Audit 412263

Item 2024-003 Property and Equipment Management (Repeat 2023-003 and Significant Deficiency in Internal Control) Assistance Listing Number 93.600 Head Start Cluster U.S. Department of Health and Human Services Grant No. 04CH010931-05-01 Condition – The Inventory tracking sheet did not contain all required asset information and was not properly reconciled to property records. Criteria – 2 CFR 200.303(a) of the Uniform Guidance requires non-Federal entities to establish and maintain effective internal control over compliance with federal statutes, regulations, and the terms and conditions of federal awards. 2 CFR Part 200.313(d)(1) of the Uniform Guidance 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. The Club’s financial policies and procedures indicate a physical inventory of federal property will be taken annually. It also states that it will be reconciled by the purchasing and accounts payable bookkeeper. Cause – The Club did not include all required property information on the inventory tracking sheet and information was not properly reconciled to property records due to staff turnover. Questioned Costs – Not determinable. Effect – Failure to comply with equipment management requirements could result in noncompliance with the grant agreements. Recommendation – CRI recommends the Club follow the requirements of 2 CFR Part 200.313(d)(1). CRI also recommends the Club include all of the information required by the Uniform Guidance in one central tracking spreadsheet and include the following fields in addition to the items previously being tracked: • the source of funding for the property (including the Federal award identification number), • who holds title, • the acquisition date, • cost of the property, • percentage of Federal participation in the project costs for the Federal award under which the property was acquired, • use and • condition of the property, • and any ultimate disposition data including the date of disposal and sales price of the property (2 CFR section 200.313(d)(1)). This spreadsheet should also be used to conduct a physical observation which is reconciled with the property records. This inventory should be taken at least once every two years. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.

Item 2024-004 Financial Reporting (Significant Deficiency in Internal Control) Assistance Listing Number 93.600 Head Start Cluster U.S. Department of Health and Human Services Grant No. 04CH010931-05-01 Condition – The Club did not maintain proper documentation in support of financial reporting requirements for the two SF-425 reports that were tested. Criteria – 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. 2 CFR section 200.302(b))3) requires that nonfederal entities keep records that include information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Cause – Supporting records used to populate the required financial reporting were not retained by the Club. Effect – The Club could submit incorrect information. Questioned Costs – Not determinable. Recommendation – Documentation should be prepared, reviewed, and retained to support the required reporting. The documentation should clearly document who prepared the information, who reviewed the information, and that the reviewer considered whether the information was complete and accurate. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.

Item 2024-005 Allowable Costs/Cost Principles (Noncompliance and Material Weakness in Internal Control) Assistance Listing Number 93.600 Head Start Cluster US Department of Health & Human Services Federal Grant/Contract Number: 04CH010931 Grant period – 2023-2024 Condition – Three instances were identified where payments were made in which a current lease agreement could not be obtained to substantiate the costs invoiced. Further review indicated that payments were being made for leased copiers that had previously been returned. The payments were charged to the Head Start program. Criteria – Per 2 CFR 200.303, the non-federal entity must establish 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. These internal controls should follow guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; and paragraph (g) Be adequately documented. Cause – Lack of proper review of underlying lease agreement for invoices. Effect – Inadequate or inconsistent documentation of expenses may result in improper payments or fraudulent transactions occurring, loss of funding, or disallowed costs. Management identified improper payments in fiscal year March/April 2025 and took steps to determine total amount of improper payments. As a result, the vendor returned those funds totaling $158,135 on May 22, 2025. $158,135 was returned by the Agency to the Department of Health and Human Services on May 29, 2025. Questioned Costs – $131,852 related to items expanding across fiscal years 2019 – 2024. Recommendation – Management should review internal controls and ensure all expenditures are reviewed, approved and supported by appropriate documentation. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.

Item 2024-006 Reporting (Significant Deficiency in Internal Control) Assistance Listing Number 93.600 Head Start Cluster Head Start Grant No. 04CH010931-0501 U.S. Department of Health and Human Services Federal Award Year - 2024 Condition – The grantee failed to comply with the terms of the grant award related to the SF-429 – Real Property Status Report and SF-429-A General Reporting (OMC No. 4040-0016) reports. Adequate controls were not in place to ensure reports were being filed accurately and timely. Criteria – The Uniform Guidance requires that the Agency file forms SF-429 – Real Property Status Report and SF-429-A General Reporting (OMB No. 4040-0016) annually based upon the end of the budget period. 2 CFR.200.303a requires the Agency to establish 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. Cause - Management did not have adequate controls in place to ensure the accurate and timely submission of the SF 429 report. Questioned Costs – Not applicable. Effect – Failure to submit the SF-429 – Real Property Status Report and SF-429-A General Reporting (OMB No. 4040-0016) reports accurately and timely results in noncompliance with the federal statute. The report was submitted 14 months late and $18,000 of land was not included in the report. Recommendation – We recommend the Agency implement internal controls, which will ensure the accurate and timely filing of the reports listed under Special Reporting in the Uniform Guidance. Management and the board of directors should continually be aware of the compliance requirements and related changes in the applicable compliance requirements associated with its federal awards programs. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.