Audit 415374

Criteria – Management is responsible for the design and implementation of internal controls to ensure reporting is accurate, complete, and compliant with relevant regulations. Condition and Context – Audit procedures noted that several reports tested for federal and state agreements were not reviewed and approved before submission or lacked documentation that a review or approval occurred. Cause – Staff turnover and change of responsibilities has led to insufficient controls to ensure reporting review and approval documentation prior to submission. Effect – Audit procedures noted the semi-annual SF-425 report required by Head Start did not contain the recipient shares of expenditures. Without proper review and approval, there is a heightened risk that reports may be inaccurate, incomplete, or non-compliant with regulatory requirements. Questioned Costs – None Recommendations – We recommend that the Organization prioritize training for staff involved in the preparation and review of reports. Clear guidelines, defined responsibilities, and established deadlines should be implemented to support accuracy and accountability. Additionally, efforts should be made to ensure continuity of internal controls in the event of staffing or responsibility changes. Management should periodically test these controls to ensure they operate effectively, particularly following changes in key personnel involved in the process. Views of Responsible Officials and Planned Corrective Actions – Management concurred with the finding and implemented enhanced internal controls for FY2026 to strengthen the preparation, review, and submission of fiscal reports. Under the revised process, the Senior Accountant prepares the reports, program directors review and approve programmatic and fiscal reports for accuracy, completeness, and compliance before submission to the outsourced accounting provider for final fiscal review. Documentation of these reviews and approvals is maintained to demonstrate oversight. Written procedures have also been updated to clarify responsibilities, review timelines, and approval requirements, with periodic monitoring planned to assess the effectiveness of these controls, particularly during staff transitions. To further strengthen compliance with federal Head Start reporting requirements, the President/CEO, Head Start Director, and fiscal staff attended the Fiscal Accountability, Integrity, & Risk (FAIR) Forum in September 2026. The Organization’s Senior Accountant is also scheduled to attend the Head Start National Center on Program Management and Fiscal Operations (PMFO) Institute, which provides training on financial leadership, internal controls, financial reporting, cost allocation, audit readiness, and organizational accountability. These efforts are intended to improve staff understanding of federal reporting requirements, including the preparation of SF-425 reports and the reporting of recipient share of expenditures.

Criteria – Per 2 CFR § 200.512(a)(1), the audit must be completed and the reporting package must be submitted to the Federal Audit Clearinghouse (FAC) within the earlier of 30 calendar days after receipt of the auditor’s reports or nine months after the end of the audit period. The Organization’s normal FAC submission deadline was June 30, 2026. Condition and Context – The Organization did not complete and submit its single audit reporting package to the Federal Audit Clearinghouse by the normal June 30, 2026 deadline. The Organization requested an extension of the submission deadline to September 30, 2026; however, the Organization did not receive an approval from federal HHS regarding the extension request. The current completion date is October 26, 2026, which is one month beyond the requested extended deadline of September 30, 2026. Cause – The delay was primarily attributable to turnover in the Organization’s fiscal department, as well as turnover in key personnel at the outsourced accounting service provider during the audit period. These staffing changes disrupted the normal flow of information needed to support the audit and required additional time to address outstanding requests, obtain supporting documentation, and resolve audit inquiries. As the audit progressed, management and the auditors identified accounting adjustments and revisions to schedules that required further analysis and updates to previously provided information. Because these changes affected balances and disclosures subject to audit testing, the audit team was required to perform additional procedures, expand testing in certain areas, and revisit portions of work that had already been completed. Collectively, these circumstances significantly increased the time required to complete the audit. Effect – The Organization was not in compliance with the single audit reporting package submission requirements. The late submission may impact the Organization’s ability to qualify as a low-risk auditee in future audit periods and may result in additional oversight or follow-up by federal awarding agencies or pass-through entities. Questioned Costs – None. Recommendations – We recommend the Organization strengthen its year-end financial reporting and single audit preparation process to ensure the reporting package is completed and submitted to the Federal Audit Clearinghouse by the required deadline. The Organization should establish a formal single audit timeline that includes key milestones for closing the general ledger, preparing audit schedules, reviewing supporting documentation, responding to audit requests, and completing management review of the financial statements, schedule of expenditures of federal awards, and related compliance reporting. We also recommend the Organization implement procedures to mitigate the impact of staffing transitions within the fiscal department and outsourced accounting support function. Such procedures may include cross-training fiscal personnel, maintaining current documentation of key accounting and grant reporting processes, assigning clear responsibility for audit request coordination, and holding periodic status meetings with the outsourced accounting service provider and auditors during the audit process. Views of Responsible Officials and Planned Corrective Actions – Management acknowledged that the FY2025 Single Audit reporting package was not submitted to the Federal Audit Clearinghouse within the required timeframe due to staffing transitions, a backlog of accounting activities, and implementation of a new accounting system. The Organization has since brought account reconciliations current, increased the Senior Accountant’s involvement in the monthly close, and expanded training and knowledge transfer to improve continuity. The Organization plans to implement a year-end checklist and Single Audit timeline with assigned responsibilities and target dates for key reporting and audit milestones, monitor progress through regular status meetings, and maintain current documentation of accounting, grant reporting, and audit coordination procedures. These actions are intended to improve audit readiness and support timely submission of future Single Audit reporting packages.