Finding Text
Criteria: Federal and state grant agreements typically require recipients to maintain effective internal controls over financial reporting. These include accurate and timely submission of required reports; proper documentation and retention of supporting records and review and approval processes to ensure compliance and accuracy. These requirements are also consistent with principles outline in Uniform Guidance (2 CFR Part 200), particularly sections 200.303 (Internal Controls) and 200.328 (Monitoring and Reporting Program Performance). Condition: The Association’s controls were not effective to ensure it was reporting expenditures related to excess meal costs. This internal control deficiency is considered to be a significant deficiency. Context: Our procedures included examining cash disbursements and related invoices for allowable costs. Cause: The Association included 100% of costs related to the nutrition program. In prior years, the Association recorded nutrition reimbursement revenue received from the State as a reduction in expense. When creating reimbursement requests from the Head Start program, only the excess meal costs were included. The Association changed its accounting practice in 2024 and recorded State meal reimbursement as revenue. However, they did not change how they prepared reimbursement requests from Head Start. As a result, 100% of meal costs were included in reimbursement requests. The Association reconciled this program with the final claim for 2024, which was prepared in 2025. Therefore, there are no questioned costs, as only the excess cost of meals was charged to the program. Effect: Weak internal controls over grant drawdowns and reporting increase the risk of reimbursement for unallowable costs; inaccurate performance reporting and potential loss of funding or reputational damage. Recommendation: The Association establish controls that allow for accurate reporting of expenditures when requesting reimbursement from grantors. View of responsible officials: There is no disagreement with this audit finding.