Audit 402682

2025-001 – Pathways, AL# 17.270, Reporting Condition The quarterly progress report for the period ending September 30, 2024 was submitted late on December 20, 2024. It was due on November 15, 2024. Criteria Under the grant requirements, the Organization is required to submit quarterly reports no later than 45 days past the reporting period end. Cause Management did not submit the report timely. Effect The quarterly report for the period ending September 30, 2024 was submitted late. Questioned Cost Amount $-0- Perspective Information An exception was noted for one of the two reports selected for testing, from a total population of four reports.Repeat Finding N/A Recommendation Management should take steps to ensure that all required reports are filed timely. View of Responsible Officials and Planned Corrective Action We acknowledge that the quarterly report for the period ending September 30, 2024, was submitted after the required due date of November 15, 2024. However, the delay was not due to a failure to prepare the report in a timely manner, but rather resulted from a reporting system constraint caused by an incorrect drawdown. The report was completed and ready for submission on November 14, 2024. At that time, it was identified that cash receipts exceeded expenditures due to an incorrect drawdown that had been mistakenly applied to the program. This discrepancy prevented submission through the Payment Management System (PMS) until the issue was resolved. The incorrect drawdown was subsequently reclassified to the appropriate program by a TAP finance team member on November 14, 2024. On November 15, 2024, management notified the Department of Labor, Project Officer, of the issue and the resulting inability to submit the report while the system correction was pending. Although the adjustment had been made, the submission remained delayed because the PMS had not yet updated to reflect the correction. As of November 18, and November 21, 2024, the PMS still had not been updated, and the report could not be submitted despite continued monitoring and follow-up communications; additional communication was received from the Project Officer regarding the issue, on December 3, 2024, and we responded, noting that submission would likely be possible once activity for the next reporting period (quarter ending December 31, 2024) was reflected in the system. Corrective Action and Prevention Measures: To prevent recurrence, we will implement the following actions: • Monthly reconciliation of drawdowns and PMS records to ensure expenditures and receipts are properly aligned and discrepancies are identified promptly. • Pre-submission reconciliation checklist to verify drawdowns, expenditures, and PMS balances prior to report submission. • Enhanced coordination with finance staff to ensure all drawdowns are accurately charged to the correct program at the time of posting. • Formal escalation process for unresolved PMS or federal reporting system issues to ensure timely resolution with the federal agency. • Earlier internal reporting deadlines to allow sufficient time for review and resolution of any discrepancies prior to federal due dates. • Documentation retention procedures to ensure all communications, PMS discrepancies, and resolution steps are maintained to support audit review. • Ongoing training/refresher guidance for finance and program staff on drawdown procedures and federal reporting requirements.

2025-002 – Pathways, AL# 17.270, HeadStart Cluster, AL# 93.600, Supportive Services for Veteran Families, AL# 64.033, Other Findings Condition The Data Collection Form for the FY25 audit was not submitted to the Federal Audit Clearinghouse by the nine-month March 31, 2026 deadline. Criteria The Data Collection Form is required to be submitted by the earlier of 30 days from audit report issuance or nine months from fiscal year end. Cause The FY25 audit was not completed by March 31, 2026. Effect The Data Collection Form was submitted late. Questioned Cost Amount $-0- Perspective Information N/A Repeat Finding N/A Recommendation Management should take steps to ensure that the audit is completed timely and the Data Collection Form is submitted before the deadline. View of Responsible Officials and Planned Corrective Action Management concurs with the finding and will: • Establish an earlier audit planning timeline with the external auditor to ensure audit fieldwork, review, and issuance are completed prior to federal submission deadlines. • Strengthening coordination between program management and the finance team to ensure year-end reconciliations, schedules, and audit support documentation are completed in a timely manner. • Implement a structured year-end close calendar led by the finance team to support timely audit completion. • Require the finance team to prepare audit support packages earlier in the audit cycle, including trial balances and reconciliation schedules. • Conduct ongoing monthly and quarterly reconciliations to ensure financial records are accurate and audit-ready.

2025-003 – HeadStart Cluster, AL# 93.600, Activities Allowed/Unallowed Condition Included in HeadStart expenditures for 2025 are amounts that are believed to be fraudulently expended and not for their intended use. In some instances, the funds were disbursed without proper authorization, primarily through use of Agency credit cards. In other instances, co-payments for HeadStart services were not properly remitted for deposit, resulting in the need to use additional Federal funds to cover costs. Criteria All expenditures are to be properly authorized, and all funds are to be properly remitted for deposit. The Agency does have policies in place requiring these to occur. Cause An employee acted outside the policies and procedures in place to misappropriate funds. Effect HeadStart funds were not used for their intended purpose. Questioned Cost Amount $19,800 Perspective Information Based on the audit procedures performed, no exceptions were noted in the transactions tested. Management identified suspected fraud and self-reported the related questionedcosts. Management engaged a forensic consultant to determine and quantify the amount of questioned costs. Repeat Finding 2024-001 Recommendation While HeadStart has review and approval policies in place, we recommend that they continue to look for ways to tighten policies and procedures around agency card use and remittance of funds for deposit. Any additional segregation of processes that can be feasibly made should be taken. View of Responsible Officials and Planned Corrective Action Management notes that the questioned costs identified in FY2025 represent a continuation of items previously reported in FY2024 and addressed through an established corrective action plan. As part of the prior year response, management implemented a comprehensive action plan and engaged an independent forensic audit to assess the identified irregularities. Building on these efforts, management is further strengthening internal controls to ensure sustained compliance. These actions include: • Continued implementation and monitoring of corrective measures identified in the prior year audit and forensic review. • Enhanced oversight of credit card issuance, approval, and reconciliation processes. • Reinforced segregation of duties to reduce the risk of unauthorized transactions. • Strengthened monitoring of cash receipts and deposit procedures to ensure all program funds are accurately recorded and deposited promptly. • Ongoing compliance reviews to confirm that prior audit findings are fully resolved and do not recur.