Audit 401203

Finding 2024-001: Segregation of Duties and Staffing Continuity Condition During the fiscal period covered by the audit, Home Start, Inc. experienced personnel turnover that resulted in certain critical positions within the program and finance functions being vacant for periods of time. The turnover created gaps in key roles responsible for the processing, oversight, and monitoring of program funding. As a result, appropriate segregation of duties was not consistently maintained, and there was limited continuity in responsibilities for financial processing and program funding oversight during portions of the fiscal year. Criteria Effective internal control requires that duties be appropriately segregated to reduce the risk of errors or irregularities. Internal control principles established in the COSO Internal Control Framework, which is referenced in Government Auditing Standards (Yellow Book), 2018 Revision, Paragraph 6.04, emphasize the importance of assigning responsibilities to ensure that no single individual has control over all phases of a transaction. Cause Personnel turnover during the fiscal year resulted in vacancies in key positions responsible for financial and program oversight. During these periods, responsibilities were redistributed among remaining personnel, which limited the Organization’s ability to maintain consistent segregation of duties and continuity of oversight functions. Effect The lack of consistent segregation of duties and staffing continuity increased the risk that errors or irregularities in the processing and monitoring of program funding could occur and not be detected in a timely manner. Recommendation We recommend that management evaluate staffing levels and internal control procedures to ensure that key financial and program oversight responsibilities remain appropriately segregated, even during periods of personnel transition. Management should consider implementing compensating controls, such as documented supervisory reviews, cross-training of personnel, and clearly defined backup responsibilities for critical functions. Establishing these procedures will help maintain effective internal control over program funding and financial processing during periods of staff turnover.

Finding 2024-002: Preparation of the Schedule of Expenditures of Federal Awards (SEFA) Condition At the beginning of the audit, Home Start, Inc. did not provide a properly completed Schedule of Expenditures of Federal Awards (SEFA). Certain programs administered by the Organization were funded through a combination of federal and non-federal sources. The Organization had not identified the portion of expenditures attributable to federal awards prior to the commencement of audit fieldwork. As a result, the identification of federal expenditures and the amounts to be included in the SEFA occurred during the audit process rather than prior to the start of the audit. This resulted in delays in determining the complete population of federal expenditures and the programs subject to audit under the Uniform Guidance. Criteria Under 2 CFR §200.510(b) of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), auditees are responsible for preparing a Schedule of Expenditures of Federal Awards for the period covered by the financial statements. The SEFA must accurately present total federal expenditures for each federal program, including the Assistance Listing number and pass-through identifying information, where applicable. Cause The Organization does not have a formalized process to identify and track the federal portion of expenditures for programs funded through multiple sources during the fiscal year. As a result, management had not compiled or finalized the SEFA prior to the start of the audit. Effect The absence of a completed SEFA at the commencement of the audit delayed the auditor’s ability to determine the population of federal expenditures and identify major programs for testing under the Uniform Guidance. This resulted in additional time required during fieldwork to determine the appropriate amounts to include in the SEFA. Recommendation We recommend that management implement procedures to identify and track federal expenditures by Assistance Listing number throughout the year, particularly for programs with mixed funding sources. Management should prepare and review a complete and accurate SEFA prior to the start of the audit, including identification of federal funding components within blended funding streams. Establishing formal procedures for the preparation and review of the SEFA will help ensure compliance with 2 CFR §200.510(b) and support timely completion of the annual Single Audit.

Finding 2024-003: Documentation of Procurement and Competitive Bidding Procedures Condition During testing of procurement transactions, we noted that a vendor was selected for services without documented evidence that competitive bidding or price quotations were obtained, and the procurement file did not include documentation describing the basis for vendor selection. While Home Start, Inc.’s fiscal policies allow for the use of oral quotes and permit vendor selection based on responsiveness and advantage to the Organization considering factors such as price, quality, and other relevant considerations, the procurement documentation maintained by the Organization did not include evidence that quotes were obtained or documentation supporting the basis for vendor selection. Criteria Under 2 CFR §200.318(a), non-federal entities must establish and maintain effective internal controls over the procurement process to ensure compliance with federal statutes, regulations, and the terms and conditions of federal awards. Additionally, 2 CFR §200.318(i) requires non-federal entities to maintain records sufficient to detail the history of procurement, including documentation of the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Further, 2 CFR §§200.319–200.320 require that procurements be conducted in a manner providing full and open competition, and that appropriate price or rate quotations be obtained depending on the procurement method. Cause The Organization did not consistently maintain documentation supporting the procurement process, including evidence of quotes obtained or documentation explaining the basis for vendor selection when competitive quotes were not documented. Effect The absence of procurement documentation reduces the Organization’s ability to demonstrate compliance with Uniform Guidance procurement requirements and increases the risk that procurements funded with federal awards may not meet federal competition standards. Recommendation We recommend that management strengthen procurement documentation procedures to ensure that procurement files include sufficient documentation of the competitive bidding or quotation process, including: • Evidence of quotes or bids obtained, including oral quotes where permitted by policy. • Documentation supporting the evaluation and selection of vendors. • Written justification when competitive bids or quotes are not obtained, consistent with both Uniform Guidance requirements (2 CFR §200.318(i)) and the Organization’s fiscal policies. Implementing these procedures will help ensure that procurement activities funded by federal awards are adequately documented and compliant with Uniform Guidance procurement standards.