Audit 375856

Finding 2025-001: Head Start Cluster Semi-Annual Certification Procedures U.S. Department of Education Type of Finding: Control Pass-through agency: Michigan Department of Education Assistance Listing Number: 93.600 Award numbers: 05CH011882-04, 05CH011882-05 Award year ends: November 30, 2024 and November 30, 2025 Specific Requirement: Allowable Costs/Cost Principles Criteria: Section 200.430 of the Cost Principles of the Title 2 U.S. Code of Federal Regulations (CFR) Part 200—Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires charges to federal award for salaries and wages to be based on records that accurately reflect the work performed. These records must (1) be supported by a system of internal controls which provide reasonable assurance that charges are accurate, allowable and properly allocated, (2) reasonably reflect total activity for which the employee is compensated, (3) encompass both federally assisted and all other activities compensated by the entity, (4) support the distribution of the employee’s wages among specific cost objectives if the employee works on more than one federal award, (5) be reconciled with payroll budget estimates with necessary adjustments made to accounting records to ensure that excess costs are not charged to federal programs. Appendix B to 2 CFR, Part 225—Selected Items of Cost indicates that where employees are expected to work solely on a single Federal award or cost objective, charges for their salaries and wages will be supported by periodic certifications that the employees worked solely on that program for the period covered by the certification. These certifications will be prepared at least semi-annually and will be signed by the employee or supervisory official having first-hand knowledge of the work performed by the employee. Questioned Costs: None. Condition: During our detailed testing of time-and-effort reporting for the Head Start Cluster programs, we noted that semi-annual certifications were prepared to comply with federal time and effort requirements. However, the reports were not timely prepared or timely reviewed by the program supervisors with documented approval. Context: Thirteen employees working in the federal program were eligible for semi-annual certifications because their payroll costs were fully allocated to a single federal program or cost objective. Separate semi-annual certifications were prepared for each six-month period during the fiscal year. While all certifications contained the proper components, including documented supervisor approval, they inadvertently excluded two eligible employees from each report originally. These reports were later re-prepared to include these two employees, however, they were not prepared timely as the forms were completed and certified at least two months after the six-month period ending dates. The sample was not a statistically valid sample. This appears to be an isolated condition. Effect: Failure to timely prepare and review time-and-effort reporting could allow improper payroll expenses to be charged to the School District’s federal programs. As a result, payroll compensation and fringe benefits charged for these employees could be disallowed, or there could be missed opportunities for reimbursement. Cause: The School District program personnel inadvertently excluded two employees from the list of 100% eligible Head Start employees who are required to complete semi-annual certifications. Although these reports were later fixed, they were not timely reviewed and approved. As a result, semi-annual certifications were not reviewed and approved for these employees during the required timeframes. Repeat Finding: This is not a repeat finding. Recommendation: The School District should provide training to educate all employees working in federal programs of the requirements for verifying program employee listings are complete under Uniform Guidance, and the School District should require proper time-and-effort documentation to be timely reviewed and approved by the appropriate program supervisor. Views of Responsible Officials: The School District agrees with this finding.