Audit 407173

Finding #2025-001 – Significant Deficiency and Other Noncompliance. Applicable federal programs: Department of Health and Human Services, Assistance Listing #: 93.575 – Childcare and Development Block Grant (CCDF Cluster), Passed through Houston-Galveston Area Council, Contract Number: 13410, Contract Year: 10/01/24 - 09/30/25, Assistance Listing #: 93.596 – Child Care Mandatory and Matching Funds of the Child Care and Development Fund (CCDF Cluster), Passed through Houston-Galveston Area Council, Contract Number: 13410, Contract Year: 10/01/24 - 09/30/25. Criteria: Allowable costs – Section 200.303 of the Uniform Guidance indicates that the organization must 1) establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award and 2) evaluate and monitor the compliance with statutes, regulations, and terms and conditions of the federal award. The non-federal entity must also take prompt action when instances of noncompliance are identified. Condition and context: During the planning phase of the audit, management disclosed that childcare providers were paid $3.6 million in duplicate childcare assistance payments in July 2025. As of May 15, 2026, $2.5 million of the duplicate payments have been recovered. Questioned costs: $1.1 million. Cause: BakerRipley’s state-required childcare assistance payment application was first implemented in January 2025 with software updates made by the state in July 2025. The updates impacted the final payment report on one payment batch, resulting in duplications of individual children listed on that report. A final reconciliation of the batch of childcare payments was not performed to identify any duplicated transactions at the time the batch was processed. Effect: Duplicate childcare provider payments were issued and charged to the grant. Recommendation: Implement prevention procedures to identify duplicate payments prior to payment. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2025-002 – Significant Deficiency and Other Noncompliance. Applicable federal programs: Department of Health and Human Services, Assistance Listing #: 93.575 – Childcare and Development Block Grant (CCDF Cluster), Passed through Houston-Galveston Area Council, Contract Number: 13410 and 20020, Contract Year: 10/01/24 – 09/30/25, 10/01/25 - 09/30/26, Assistance Listing #: 93.596 – Child Care Mandatory and Matching Funds of the Child Care and Development Fund (CCDF Cluster), Passed through Houston-Galveston Area Council, Contract Number: 13410 and 20020, Contract Year: 10/01/24 – 09/30/25, 10/01/25 - 09/30/26, Department of Agriculture, Assistance Listing #: 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (SNAP Cluster), Passed through Houston-Galveston Area Council, Contract Number: 20020, Contract Year: 10/01/25 - 09/30/26. Criteria: Allowable costs – The Texas Workforce Commission (TWC) requires that childcare providers are paid for services to low-income families based upon approved rates. Condition and context: During our testing of 40 federal and state payments to childcare providers under the Houston-Galveston Area Council contract, we noted that 1 childcare provider was paid at an incorrect provider rate resulting in an overpayment of $9.10. Questioned costs: $9.10. Cause: BakerRipley’s procedures failed to identify that the childcare provider was being paid at the incorrect rate. Effect: Payments to childcare providers were overstated by the use of the incorrect rate resulting in unallowable costs under the impacted program and necessitating recoupment efforts. Recommendation: Re-emphasize training of personnel and adherence to BakerRipley’s and TWC’s policies and procedures. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.