Audit 396867

2025-001 — Reporting Federal program information: Funding Agency: U.S. Department of Health and Human Services Title: Head Start Assistance Listing Number : 93.600 Award Year: July 1, 2024 – July 31, 2025 Criteria: The program is required to submit a semi-annual and an annual SF-425 report during the award period. Condition: The semiannual SF-425 report selected for testing was not prepared or submitted to the granting agency. Context: One of one semi-annual SF-425 report tested. Questioned Costs: None. Cause: Internal controls have not been implemented to ensure that the semiannual SF-425 report is submitted in a timely manner. Effect: SNMCAC is not in compliance with reporting requirements for the Head Start program. Auditor’s Recommendations: SNMCAC should develop internal controls to ensure that financial reports are properly completed and submitted to the granting agency by the required due dates. Documentation substantiating compliance with reporting requirements should be maintained. Such documentation should include reconciliations of amounts in the financial reporting forms to SNMCAC’s accounting records. Management’s Response: SNMCAC acknowledges the finding related to the semi-annual SF-425 reporting requirement. SNMCAC prepared and submitted the SF-425 report within the required timeframe. However, the report was not accepted by the Office of Head Start due to the pending approval of a waiver of non-federal matching. During this period, the Office of Head Start was affected by a federal shutdown and a reorganization of their regional offices that included the closure of the regional office overseeing the grant. This contributed to delays in communication and timely resolution.

2025-002 — Activities Allowed Federal program information: Funding Agency: U.S. Department of Health and Human Services Title: Head Start Assistance Listing Number : 93.600 Award Year: July 1, 2024 – July 31, 2025 Criteria: Funds may be used for development and administrative costs, subject to the limitation that no financial assistance shall be extended in any case in which the costs of developing and administering a program exceed 15 percent of the total costs, including the required nonfederal contributions to such costs. The term “development and administrative costs” means costs incurred in accordance with an approved Head Start budget that do not directly relate to the provision of program component services. Condition: Total administrative cost allocations and administrative salaries charged to the Head Start program totaled $1,526,131, which exceeded the 15% cap by approximately 4%. Context: Based on review of administrative costs and total costs charged to the program. Questioned Costs: None. Cause: Internal controls have not been implemented to ensure that SNMCAC is properly charging administrative costs to the program. Effect: SNMCAC is not in compliance with allowable activity requirements for the Head Start program. Auditor’s Recommendations: SNMCAC should review development and administrative costs charged to the program and develop internal controls to ensure they are meeting the 15% cap. All administrative costs charged should be reviewed and a determination should be made as to whether they fall under the definition of administrative costs. Documentation should be maintained evidencing program compliance. Management’s Response: SNMCAC acknowledges the finding related to administrative cost limitations under the Head Start program and accepts responsibility for ensuring compliance with the 15% administrative cost cap. During the grant period, SNMCAC followed guidance and direction provided by the Office of Head Start regarding the classification and allocation of certain program costs. This resulted in the inclusion of costs within administrative categories that contributed to exceeding the 15% threshold. While SNMCAC acted in accordance with guidance received from the granting agency, management recognizes that ultimate responsibility for compliance with federal cost limitations rests with the organization.