During the audit, it was observed that the Organization recorded the majority of the audit adjustments identified and proposed. However, a few adjustments were recorded inaccurately, and some were not recorded. These discrepancies are significant to the financial statements prepared in accordance with Auditing Standards Generally Accepted in the United States of America.
During the audit, it was observed that while the Organization has made efforts to improve its documentation processes, a few internal control challenges remain. Instances of missing or incomplete documentation, including purchase orders (POs), invoices, and supporting agreements, were noted. These missing records were not widespread but did raise concerns regarding internal controls, particularly in documentation management.
As noted in prior year findings, the Organization has not yet appointed a Compliance Officer. The absence of this position has resulted in missed opportunities for more effective oversight and timely resolution of recurring issues noted in the financial reporting process. While financial processes and controls have been strengthened, the establishment of a Compliance Officer would provide additional oversight, ensuring more consistent adherence to policies, improved monitoring of financial reporting, and enhanced internal controls.
During the audit, it was observed that all program funding is received through a single central bank account. Program directors and assistants are responsible for matching the received funds with requested reimbursements, addressing any discrepancies, and recording the transactions.
To resolve the prior year finding related to non-compliance with Head Start program requirements (Compliance N), the Organization is in the process of securing alternative funding for medical and oral health services. While the issue of non-compliance still persists, efforts are ongoing. Additionally, the Organization previously lacked policies requiring Board approval for major financial expenditures before procurement, leading to OMB compliance deficiencies. However, the Board has now formally approved the budget, and implementation of the necessary policies is in progress.
The fixed asset records for the Head Start program remain incomplete, with missing serial numbers for some larger equipment. Although updates have been made, certain items, such as refrigerators and stoves, could not be fully identified due to the inability to access serial numbers. Additionally, the physical fixed asset count, which was recommended to be conducted promptly, was not performed within the audit year. However, it has since been conducted, and future reconciliations have now been scheduled.
There is no risk assessment process established or implemented by management to identify risks related to non-compliance with required compliance obligations as outlined in the OMB Supplement 2024. The absence of such a process has led to the inability to assess risks effectively, which may result in overlooked instances of non-compliance.
The Organization currently lacks a formal control process for identifying and reviewing potential fraud risks. While fraud risks may be reported by Those Charged With Governance (TCWG), there is no documented process for evaluating, responding to, and monitoring these risks over time. The absence of such a review and monitoring mechanism hinders the Organization's ability to promptly detect and mitigate fraud-related threats.