Finding Text
Federal Reporting and Grant Drawdowns Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Federal Agency: U.S. Department of Health and Human Services Type of Finding: Significant Deficiency in Internal Control Over Compliance Fiscal year finding initially occurred: 2025 CONDITION: Avoyelles Child Development Services, Inc. (Agency) did not maintain adequate internal controls over federal reporting and grant drawdown activities related to the Head Start program. Audit procedures determined the Agency did not timely file its required mid-year SF-425 Federal Financial Report. Additionally, the Agency drew $123,272 in federal grant funds related to proposed capital expenses prior to receiving formal HUD approval to incur the expenses. As a result, the Agency recorded a liability due to HHS totaling $123,272 at year-end and subsequently repaid the grant funds during the following reporting period. CRITERIA: Uniform Guidance requires non-federal entities to establish and maintain effective internal controls over federal programs to provide reasonable assurance that federal awards are managed in compliance with federal statutes, regulations, and award terms and conditions. Federal grant recipients are also responsible for timely submission of required federal reports and for ensuring federal funds are drawn down only for approved and allowable purposes. CAUSE: The condition resulted from inadequate controls over 1) monitoring and timely submission of required federal reports, 2) contingency procedures for system interruptions affecting compliance activities, and 3) review procedures to ensure federal approval were obtained prior to drawing federal funds associated with proposed capital expenses. EFFECT: The Agency failed to timely submit a required federal financial report, drew grant funds prior to obtaining required approval, and incurred a material liability due to HHS at year-end of $123,272. RECOMMENDATION: Management should strengthen internal controls over federal reporting and grant administration by 1) implementing procedures to ensure timely submission of all required federal reports, 2) establishing contingency procedures for system interruptions, and 3) requiring documented evidence of federal approval prior to drawing grant funds associated with capital expenses or other restricted activities. VIEWS OF RESPONSIBLE OFFICIALS: Management believes that the organization maintains a comprehensive and effective system of internal controls over financial reporting, compliance, and grant administration. The findings relate to a specific control deficiency identified during the audit which were both impacted by a lack of communications from the funding agency and the 43-day Federal Government shutdown from October 1, 2025 to November 12, 2025, and do not, in management's view, reflect a systemic weakness in the overall control environment. Management acknowledges the circumstances that resulted in the findings and recognizes the opportunity to strengthen certain procedures and documentation practices. The conditions identified were limited in scope and occurred despite the existence of established policies, oversight processes, and monitoring activities designed to promote compliance with applicable federal requirements.