Audit 290035

Finding 2022-01 – Material Weakness in Internal Control over Compliance with Allowable Costs and Reporting - Child Care and Development Block Grant- Assistance Listing #93.575, Child Care Mandatory and Matching Funds of the Child Care Development Fund - Assistance Listing #93.596 Criteria or Specified Requirement Accounting staff submit periodic reimbursement requests to the California Department of Social Services for expenses reimbursable under the Council's federal Child Care Development Fund contract. Costs are recognized as the liability is incurred consistent with Generally Accepted Accounting Principles. Management uses two pool funds to allocate central office costs to its various funds, activities and projects. Payroll and related expenses are allocated based on direct hours, and facilities expenses are allocated based on square footage. Condition Found In review of the allocation from the two pool funds, it was noted that allocation ratios had not been updated from the prior year amounts despite the program mix changing. As such, the other funds, activities and projects are charged more than their share of those costs. A review of the year end accounts for accrued payroll and payroll taxes showed stale balances that had not been reconciled to actual accrued costs. Cause Management indicated that the loss of the Executive Director during the year placed too much pressure on the finance department to give them the time to undertake a new indirect calculation and to adequately review and tie out balance sheet accounts. Effect Some grant funds or projects receive excess pool allocations and costs that cannot be traced to actual expenses. Questioned Costs Monthly allocations are made within the accounting software but the hour and square footage totals and year end balance sheet accruals are not documented; consequently, there is no way to recompute the allocation to include all funds, activities and projects used by the Organization. Since audit procedures were performed to vouch cutoff, accruals, reclassifications, and allowable costs eligible for reimbursement as of June 30, 2022, there are no questioned costs. Recommendation We recommend that the indirect cost allocation be updated at least annually to include all funds, activities and projects so that each shares in the pool cost. After consultation regarding possible remedies to the condition, the Council engaged an outside accounting firm to provide financial oversight. We recommend that the Council continue that relationship, or a similar relationship until such time as they can develop sufficient capability among staff to meet the requirements for oversight.

Finding 2022-01 – Material Weakness in Internal Control over Compliance with Allowable Costs and Reporting - Child Care and Development Block Grant- Assistance Listing #93.575, Child Care Mandatory and Matching Funds of the Child Care Development Fund - Assistance Listing #93.596 Criteria or Specified Requirement Accounting staff submit periodic reimbursement requests to the California Department of Social Services for expenses reimbursable under the Council's federal Child Care Development Fund contract. Costs are recognized as the liability is incurred consistent with Generally Accepted Accounting Principles. Management uses two pool funds to allocate central office costs to its various funds, activities and projects. Payroll and related expenses are allocated based on direct hours, and facilities expenses are allocated based on square footage. Condition Found In review of the allocation from the two pool funds, it was noted that allocation ratios had not been updated from the prior year amounts despite the program mix changing. As such, the other funds, activities and projects are charged more than their share of those costs. A review of the year end accounts for accrued payroll and payroll taxes showed stale balances that had not been reconciled to actual accrued costs. Cause Management indicated that the loss of the Executive Director during the year placed too much pressure on the finance department to give them the time to undertake a new indirect calculation and to adequately review and tie out balance sheet accounts. Effect Some grant funds or projects receive excess pool allocations and costs that cannot be traced to actual expenses. Questioned Costs Monthly allocations are made within the accounting software but the hour and square footage totals and year end balance sheet accruals are not documented; consequently, there is no way to recompute the allocation to include all funds, activities and projects used by the Organization. Since audit procedures were performed to vouch cutoff, accruals, reclassifications, and allowable costs eligible for reimbursement as of June 30, 2022, there are no questioned costs. Recommendation We recommend that the indirect cost allocation be updated at least annually to include all funds, activities and projects so that each shares in the pool cost. After consultation regarding possible remedies to the condition, the Council engaged an outside accounting firm to provide financial oversight. We recommend that the Council continue that relationship, or a similar relationship until such time as they can develop sufficient capability among staff to meet the requirements for oversight.

Finding 2022-02 - Significant Deficiency in Internal Control over Compliance with Reporting - Child Care and Development Block Grant- Assistance Listing #93.575, Child Care Mandatory and Matching Funds of the Child Care Development Fund - Assistance Listing #93.596 Criteria or Specified Requirement Title 2 CFR Section 200.512(a) requires, the auditee must submit the data collection form described in paragraph (b) of 2 CFR Section 200.512 and the reporting package described in paragraph (c) of that section within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. The required data elements described in Appendix X to Part 200, state whether the audit was completed in accordance with this part and provide information about the auditee, its Federal programs, and the results of the audit. The data must include information available from the audit that is necessary for Federal agencies to use the audit to ensure integrity for Federal programs. Condition Found The Council failed to meet the statutory deadline for filing its Single Audit with the Federal Clearinghouse. Cause Due to changes in staffing during the execution period of the 2021-2022 audit, the Council lacked management staff with the experience and first hand knowledge of the transaction for that period to be able to take responsibility for the audit. As a result, it was necessary to engage an outside accounting firm to complete the year end in order to be able to complete the audit and to take responsibility for the financial statements. This process extended beyond the statutory deadline for the submission of the Data Collection Forms to the Federal Clearinghouse. Effect The Council was out of compliance with 2 CFR 200,512(a). Questioned Costs Monthly allocations are made within the accounting software but the hour and transaction totals are not documented; consequently, there is no way to recompute the allocation to include all funds, activities and projects used by the Organization. However, it is believed that the differences would not be material to any individual award. Recommendation After consultation regarding possible remedies to the condition, the Council engaged an outside accounting firm to provide financial oversight. We recommend that the Council continue that relationship, or a similar relationship until such time as they can develop sufficient capability among staff to meet the requirements for oversight.

Finding 2022-02 - Significant Deficiency in Internal Control over Compliance with Reporting - Child Care and Development Block Grant- Assistance Listing #93.575, Child Care Mandatory and Matching Funds of the Child Care Development Fund - Assistance Listing #93.596 Criteria or Specified Requirement Title 2 CFR Section 200.512(a) requires, the auditee must submit the data collection form described in paragraph (b) of 2 CFR Section 200.512 and the reporting package described in paragraph (c) of that section within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. The required data elements described in Appendix X to Part 200, state whether the audit was completed in accordance with this part and provide information about the auditee, its Federal programs, and the results of the audit. The data must include information available from the audit that is necessary for Federal agencies to use the audit to ensure integrity for Federal programs. Condition Found The Council failed to meet the statutory deadline for filing its Single Audit with the Federal Clearinghouse. Cause Due to changes in staffing during the execution period of the 2021-2022 audit, the Council lacked management staff with the experience and first hand knowledge of the transaction for that period to be able to take responsibility for the audit. As a result, it was necessary to engage an outside accounting firm to complete the year end in order to be able to complete the audit and to take responsibility for the financial statements. This process extended beyond the statutory deadline for the submission of the Data Collection Forms to the Federal Clearinghouse. Effect The Council was out of compliance with 2 CFR 200,512(a). Questioned Costs Monthly allocations are made within the accounting software but the hour and transaction totals are not documented; consequently, there is no way to recompute the allocation to include all funds, activities and projects used by the Organization. However, it is believed that the differences would not be material to any individual award. Recommendation After consultation regarding possible remedies to the condition, the Council engaged an outside accounting firm to provide financial oversight. We recommend that the Council continue that relationship, or a similar relationship until such time as they can develop sufficient capability among staff to meet the requirements for oversight.

Finding 2022-01 – Material Weakness in Internal Control over Compliance with Allowable Costs and Reporting - Child Care and Development Block Grant- Assistance Listing #93.575, Child Care Mandatory and Matching Funds of the Child Care Development Fund - Assistance Listing #93.596 Criteria or Specified Requirement Accounting staff submit periodic reimbursement requests to the California Department of Social Services for expenses reimbursable under the Council's federal Child Care Development Fund contract. Costs are recognized as the liability is incurred consistent with Generally Accepted Accounting Principles. Management uses two pool funds to allocate central office costs to its various funds, activities and projects. Payroll and related expenses are allocated based on direct hours, and facilities expenses are allocated based on square footage. Condition Found In review of the allocation from the two pool funds, it was noted that allocation ratios had not been updated from the prior year amounts despite the program mix changing. As such, the other funds, activities and projects are charged more than their share of those costs. A review of the year end accounts for accrued payroll and payroll taxes showed stale balances that had not been reconciled to actual accrued costs. Cause Management indicated that the loss of the Executive Director during the year placed too much pressure on the finance department to give them the time to undertake a new indirect calculation and to adequately review and tie out balance sheet accounts. Effect Some grant funds or projects receive excess pool allocations and costs that cannot be traced to actual expenses. Questioned Costs Monthly allocations are made within the accounting software but the hour and square footage totals and year end balance sheet accruals are not documented; consequently, there is no way to recompute the allocation to include all funds, activities and projects used by the Organization. Since audit procedures were performed to vouch cutoff, accruals, reclassifications, and allowable costs eligible for reimbursement as of June 30, 2022, there are no questioned costs. Recommendation We recommend that the indirect cost allocation be updated at least annually to include all funds, activities and projects so that each shares in the pool cost. After consultation regarding possible remedies to the condition, the Council engaged an outside accounting firm to provide financial oversight. We recommend that the Council continue that relationship, or a similar relationship until such time as they can develop sufficient capability among staff to meet the requirements for oversight.

Finding 2022-01 – Material Weakness in Internal Control over Compliance with Allowable Costs and Reporting - Child Care and Development Block Grant- Assistance Listing #93.575, Child Care Mandatory and Matching Funds of the Child Care Development Fund - Assistance Listing #93.596 Criteria or Specified Requirement Accounting staff submit periodic reimbursement requests to the California Department of Social Services for expenses reimbursable under the Council's federal Child Care Development Fund contract. Costs are recognized as the liability is incurred consistent with Generally Accepted Accounting Principles. Management uses two pool funds to allocate central office costs to its various funds, activities and projects. Payroll and related expenses are allocated based on direct hours, and facilities expenses are allocated based on square footage. Condition Found In review of the allocation from the two pool funds, it was noted that allocation ratios had not been updated from the prior year amounts despite the program mix changing. As such, the other funds, activities and projects are charged more than their share of those costs. A review of the year end accounts for accrued payroll and payroll taxes showed stale balances that had not been reconciled to actual accrued costs. Cause Management indicated that the loss of the Executive Director during the year placed too much pressure on the finance department to give them the time to undertake a new indirect calculation and to adequately review and tie out balance sheet accounts. Effect Some grant funds or projects receive excess pool allocations and costs that cannot be traced to actual expenses. Questioned Costs Monthly allocations are made within the accounting software but the hour and square footage totals and year end balance sheet accruals are not documented; consequently, there is no way to recompute the allocation to include all funds, activities and projects used by the Organization. Since audit procedures were performed to vouch cutoff, accruals, reclassifications, and allowable costs eligible for reimbursement as of June 30, 2022, there are no questioned costs. Recommendation We recommend that the indirect cost allocation be updated at least annually to include all funds, activities and projects so that each shares in the pool cost. After consultation regarding possible remedies to the condition, the Council engaged an outside accounting firm to provide financial oversight. We recommend that the Council continue that relationship, or a similar relationship until such time as they can develop sufficient capability among staff to meet the requirements for oversight.

Finding 2022-02 - Significant Deficiency in Internal Control over Compliance with Reporting - Child Care and Development Block Grant- Assistance Listing #93.575, Child Care Mandatory and Matching Funds of the Child Care Development Fund - Assistance Listing #93.596 Criteria or Specified Requirement Title 2 CFR Section 200.512(a) requires, the auditee must submit the data collection form described in paragraph (b) of 2 CFR Section 200.512 and the reporting package described in paragraph (c) of that section within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. The required data elements described in Appendix X to Part 200, state whether the audit was completed in accordance with this part and provide information about the auditee, its Federal programs, and the results of the audit. The data must include information available from the audit that is necessary for Federal agencies to use the audit to ensure integrity for Federal programs. Condition Found The Council failed to meet the statutory deadline for filing its Single Audit with the Federal Clearinghouse. Cause Due to changes in staffing during the execution period of the 2021-2022 audit, the Council lacked management staff with the experience and first hand knowledge of the transaction for that period to be able to take responsibility for the audit. As a result, it was necessary to engage an outside accounting firm to complete the year end in order to be able to complete the audit and to take responsibility for the financial statements. This process extended beyond the statutory deadline for the submission of the Data Collection Forms to the Federal Clearinghouse. Effect The Council was out of compliance with 2 CFR 200,512(a). Questioned Costs Monthly allocations are made within the accounting software but the hour and transaction totals are not documented; consequently, there is no way to recompute the allocation to include all funds, activities and projects used by the Organization. However, it is believed that the differences would not be material to any individual award. Recommendation After consultation regarding possible remedies to the condition, the Council engaged an outside accounting firm to provide financial oversight. We recommend that the Council continue that relationship, or a similar relationship until such time as they can develop sufficient capability among staff to meet the requirements for oversight.

Finding 2022-02 - Significant Deficiency in Internal Control over Compliance with Reporting - Child Care and Development Block Grant- Assistance Listing #93.575, Child Care Mandatory and Matching Funds of the Child Care Development Fund - Assistance Listing #93.596 Criteria or Specified Requirement Title 2 CFR Section 200.512(a) requires, the auditee must submit the data collection form described in paragraph (b) of 2 CFR Section 200.512 and the reporting package described in paragraph (c) of that section within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. The required data elements described in Appendix X to Part 200, state whether the audit was completed in accordance with this part and provide information about the auditee, its Federal programs, and the results of the audit. The data must include information available from the audit that is necessary for Federal agencies to use the audit to ensure integrity for Federal programs. Condition Found The Council failed to meet the statutory deadline for filing its Single Audit with the Federal Clearinghouse. Cause Due to changes in staffing during the execution period of the 2021-2022 audit, the Council lacked management staff with the experience and first hand knowledge of the transaction for that period to be able to take responsibility for the audit. As a result, it was necessary to engage an outside accounting firm to complete the year end in order to be able to complete the audit and to take responsibility for the financial statements. This process extended beyond the statutory deadline for the submission of the Data Collection Forms to the Federal Clearinghouse. Effect The Council was out of compliance with 2 CFR 200,512(a). Questioned Costs Monthly allocations are made within the accounting software but the hour and transaction totals are not documented; consequently, there is no way to recompute the allocation to include all funds, activities and projects used by the Organization. However, it is believed that the differences would not be material to any individual award. Recommendation After consultation regarding possible remedies to the condition, the Council engaged an outside accounting firm to provide financial oversight. We recommend that the Council continue that relationship, or a similar relationship until such time as they can develop sufficient capability among staff to meet the requirements for oversight.