Audit 58603

Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Head Start Cluster Federal Assistance Listing Number: 93.600 Compliance Requirement: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: The Society is required to recognize expenses in the period in which they are incurred and revenues in the period in which they are earned and realizable in accordance with GAAP. The Society is required to assess the expenditure of federal awards in accordance with requirement in 2 CFR 200.502. Condition and Context: Vendor invoices received subsequent to May 31, 2022 were not properly reviewed to determine whether a liability and expense were incurred by the Society for the year ended May 31, 2022. As a result, this caused an understatement of approximately $87,000 to accounts payable and accrued expenses, as well as expenses recognized in the statement of activities for the year ended May 31, 2022. Due to a portion of these expenses qualifying for reimbursement under ALN 93.600, federal expenditures reported on the SEFA also excluded approximately $69,000 of allowable expenses from ALN 93.600 Head Start Cluster and approximately $11,000 of allowable expenses from two other non-major federal programs. Cause: In completing the financial close process for the year ended May 31, 2022, the Society did not perform a thorough review of all vendor invoices received subsequent to year end to identify those that would meet the criteria to be accrued for as of May 31, 2022. Effect: The initial trial balance prepared by management excluded transactions that should have been accrued for under GAAP and reported as current year federal expenditures on the SEFA. Questioned Costs: None Identification as a Repeat Finding: No Auditor's Recommendation: We recommend the Society strengthen internal controls over the expenditures cycle. Subsequent disbursements should be reviewed and evaluated thoroughly for accrual and procedures should be in place to approve and record the accruals. As part of this process, consideration should be given to the impact expense accruals have on the receivables and revenue recognized under federal and state grants and contracts. Views of Responsible Officials: The Society agrees with the auditor?s finding. As previously noted, the Society experienced turnover in the Chief Financial Officer position. A new Chief Financial Officer was hired on June 27, 2022. New procedures have been adopted to strengthen the monthly close cycle. The Society has also implemented additional controls to ensure proper cut-off and alignment with the Society?s SEFA and SESFA.

Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Head Start Cluster Federal Assistance Listing Number: 93.600 Compliance Requirement: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: The Society is required to recognize expenses in the period in which they are incurred and revenues in the period in which they are earned and realizable in accordance with GAAP. The Society is required to assess the expenditure of federal awards in accordance with requirement in 2 CFR 200.502. Condition and Context: Vendor invoices received subsequent to May 31, 2022 were not properly reviewed to determine whether a liability and expense were incurred by the Society for the year ended May 31, 2022. As a result, this caused an understatement of approximately $87,000 to accounts payable and accrued expenses, as well as expenses recognized in the statement of activities for the year ended May 31, 2022. Due to a portion of these expenses qualifying for reimbursement under ALN 93.600, federal expenditures reported on the SEFA also excluded approximately $69,000 of allowable expenses from ALN 93.600 Head Start Cluster and approximately $11,000 of allowable expenses from two other non-major federal programs. Cause: In completing the financial close process for the year ended May 31, 2022, the Society did not perform a thorough review of all vendor invoices received subsequent to year end to identify those that would meet the criteria to be accrued for as of May 31, 2022. Effect: The initial trial balance prepared by management excluded transactions that should have been accrued for under GAAP and reported as current year federal expenditures on the SEFA. Questioned Costs: None Identification as a Repeat Finding: No Auditor's Recommendation: We recommend the Society strengthen internal controls over the expenditures cycle. Subsequent disbursements should be reviewed and evaluated thoroughly for accrual and procedures should be in place to approve and record the accruals. As part of this process, consideration should be given to the impact expense accruals have on the receivables and revenue recognized under federal and state grants and contracts. Views of Responsible Officials: The Society agrees with the auditor?s finding. As previously noted, the Society experienced turnover in the Chief Financial Officer position. A new Chief Financial Officer was hired on June 27, 2022. New procedures have been adopted to strengthen the monthly close cycle. The Society has also implemented additional controls to ensure proper cut-off and alignment with the Society?s SEFA and SESFA.