Compliance Requirement B. Allowable Costs Finding Type Noncompliance Over $25,000 Federal Agency U.S. Department of Health and Human Services U.S. Department of Energy Federal Program Title Administration for Children & Families - Head Start (93.600) Community Service Block Grant (93.569) Weatherization Assistance for Low Income Persons (81.042) Assistance Listing Numbers 93.600/93.569/81.042 Criteria: 2 CFR section 200.431 of the Uniform Guidance provides fringe benefits are allowances and services employers provide to their employees as compensation in addition to regular salaries and wages. Fringe benefits include, but are not limited to, the costs of leave, employee insurance, pensions, and unemployment benefits. Except as provided elsewhere, the costs of fringe benefits are allowable provided that the benefits are reasonable and are required by law, an organization-employee agreement, or an established written leave policy of the recipient or subrecipient. Condition: The Organization paid fringe benefits to the CEO without having a written policy covering such benefits. Cause: Lack of awareness of fringe benefits allowed under Uniform Guidance. Effect: Failure to have a written leave policy causes the Organization to be out of compliance with Uniform Guidance and results in the payment of unallowable costs by the Organization. Questioned Costs: $ 32,154 Identification as a Repeat Finding: N/A - this was not reported as a finding in the prior audit report. Context: During the year ended June 30, 2025, the CEO of the Organization was on leave for a significant amount of time. During this time, the Organization continued to pay the CEO their normal salary and charged a portion of the payments to federal funded programs. The employee filed for and received short-term disability and endorsed all insurance checks over to the Organization. Recommendations: We recommend that procedures be implemented to ensure that all expenditures are in compliance with 2 CFR 200 Office of Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Uniform Guidance before are expended. View of Responsible Officials: The Organization agrees with this finding.
Compliance Requirement I. Procurement Finding Type Significant Deficiency in Internal Control Over Compliance and Compliance Finding Federal Agency U.S. Department of Treasury Federal Program Title Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number 21.027 Criteria: I. 2 CFR sections 200.318 - 200.326 of the Uniform Guidance require that non-federal entities follow documented procurement procedures that ensure full and open competition. All purchases using federal funds must comply with applicable thresholds, documentation, and approval requirements. Condition: The Organization did not follow required procurement procedures for certain program transactions. Cause: Though a procurement policy exists for the Organization, there was no enforcement of this policy for the federal program. Effect: Failure to follow a formal procurement policy causes the Organization to be out of compliance with Uniform Guidance and/or grant requirements and increases the likelihood of disallowance of costs. Questioned Costs: None Identification as a Repeat Finding: N/A - this was not reported as a finding in the prior audit report. Context: The Organization did not follow required procurement procedures under the major program as no competitive bidding or documented justification for sole sourcing was provided. Recommendations: We recommend that the Organization revisit their existing procurement policy and implement a formal process/policy to identify any new transactions to ensure the policy is followed. A review of each project file should be implemented to ensure that procurement activities tied to federal award are taking place. View of Responsible Officials: The Organization disagrees with this audit finding.
Compliance Requirement I. Suspension and Debarment Finding Type Significant Deficiency in Internal Control Over Compliance and ComplianceFinding Federal Agency U.S. Department of Treasury Federal Program Title Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number 21.027 Criteria: I. Recipients of the Coronavirus State and Local Fiscal Recovery Funds grant are required to follow Uniform Guidance section 200.214 Suspension and Debarment. These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Condition: For each of the transactions tested, the Organization did not have documented verification that the vendor was not suspended or debarred. Cause: Procedures were not in place to document the verification that vendors were not suspended or debarred from participation in federal programs or activities. In addition, there is a formal lack of training regarding suspension and debarment policies and documentation required under Uniform Guidance. Effect: Lack of verification (or untimely verification) of vendors' suspension or debarment status could cause federal grant funds to be expended to vendors that are excluded from participation in federal assistance programs or activities. Questioned Costs: None Identification as a Repeat Finding: N/A - this was not reported as a finding in the prior audit report. Context: Of program project files reviewed and selected for testing, none of the project files contained formal support that the contract/vendors were not suspended or debarred from participation in federal programs or activities. Recommendation: We recommend procedures be implemented to ensure that the verification of vendors' suspension and debarment status is documented prior to executing transactions. Views of Responsible Officials: The Organization disagrees with this audit finding.
Compliance Requirement L. Reporting Finding Type Significant Deficiency in Internal Control Over Compliance Federal Agency U.S. Department of Treasury Federal Program Title Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number 21.027 Criteria or Specific Requirement: L. Reporting - 2 CFR section 200.303 of the Uniform Guidance requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. The program requires submission of quarterly reports to the pass-through grantor by the 20th day of the month following the end of the quarter. Condition: During the audit, it was noted that the Organization did submit the quarterly reports in timely fashion. However, the Organization was unable to provide formal support for the internal review of the required reports under the major program before they were submitted to the pass-through grantor. Cause: The Organization lacks established procedures which provide formal evidence that the accuracy and completeness of required reports were verified before submission. Effect or Potential Effect: Without formal review controls in place, the Organization is more susceptible to reporting errors and/or noncompliance with federal requirements. Questioned costs: None Identification as a Repeat Finding: N/A - this was not reported as a finding in the prior audit report. Context: Of the four (4) quarterly reports tested, none contained formal support that an internal review took place prior to submission to the pass-through grantor. Recommendation: We recommend that the Organization implement a formal process for verifying the accuracy and completeness of required reports before submission. Views of Responsible Officials: The Organization disagrees with this audit finding.
Compliance Requirement M. Subrecipient Monitoring Finding Type Material Weakness in Internal Control Over Compliance and Compliance Finding Federal Agency U.S. Department of Treasury Federal Program Title Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number 21.027 Criteria: M. 2 CFR §200.331 requires pass-through entities to evaluate subrecipient risk, ensure each subaward is properly identified, issue required subaward notifications, verify suspension/debarment status, monitor subrecipient activities, and ensure subrecipients meet audit requirements. Condition: The Organization has not established written procedures to identify, assess, monitor, or accurately account for amounts provided to subrecipients of Coronavirus State and Local Fiscal Recovery Funds funding. The Organization could not provide a complete and accurate accounting of the amounts passed through to a subrecipient during the audit period. Cause: Lack of formal policies and training regarding subaward responsibilities under Uniform Guidance. Effect: The Organization cannot demonstrate compliance with federal subaward requirements. This increases the risk of unallowable costs, subrecipient noncompliance, and misstated SEFA reporting due to the inability to determine and disclose amounts passed through to subrecipients. Questioned Costs: $ 185,000 Identification as a Repeat Finding: N/A - this was not reported as a finding in the prior audit report. Content: The Organization entered into an agreement with a post-secondary institution to support the development of a Whole Homes Repair workforce through scholarships to eligible students. The Organization considered the post-secondary institution a contractor. However, the guidance in the U.S. Treasury Final Rule states that whether an entity is a subrecipient or a beneficiary is contingent upon the reason why an entity receives Recovery Funds. If an entity receives Recovery Funds for their own benefit, they are a beneficiary. For example, if an entity receives Recovery Funds as a response to the negative economic impact experienced due to the COVID-19 pandemic, they are a beneficiary. If they receive the funds for the purpose of carrying out the program, they are a subrecipient. Recommendation: The Organization should adopt written subrecipient monitoring and tracking policies, perform risk assessments, issue subaward notifications with all required elements, and implement procedures to accurately record and disclose the amounts provided to subrecipients in the general ledger and SEFA. Views of Responsible Officials: The Organization disagrees with this audit finding rationale.
Compliance Requirement C. Cash Management Finding Type Material Weakness in Internal Control Over Compliance and Compliance Finding Federal Agency U.S. Department of Health and Human Services Federal Program Title Administration for Children & Families - Head Start Assistance Listing Number 93.600 Criteria: The Organization receives federal assistance from the Department of Health and Human Services. The Organization requests draw down of grant funds based on actual expenditures incurred. The Organization is required to maintain adequate internal controls over financial reporting in order to ensure expenditures are properly supported, reported under the correct funding source, and within the correct grant period. 2 CFR 200.403 details the factors affecting the allowability of cost. Specifically, 2 CRF 200.403(e) provides that costs must be determined in accordance with generally accepted accounting principles (GAAP). GAAP provides that costs are not incurred until the services are performed or the product is received. In addition, Uniform Guidance 200.305(b)(1) states advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. Condition: During audit procedures, we noted total reimbursements received exceeded expenditures. The Organization requested reimbursements but could not provide supporting documentation as to how the amount requested for reimbursement of costs was determined. We consider this to be a material weakness. Cause: The Organization lacks established procedures which provide formal evidence that the accuracy and completeness of internal reports used to support reimbursement requests were verified, reviewed and approved before grant draw downs were requested. Effect: Without formal review controls in place, the Organization is more susceptible to reporting errors and/or noncompliance with federal requirements. Questioned Costs: $ 329,233 Identification as a Repeat Finding: This was reported as a finding in the prior audit report. Content: During the year ended June 30, 2024, the Organization received funds of $ 562,831 in excess of expenditures incurred. Subsequent to June 30, 2024, $ 346,944 of those funds were obligated and expended, leaving a remaining balance of $ 215,887. During the year ended June 30, 2025, the Organization requested and received reimbursements in excess of expenditures of $ 329,233. Recommendations: We recommend that the Organization implement a formal process for verifying the accuracy and completeness, and review of supporting documentation used to justify draw down requests. A reconciliation should be prepared of the expenditures recorded on the books and records to the amount submitted for reimbursement on a regular basis. All excess; unexpended funds should be returned to remain in compliance. All supporting documentation should be maintained for future reference. View of Responsible Officials: The Organization agrees with this audit finding.
Compliance Requirement B. Allowable Costs Finding Type Material Weakness in Internal Control Over Compliance and Compliance Finding Federal Agency U.S. Department of Health and Human Services Federal Program Title Administration for Children & Families - Head Start Assistance Listing Number 93.600 Criteria: The Organization is required to maintain books and records to include all revenues and expenditures, and adjusting journal entries as deemed necessary, to prevent the Organization's books and records from being materially misstated. Journal entries are to be made, when appropriate, to adjust account balances including those relating to the federal and state grant assistance funding sources. Condition: During audit procedures, we noted expenditures were charged to the federal funding source via adjusting journal entry for which adequate supporting documentation could not be provided. Cause: The Organization lacks established procedures which provide formal evidence that the accuracy and completeness of supporting documentation used to support journal entries recorded in the general ledger was accurate, verified, reviewed and approved before posting such entries within the books and records of the Organization. Effect: Several adjusting journal entries to reclassify expenditures from another funding source was recorded on the Organization's books and records at year end instead of throughout the year. As a result, the reports used in supporting draw down of funds were not accurately stated. Inaccurate financial reporting of expenditures resulted in the Organization's reimbursement requests exceeding total program expenditures. Questioned Costs: $ 272,731 Identification as a Repeat Finding: N/A - this was not reported as a finding in the prior audit report. Recommendations: We recommend the Organization implement procedures to review and approve all adjusting journal entries before they are posted to the Organization's accounts to ensure they are being charged to the correct funding source and supported by appropriate documentation. View of Responsible Officials: The Organization agrees with this audit finding.
Compliance Requirement F. Equipment and Real Property Finding Type Significant Deficiency in Internal Control Over Compliance and Compliance Finding Federal Agency U.S. Department of Health and Human Services Federal Program Title Administration for Children & Families - Head Start Assistance Listing Number 93.600 Criteria: 2 CFR 200.313(d)requires that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two (2) years. Condition: During testing it was noted that a physical inventory of all assets with federal interest under the Head Start program was taken. However, the physical inventory taken was not compared to the detailed inventory listing. Cause: The Agency did not properly delete all additions in the current year to the tangible property schedule, which resulted in a lack of accurate and proper property records. Effect: Failure to compare the physical inventory observation to the detailed listing could result in an inaccurate listing of tangible property and noncompliance with the grant agreement by not including items acquired, or including items disposed of, during the year. Questioned Costs: None Identification as a Repeat Finding: N/A - this was not reported as a finding in the prior audit report. Recommendation: We recommend the Organization follow its capital asset management policy to ensure all tangible property is adequately accounted for and properly safeguarded. We also recommend that the Organization include all of the information required by the Uniform Guidance in one central tracking spreadsheet or database to ensure all assets additions are added and assets disposed of are removed. View of Responsible Officials: The Organization agrees with this audit finding.
Compliance Requirement F. Equipment and Real Property Finding Type Significant Deficiency in Internal Control Over Compliance and Compliance Finding Federal Agency U.S. Department of Health and Human Services Federal Program Title Administration for Children & Families - Head Start Assistance Listing Number 93.600 Criteria: 2 CFR 200.313(e) requires (e) when equipment acquired under a federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Condition: During the year ended June 30, 2025, the client moved several Head Start program classrooms to new locations. Tangible equipment purchased with federal program funds was abandoned and left at the former classroom location. This equipment was not sold. The Organization did not request formal disposition instruction from the federal awarding agency. Cause: Lack of formal policies and training regarding disposition of equipment acquired using federal grant funds. Effect: Failure to take appropriate disposition actions may result in the Federal agency to direct the recipient to take appropriate disposition actions. Questioned Costs: None Identification as a Repeat Finding: N/A - this was not reported as a finding in the prior audit report. Recommendation: We recommend that the Organization implement and document a formal process in connection with disposition of equipment to be in compliance with federal requirements. View of Responsible Officials: The Organization agrees with this audit finding.