Audit 27533

2022-001--Allowable Costs/Cost Principles Federal Agency: U.S. Department of Health and Human Services Federal Program: ALN 93.575 - Child Care and Development Block Grant - Passed through New York State Office of Children and Family Services. Grant/Passthrough Number: A-11279 Grant Period: Year ended April 30, 2022 Condition: The Organization expended Child Care Stabilization Grant funds on the resurfacing of a parking lot. Criteria: In accordance with Child Care and Development Block Grant regulations (45 CFR 95.56(b)(1)) no funds shall be expended for the purchase or improvement of land, or for the purchase, construction, or permanent improvement of any building or facility. 45 CFR 98.2 defines ?facility? to include real property used for a childcare program. Cause: The Organization relied on preliminary information provided by the grantor in its decision to use the grant funds to increase accessibility to the childcare center by resurfacing the parking lot. The federal program was not initially identified by the grantor or verified by the Organization prior to the Organization expending the funds. Context: The condition was identified through other audit procedures undertaken during the audit of the financial statements and was not identified as part of a statistically valid sample. The condition was not identified in other audit testing and appears to be an isolated incident. Effect: The Organization was not in compliance with federal allowable cost principles and the related costs may need to be returned. Questioned Costs: $66,830 Repeat Finding: No Recommendation: Procedures should be put in place to ensure that the Organization has confirmed the source of grants funds, as well as any limitation on allowable costs, prior to expending the funds. Management?s Response: At the time of our decision, we be believed this cost to be allowable. This based on a webinar by New York State Head Start Collaboration office on the Stabilization Grant on 9/13/2021. During this webinar the question was asked about a parking lot, and it was indicated that we need to get 3 quotes and ensure prevailing wages are paid. At the time the frequently asked question from the state dated 7/20/2021 did not directly address resurfacing a parking lot. This was done to fill several potholes for children and building safety. The parking lot was done in November of 2021. On 4/19/22 the New York States frequently asked question were updated to specifically noting that resurfacing a parking lot was not an allowable use of funds. While we believe our decision was based on information that indicated the cost was allowable at the time of the decision we have since updated our policies and procedures to strengthen them. The Executive Director Janett Rodriguez (jrodriguez@hseoc.org) and Finance Director Sam Breyer(sbreyer@hseoc.org) are responsible for getting board approval during the November 2022 meeting and for the implementation of the following adjustments to our policies and procedure. 1. HSEOC has updated our policy FIS-30-0106 Procurement procedures to include a. HSEOC will get in writing where practical for funding not under covered under 45 CFR part 75. b. HSEOC will also get conformation from the nontraditional funding sources. 2. HSEOC training plan has been updated to include training for additional nontraditional funding sources for the Executive Director, Finance Director, and any Service Area Manager that may manage the funds when these funds are awarded. 3. Filling out of a purchase order process has been updated to include funding source that are not traditional to allow to allowability as a check point.

2022-001--Allowable Costs/Cost Principles Federal Agency: U.S. Department of Health and Human Services Federal Program: ALN 93.575 - Child Care and Development Block Grant - Passed through New York State Office of Children and Family Services. Grant/Passthrough Number: A-11279 Grant Period: Year ended April 30, 2022 Condition: The Organization expended Child Care Stabilization Grant funds on the resurfacing of a parking lot. Criteria: In accordance with Child Care and Development Block Grant regulations (45 CFR 95.56(b)(1)) no funds shall be expended for the purchase or improvement of land, or for the purchase, construction, or permanent improvement of any building or facility. 45 CFR 98.2 defines ?facility? to include real property used for a childcare program. Cause: The Organization relied on preliminary information provided by the grantor in its decision to use the grant funds to increase accessibility to the childcare center by resurfacing the parking lot. The federal program was not initially identified by the grantor or verified by the Organization prior to the Organization expending the funds. Context: The condition was identified through other audit procedures undertaken during the audit of the financial statements and was not identified as part of a statistically valid sample. The condition was not identified in other audit testing and appears to be an isolated incident. Effect: The Organization was not in compliance with federal allowable cost principles and the related costs may need to be returned. Questioned Costs: $66,830 Repeat Finding: No Recommendation: Procedures should be put in place to ensure that the Organization has confirmed the source of grants funds, as well as any limitation on allowable costs, prior to expending the funds. Management?s Response: At the time of our decision, we be believed this cost to be allowable. This based on a webinar by New York State Head Start Collaboration office on the Stabilization Grant on 9/13/2021. During this webinar the question was asked about a parking lot, and it was indicated that we need to get 3 quotes and ensure prevailing wages are paid. At the time the frequently asked question from the state dated 7/20/2021 did not directly address resurfacing a parking lot. This was done to fill several potholes for children and building safety. The parking lot was done in November of 2021. On 4/19/22 the New York States frequently asked question were updated to specifically noting that resurfacing a parking lot was not an allowable use of funds. While we believe our decision was based on information that indicated the cost was allowable at the time of the decision we have since updated our policies and procedures to strengthen them. The Executive Director Janett Rodriguez (jrodriguez@hseoc.org) and Finance Director Sam Breyer(sbreyer@hseoc.org) are responsible for getting board approval during the November 2022 meeting and for the implementation of the following adjustments to our policies and procedure. 1. HSEOC has updated our policy FIS-30-0106 Procurement procedures to include a. HSEOC will get in writing where practical for funding not under covered under 45 CFR part 75. b. HSEOC will also get conformation from the nontraditional funding sources. 2. HSEOC training plan has been updated to include training for additional nontraditional funding sources for the Executive Director, Finance Director, and any Service Area Manager that may manage the funds when these funds are awarded. 3. Filling out of a purchase order process has been updated to include funding source that are not traditional to allow to allowability as a check point.