grant funding is on a reimbursement basis. Additionally, checks should be processed and mailed immediately. Condition: The Organization is required to minimize the time elapsing between the receipt of funds and issuance of payments for program purposes. Checks written and held or backdated, are not current period expenses. Context: $66,227 out of four draws totaling $131,218 were determined to be advance draws. Checks were written and held or backdated, resulting in significant bank overdrafts. Cause: The Organization made multiple draws of federal funds for program expenses before incurring the qualifying expenditures. Numerous checks were written but not mailed until months later or were processed subsequent to year end and backdated prior to September 30, 2020. Effect: Grant funds were drawn in advance of qualifying expenditures. The draw included $51,977 in grant funding that was not earned as of the end of the grant period and was reclassified to deferred revenue. The funds are eligible for carry forward based on subsequent approval by the grantor. Bank overdrafts were recorded, which could be considered disallowed expenses. Recommendation: Management should make efforts to ensure that advance draws of federal funds do not occur. Disbursements should be processed only when being mailed to vendors. Views of Responsible Officials and Planned Corrective Actions: The COVID Pandemic caused significant delays in work being completed before the end of the fiscal year. Checks were written to be paid before the end of the fiscal year for work being completed but were held up while the contractor had delays getting the needed supplies to complete the project. We had written two checks to contractors for work to be completed in the Asheville office and were delayed in paying as we waited approval from ACL. ACL approved the payment after year end and approved use of the checks we had written. We were not advised to carry the funds over and write new checks.