2003 Comprehensive Annual Financial Report

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CITY OF SOUTH BEND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Section II — Financial Statement Findings No matters are reportable. Section III — Federal Award Findings and Questioned Costs FINDING NO. 2003 -1. CASH MANAGEMENT Federal Agency: U.S. Department of Justice Federal Program: Public Safety Partnership and Community Policing Grants CFDA Number: 16.710 Federal Award Number: 2002CKWX0059 A cash drawdown request made on December 13, 2002, was received on December 17, 2002, in the amount of $465,393.90. A purchase order was issued on December 23, 2002, in the amount of the drawdown for equipment. On May 22, 2003, an invoice was received for the equipment and payment was made on July 28, 2003, check Number 261185 in the amount of $465,393.90. The cash drawdown for $465,393.90 was held by the City for over seven months before disbursement was made. The compliance requirements for cash management are contained in the OMB Circular 102 (Para- graph 2.a.) and the A -102 Common Rule, 28 CFR, Subpart C - Post -Award Requirements, 66.20 (b) (7) which states: "Cash management. Procedures for minimizing the time elapsing between the transfer of funds from the U.S. Treasury and disbursement by grantees and subgrantees must be followed whenever advance payment procedures are used.... When advances are made by letter of credit or electronic transfer of funds method, the grantee must make drawdowns as close as possible to the time of making disbursements...." and 66.21 (c) which states: "Advances. Grantees and subgrantees shall be paid in advance, provided they maintain or demonstrate the willingness and ability to maintain procedures to minimize the time elapsing between the transfer of the funds and their disbursement by the grantee or subgrantee." Failure to comply with the provisions of cash management could cause the City to be deemed ineli- gible to receive advance payments and could jeopardize future federal funding. We recommend that the City obtain an understanding of the requirements of cash management and then design and monitor procedures to ensure that the requirements are met. 155