Audit 400248

United States Department of Health and Human Services Direct funding Program: Head Start CFDA: 93.600 Grant Number: 04CH011788-05-01 and 04CH012862-01-00 Noncompliance / Significant Deficiency Reporting Criteria The grant requires semi-annual and annual reporting expenditures incurred for awards. Semi-annual SF-425 report were due March 1, 2025 and October 31, 2025. The annual SF-425 report was due October 31, 2025. Condition The Center failed to submit timely semi-annual and annual reports for the grant periods ending January 31, 2025, and July 31, 2025. They were all submitted late. Cause Reporting deadlines are not being appropriately tracked and monitored. Effect The Center was required to file the reports late to rectify the matter. Recommendation We recommend management review current controls over reporting to ensure timeliness of report submissions. Management's Response Management agrees with our recommendation and finding. The delinquent reports have been prepared and submitted as of audit issuance. As such, a different individual will be monitoring and tracking the reporting requirements.

All Funding Sources Significant Deficiency Procurement Criteria An entity must have and use documented procurement policies consistent with Federal, State, and local laws, regulations, and standards for the acquisition of property or services required under a Federal award or subaward. The procedures must conform to the procurement standards identified in CFR § 200.317 through 200.327. Condition The Center maintains specific grant manuals and guidelines as its written policies; however, previous audit identified errors in misapplying grant guidelines among funding sources. A recommendation was made in previous audit to develop a policy that would cover all procurements using Federally sourced funds. A draft policy was developed, but was not approved during the year ended September 30, 2025. Cause The entity has continued to reference specific grant manuals and guidelines as its written procurement policy. Effect Failure to follow appropriate procurement procedures could result in excess procurement costs being disallowed and subject the entity to possible claims. Recommendation We recommend management present the draft to the board, so it can be voted on and put into place. Management's Response Management agrees with our recommendation and the policy was voted on subsequent to year end and put into place.

All Funding Sources Noncompliance Improper Charges to Federal Funded Reimbursable Grants Criteria Under CFR § 200 (Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards) and the respective federal grant agreements, only allowable, reasonable, and allocable costs actually incurred and supported by adequate documentation may be charged to a federal award. Reimbursement requests must be based on actual, recorded expenditures. Condition During our testing of expenditures charged to multiple federally funded reimbursable grants subject to the Uniform Guidance, we noted instances where the Organization billed and received reimbursement for costs that were not supported by actual underlying expenses. Specifically, reimbursement requests included amounts in excess of actual costs incurred, resulting in estimated over-reimbursements of approximately $15,000 during the period under audit. Cause The condition resulted from a breakdown in internal controls over the grant billing process, including inadequate reconciliation of reimbursement requests to the general ledger and supporting documentation, and insufficient oversight. Existing policies and procedures were not effectively implemented to prevent or detect improper charges to federal awards on a timely basis. Effect The Organization received excess federal grant reimbursements of approximately $15,000 to which it was not entitled and may be required to repay these amounts to the respective federal grantor agencies or pass-through entities. The risk was mitigated by management’s identification of the issue, prompt reporting to governance and the auditors, and immediate personnel and control actions. Recommendation We recommend that the Organization reconcile all affected federal grant reimbursement requests to underlying expenditures to determine the exact over-reimbursement amount and work with the applicable grantor(s) to return any unallowable costs. The Organization should strengthen controls over grant billings by requiring documented reconciliations to the general ledger and formal review and approval of all reimbursement requests, ensure appropriate segregation of duties, and provide training to relevant staff on Uniform Guidance cost principles and the Organization’s grant billing procedures. Management's Response Management concurs with the finding. Management is performing a comprehensive reconciliation of all affected federal grant reimbursements to actual expenditures and will work with the applicable federal agencies/pass-through entities to return unallowable amounts.