Finding Text
Finding 2023-002
Assistance Listing Numbers: 93.356, 93.600 – Head Start Cluster
U.S. Department of Health and Human Services
Type of Finding: Material Weakness in Internal Control over Compliance and Noncompliance
Compliance Requirement: Allowable Costs/Cost Principles
Criteria
As a condition of receiving Federal awards, non-Federal entities agree to comply with laws, regulations
and the provisions of grant agreements and contracts, and to maintain internal control to provide
reasonable assurance of compliance with these requirements.
The U.S. Department of Health and Human Services has established “allowable costs/cost principles”
compliance requirements applicable to the Head Start Cluster which stipulate that compensation
charged for personal services satisfy specific requirements of the Uniform Guidance including that the
charges be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable and properly allocated.
Condition
During our testing of payroll charged to the Head Start program, the Agency was unable to provide
sufficient documentation to show that the pay rates for 28 of the 40 employees tested were properly
authorized by the Agency. The difference between the amounts paid/charged and amounts supported
by Agency records for the test selections was $2,391. Based on the error rate noted, there is a reasonable
possibility that material noncompliance could occur and not be prevented, or detected and corrected,
on a timely basis.
Cause
The Agency’s internal control over compliance for the allowable cost/cost principles requirement of the
Head Start program is inadequate to ensure that personnel expenses meet the specific requirements of
the Uniform Guidance.
Effect or Potential Effect
As a result of the deficiency in internal control over compliance over allowable costs/cost principles, the
Agency is not in compliance with the allowable costs/cost principles requirement of the Head Start
program. Recommendation
We recommend that Agency’s management evaluate and improve its controls over the allowable
costs/cost principles requirements of the Head Start program to help ensure compliance with the
requirements.