2024-001 Compensation for Personal Services
Head Start Cluster – Assistance Listing No. 93.600
Award Numbers:
08CH010736-06 – Award Period: December 1, 2023 through June 30, 2024
08CH012759-01 – Award Period: July 1, 2024 through November 30, 2024
MOEAI-202366770 – Award Period: July 1, 2023 through June 30, 2024
MOEAI-202474487 – Award Period: July 1, 2024 through June 30, 2025
Maternal, Infant and Early Childhood Home Visiting Grant – Assistance Listing No. 93.870
Award Numbers:
CTGG1 QAAA 2024*2428 – Award Period: October 1, 2023 through September 30, 2024
CTGG1 QAAA 2025*2585 – Award Period: October 1, 2024 through September 30, 2025
Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters
Condition: During our testing of time and effort records we noted that although timesheets were kept, they do not identify time spent working on different funding sources/cost objectives, so they were not used to calculate wages charged to the Federal awards tested. Instead, budgeted allocations were used, and the Organization could not support the allocation methodology(ies) applied to four out of the ten sampled employees.
Criteria: According to 2 CFR Part 200.430(i)(1), Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS);
(iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy;
(v) Comply with the established accounting policies and practices of the non-Federal entity (See paragraph (h)(1)(ii) above for treatment of incidental work for IHEs.); and
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
(viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that:
(A) The system for establishing the estimates produces reasonable approximations of the activity actually performed;
C. FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAMS AUDIT (Continued)
Criteria (Concluded):
(B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and
(C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.
Questioned Costs: Not determinable.
Cause: The Organization did not document allocation methodology(ies) reflecting reasonable approximations of the activity actually performed for sampled employees in positions other than teachers and teaching assistants. Budget estimates were used for interim accounting purposes, however, there was no documented process to perform periodic after-the-fact reviews of interim charges nor adjustments made to ensure final amounts charged were properly allocated.
Effect: Costs for salaries and wages were not fully supported by documentation in accordance with 2 CFR Part 200.430. Allowable costs could potentially be overpaid or underpaid or disallowed and required to be paid back to the Federal awarding agency (and/or pass-through entity).
Recommendation: The Organization should strengthen policies and procedures to support a system of internal control which provides a reasonable assurance that the charges to Federal awards for salaries and wages are accurate, allowable, and properly allocated. This might include:
1. Enhance timesheet tracking to charge actual time spent working on different funding sources/cost objectives, or
2. Establishing a process to periodically review after-the-fact interim charges made to Federal awards based on budget estimates, make timely adjustments to ensure final amounts charged to Federal awards are accurate, allowable, and properly allocated, and document their reconciliation.
Views of Responsible Officials and Planned Corrective Actions: Family Star acknowledges the FY24 finding related to labor allocation. During that fiscal year, the organization experienced several operational challenges, including insufficient documentation and oversight of labor allocation reporting. These administrative issues were contributing factors in a broader leadership restructuring, which included the elimination of five middle management positions. As a result, responsibilities for labor allocation were reassigned to ensure proper oversight.
Since that time, Family Star has taken intentional steps to strengthen internal controls and improve the accuracy and consistency of key administrative functions. Labor time reporting is now aligned with organizational slot distribution across programs and funding sources to ensure compliance and transparency moving forward.
To further reinforce accountability, we have implemented a new monthly monitoring procedure. On the first Wednesday of each month, the Senior Director of Community Partnerships and the HR Specialist jointly review and archive labor allocation records. This process ensures allocations are preserved, updates are made in a timely and compliant manner, and labor costs are supported by accurate documentation.
These measures are designed to increase transparency, enhance internal controls, and ensure labor allocations are properly managed going forward.