Audit 386791

Federal Program: Head Start Cluster (CFDA 93.600) Federal Agency: U.S. Department of Health and Human Services Federal Award Number(s): 08CH012021-02-01 Compliance Requirement: Allowable Costs/Cost Principles Questioned Costs: $125 Condition – During testing of expenditures charged to the Head Start program several transactions were identified for which adequate supporting documentation such as invoices, receipts, or other evidence demonstrating the nature and purpose of the expenditures could not be provided. Criteria – Under 2 CFR 200.403(g) costs charged to federal awards must be adequately documented to be allowable. Additionally, 2 CFR 200.302(b)(3) requires non-federal entities to maintain records that “identify adequately the source and application of funds” for federally funded activities. Cause – Internal control procedures were not consistently followed related to retaining supporting documentation for federal program expenditures. Control over documentation retention was not sufficiently designed or monitored to ensure that all required records were maintained and readily available. Effect – Inadequate documentation increases the risk that unallowable costs may be charged to the federal program and may result in disallowed costs or repayment to the federal awarding agency. Recommendation – We recommend that the government strengthen its internal controls over documentation retention for federal program expenditures and ensure staff is knowledgeable regarding Uniform Guidance documentation requirements. Client Response – Management acknowledges this finding. We no longer service this program. In the future if we take a grant of this size on, training will be held for any employees involved with the grant. Status of Finding – This is not a repeat finding from the prior year.

Federal Program: Head Start Cluster (CFDA #93.600) Federal Agency: U.S. Department of Health and Human Services Federal Award Number(s): 08CH012021-02-01 Compliance Requirement: Allowable Costs/Costs Principles Questioned Costs: $281 Condition – During testing of payroll expenditures charged to the Head Start program multiple deficiencies in payroll processing and documentation were identified including hours did not agree to approved timecards, incorrect pay rates, supporting documentation was missing or incomplete, retirement and/or FICA contributions were calculated incorrectly, and allocation percentages did not agree with approved allocations. Criteria – Under 2 CFR 200.430(i) charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed supported by documentation that is accurate, reflects actual hours worked, supported by the entity’s internal controls, and consistent with the entity’s established policies. Cause - Internal controls over payroll processing and documentation were not consistently followed or adequately monitored. There was insufficient review of payroll inputs, allocation percentages, and benefit calculations prior to posting payroll costs to the Head Start program. Additionally, staff responsible for payroll processing did not consistently retain or verify supporting documentation. Effect – Payroll costs charged to the Head Start program may be inaccurate or unallowable. Recommendation - We recommend that the government strengthen its internal controls related to payroll processing and documentation for federal program expenditures and ensure staff is knowledgeable regarding Uniform Guidance documentation requirements. Client Response – Management acknowledges this finding. With the changes in staffing at the time, there was not proper training for each employee. We no longer service this program. In the future if we take a grant of this size on, training will be held for any employees involved with the grant. Status of Finding – This is not a repeat finding from the prior year.

Federal Program: Head Start Cluster (CFDA #93.600) Federal Agency: U.S. Department of Health and Human Services Federal Award Number(s): 08CH012021-02-01 Compliance Requirement: Reporting Questioned Costs: None noted Condition – During testing of reporting requirements for the Head Start program we noted that SF-429-B was not submitted prior to purchasing land during the budget period and SF-429-A for the budget period July 1, 2022 through June 30, 2023 was also not submitted. Criteria – 45 CFR §1303.44 – 1303.47 requires grantees to obtain prior approval from the Office of Head Start (OHS) before purchasing real property and to record a federal interest. SF-429-B must be submitted and approved prior to the acquisition and SF-429-A must be submitted annually for each property in which the federal government retains an interest. Cause – Due to staffing changes not all staff responsible for grant administration were fully aware of the SF-429 reporting obligations associated with real property acquisition under the Head Start program. Effect – Lack of required reporting increases the risk that real property may be acquired, used, or disposed of without proper federal oversight, which may result in administrative action or potential disallowance of costs. Recommendation – We recommend that the government establishes procedures to ensure that SF-429-A is submitted annually for all properties with a federal interest. As well as provide training to program staff on Head Start real property requirements under 45 CFR Part 1303. Client Response – We worked with those in charge of the Head Start grant closely through the process regarding the federal interest. We no longer own the property and have no plans to do so in the future. Status of Finding – This is not a repeat finding from the prior year.

Federal Program: Head Start Cluster (CFDA #93.600) Federal Agency: U.S. Department of Health and Human Services Federal Award Number(s): 08CH012021-02-01 Compliance Requirement: Reporting Questioned Costs: None noted Condition – During testing of reporting requirements for the Head Start program it was noted that the government submitted the required SF-425, however the Federal Cash and Federal Expenditure amounts reported did not agree to the general ledger. Criteria – Federal regulations require that financial reports submitted to federal agencies be accurate, complete, and supported by the accounting records. Cause – Internal controls or review procedures over reporting were not adequate to ensure that the financial information reported on SF-425 is reconciled to the general ledger. Effect – Submitting SF-425 reports that do not agree to the general ledger results in inaccurate reporting to the federal awarding agency. Noncompliance with Uniform Guidance reporting requirements increases the risk that errors in financial information may go undetected. Federal oversight is also impaired. Recommendation – We recommend that the government strengthen internal controls over federal financial reporting by requiring that all amounts reported on the SF-425 be reconciled to the general ledger prior to submission. Client Response – There was a spreadsheet completed for each month to track expenses by code, fiscal year and award. The administrative costs were monitored closely to make sure the 15% cap was not exceeded and the general ledger reconciled to reimbursement requests submitted. We released the grant in December of 2022 so this should no longer be an issue. We currently reconcile any grant reimbursement before they are submitted. Status of Finding – This is a repeat finding of 2022-005.