Finding Text
2025-003 – HeadStart Cluster, AL# 93.600, Activities Allowed/Unallowed Condition Included in HeadStart expenditures for 2025 are amounts that are believed to be fraudulently expended and not for their intended use. In some instances, the funds were disbursed without proper authorization, primarily through use of Agency credit cards. In other instances, co-payments for HeadStart services were not properly remitted for deposit, resulting in the need to use additional Federal funds to cover costs. Criteria All expenditures are to be properly authorized, and all funds are to be properly remitted for deposit. The Agency does have policies in place requiring these to occur. Cause An employee acted outside the policies and procedures in place to misappropriate funds. Effect HeadStart funds were not used for their intended purpose. Questioned Cost Amount $19,800 Perspective Information Based on the audit procedures performed, no exceptions were noted in the transactions tested. Management identified suspected fraud and self-reported the related questionedcosts. Management engaged a forensic consultant to determine and quantify the amount of questioned costs. Repeat Finding 2024-001 Recommendation While HeadStart has review and approval policies in place, we recommend that they continue to look for ways to tighten policies and procedures around agency card use and remittance of funds for deposit. Any additional segregation of processes that can be feasibly made should be taken. View of Responsible Officials and Planned Corrective Action Management notes that the questioned costs identified in FY2025 represent a continuation of items previously reported in FY2024 and addressed through an established corrective action plan. As part of the prior year response, management implemented a comprehensive action plan and engaged an independent forensic audit to assess the identified irregularities. Building on these efforts, management is further strengthening internal controls to ensure sustained compliance. These actions include: • Continued implementation and monitoring of corrective measures identified in the prior year audit and forensic review. • Enhanced oversight of credit card issuance, approval, and reconciliation processes. • Reinforced segregation of duties to reduce the risk of unauthorized transactions. • Strengthened monitoring of cash receipts and deposit procedures to ensure all program funds are accurately recorded and deposited promptly. • Ongoing compliance reviews to confirm that prior audit findings are fully resolved and do not recur.