Audit 3568

on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. The Unit did not have adequate documentation to support expenditures. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $23,700. Context: We noted that there was no primary, documented review for one of the seventeen sample vendor head start cluster accounts payable vouchers. Additionally, one of the vouchers was not supported by appropriate documentation. The voucher was for the purchase of gift cards for teachers to buy books for professional development. However, there was no backup or support showing what the gift cards were used to purchase. The total of this voucher was $23,700. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all supporting documentation to show what the gift cards were used to purchase to ensure they are used for allowable purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. The Unit did not have adequate documentation to support expenditures. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $23,700. Context: We noted that there was no primary, documented review for one of the seventeen sample vendor head start cluster accounts payable vouchers. Additionally, one of the vouchers was not supported by appropriate documentation. The voucher was for the purchase of gift cards for teachers to buy books for professional development. However, there was no backup or support showing what the gift cards were used to purchase. The total of this voucher was $23,700. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all supporting documentation to show what the gift cards were used to purchase to ensure they are used for allowable purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. The Unit did not have adequate documentation to support expenditures. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $23,700. Context: We noted that there was no primary, documented review for one of the seventeen sample vendor head start cluster accounts payable vouchers. Additionally, one of the vouchers was not supported by appropriate documentation. The voucher was for the purchase of gift cards for teachers to buy books for professional development. However, there was no backup or support showing what the gift cards were used to purchase. The total of this voucher was $23,700. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all supporting documentation to show what the gift cards were used to purchase to ensure they are used for allowable purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. The Unit did not have adequate documentation to support expenditures. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $23,700. Context: We noted that there was no primary, documented review for one of the seventeen sample vendor head start cluster accounts payable vouchers. Additionally, one of the vouchers was not supported by appropriate documentation. The voucher was for the purchase of gift cards for teachers to buy books for professional development. However, there was no backup or support showing what the gift cards were used to purchase. The total of this voucher was $23,700. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all supporting documentation to show what the gift cards were used to purchase to ensure they are used for allowable purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Reporting Audit Finding: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit in order to ensure compliance with requirements related to the grant agreement and the reporting compliance requirement. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the reporting requirements. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: We noted that for two federal financial reports in a sample of two reports, the Supervisor prepared the report without a secondary, documented review before the submission of the report to ensure the accuracy of the report. The amounts reported agreed to the supporting records without error. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the Unit implement a documented, formal review of the reports before they are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Reporting Audit Finding: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit in order to ensure compliance with requirements related to the grant agreement and the reporting compliance requirement. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the reporting requirements. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: We noted that for two federal financial reports in a sample of two reports, the Supervisor prepared the report without a secondary, documented review before the submission of the report to ensure the accuracy of the report. The amounts reported agreed to the supporting records without error. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the Unit implement a documented, formal review of the reports before they are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Reporting Audit Finding: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit in order to ensure compliance with requirements related to the grant agreement and the reporting compliance requirement. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the reporting requirements. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: We noted that for two federal financial reports in a sample of two reports, the Supervisor prepared the report without a secondary, documented review before the submission of the report to ensure the accuracy of the report. The amounts reported agreed to the supporting records without error. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the Unit implement a documented, formal review of the reports before they are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Reporting Audit Finding: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit in order to ensure compliance with requirements related to the grant agreement and the reporting compliance requirement. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the reporting requirements. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: We noted that for two federal financial reports in a sample of two reports, the Supervisor prepared the report without a secondary, documented review before the submission of the report to ensure the accuracy of the report. The amounts reported agreed to the supporting records without error. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the Unit implement a documented, formal review of the reports before they are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. The Unit did not have adequate documentation to support expenditures. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $23,700. Context: We noted that there was no primary, documented review for one of the seventeen sample vendor head start cluster accounts payable vouchers. Additionally, one of the vouchers was not supported by appropriate documentation. The voucher was for the purchase of gift cards for teachers to buy books for professional development. However, there was no backup or support showing what the gift cards were used to purchase. The total of this voucher was $23,700. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all supporting documentation to show what the gift cards were used to purchase to ensure they are used for allowable purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. The Unit did not have adequate documentation to support expenditures. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $23,700. Context: We noted that there was no primary, documented review for one of the seventeen sample vendor head start cluster accounts payable vouchers. Additionally, one of the vouchers was not supported by appropriate documentation. The voucher was for the purchase of gift cards for teachers to buy books for professional development. However, there was no backup or support showing what the gift cards were used to purchase. The total of this voucher was $23,700. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all supporting documentation to show what the gift cards were used to purchase to ensure they are used for allowable purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. The Unit did not have adequate documentation to support expenditures. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $23,700. Context: We noted that there was no primary, documented review for one of the seventeen sample vendor head start cluster accounts payable vouchers. Additionally, one of the vouchers was not supported by appropriate documentation. The voucher was for the purchase of gift cards for teachers to buy books for professional development. However, there was no backup or support showing what the gift cards were used to purchase. The total of this voucher was $23,700. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all supporting documentation to show what the gift cards were used to purchase to ensure they are used for allowable purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. The Unit did not have adequate documentation to support expenditures. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: $23,700. Context: We noted that there was no primary, documented review for one of the seventeen sample vendor head start cluster accounts payable vouchers. Additionally, one of the vouchers was not supported by appropriate documentation. The voucher was for the purchase of gift cards for teachers to buy books for professional development. However, there was no backup or support showing what the gift cards were used to purchase. The total of this voucher was $23,700. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all supporting documentation to show what the gift cards were used to purchase to ensure they are used for allowable purposes. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Reporting Audit Finding: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit in order to ensure compliance with requirements related to the grant agreement and the reporting compliance requirement. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the reporting requirements. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: We noted that for two federal financial reports in a sample of two reports, the Supervisor prepared the report without a secondary, documented review before the submission of the report to ensure the accuracy of the report. The amounts reported agreed to the supporting records without error. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the Unit implement a documented, formal review of the reports before they are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Reporting Audit Finding: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit in order to ensure compliance with requirements related to the grant agreement and the reporting compliance requirement. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the reporting requirements. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: We noted that for two federal financial reports in a sample of two reports, the Supervisor prepared the report without a secondary, documented review before the submission of the report to ensure the accuracy of the report. The amounts reported agreed to the supporting records without error. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the Unit implement a documented, formal review of the reports before they are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Reporting Audit Finding: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit in order to ensure compliance with requirements related to the grant agreement and the reporting compliance requirement. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the reporting requirements. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: We noted that for two federal financial reports in a sample of two reports, the Supervisor prepared the report without a secondary, documented review before the submission of the report to ensure the accuracy of the report. The amounts reported agreed to the supporting records without error. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the Unit implement a documented, formal review of the reports before they are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Head Start Cluster - Internal Controls Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Reporting Audit Finding: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Condition: An effective internal control system was not in place at the Unit in order to ensure compliance with requirements related to the grant agreement and the reporting compliance requirement. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the reporting requirements. Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: We noted that for two federal financial reports in a sample of two reports, the Supervisor prepared the report without a secondary, documented review before the submission of the report to ensure the accuracy of the report. The amounts reported agreed to the supporting records without error. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that the Unit implement a documented, formal review of the reports before they are submitted. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.