Finding Text
Compliance Requirement C. Cash Management Finding Type Material Weakness in Internal Control Over Compliance and Compliance Finding Federal Agency U.S. Department of Health and Human Services Federal Program Title Administration for Children & Families - Head Start Assistance Listing Number 93.600 Criteria: The Organization receives federal assistance from the Department of Health and Human Services. The Organization requests draw down of grant funds based on actual expenditures incurred. The Organization is required to maintain adequate internal controls over financial reporting in order to ensure expenditures are properly supported, reported under the correct funding source, and within the correct grant period. 2 CFR 200.403 details the factors affecting the allowability of cost. Specifically, 2 CRF 200.403(e) provides that costs must be determined in accordance with generally accepted accounting principles (GAAP). GAAP provides that costs are not incurred until the services are performed or the product is received. In addition, Uniform Guidance 200.305(b)(1) states advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. Condition: During audit procedures, we noted total reimbursements received exceeded expenditures. The Organization requested reimbursements but could not provide supporting documentation as to how the amount requested for reimbursement of costs was determined. We consider this to be a material weakness. Cause: The Organization lacks established procedures which provide formal evidence that the accuracy and completeness of internal reports used to support reimbursement requests were verified, reviewed and approved before grant draw downs were requested. Effect: Without formal review controls in place, the Organization is more susceptible to reporting errors and/or noncompliance with federal requirements. Questioned Costs: $ 329,233 Identification as a Repeat Finding: This was reported as a finding in the prior audit report. Content: During the year ended June 30, 2024, the Organization received funds of $ 562,831 in excess of expenditures incurred. Subsequent to June 30, 2024, $ 346,944 of those funds were obligated and expended, leaving a remaining balance of $ 215,887. During the year ended June 30, 2025, the Organization requested and received reimbursements in excess of expenditures of $ 329,233. Recommendations: We recommend that the Organization implement a formal process for verifying the accuracy and completeness, and review of supporting documentation used to justify draw down requests. A reconciliation should be prepared of the expenditures recorded on the books and records to the amount submitted for reimbursement on a regular basis. All excess; unexpended funds should be returned to remain in compliance. All supporting documentation should be maintained for future reference. View of Responsible Officials: The Organization agrees with this audit finding.