Finding Text
Item 2024-005 Allowable Costs/Cost Principles (Noncompliance and Material Weakness in Internal Control) Assistance Listing Number 93.600 Head Start Cluster US Department of Health & Human Services Federal Grant/Contract Number: 04CH010931 Grant period – 2023-2024 Condition – Three instances were identified where payments were made in which a current lease agreement could not be obtained to substantiate the costs invoiced. Further review indicated that payments were being made for leased copiers that had previously been returned. The payments were charged to the Head Start program. Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; and paragraph (g) Be adequately documented. Cause – Lack of proper review of underlying lease agreement for invoices. Effect – Inadequate or inconsistent documentation of expenses may result in improper payments or fraudulent transactions occurring, loss of funding, or disallowed costs. Management identified improper payments in fiscal year March/April 2025 and took steps to determine total amount of improper payments. As a result, the vendor returned those funds totaling $158,135 on May 22, 2025. $158,135 was returned by the Agency to the Department of Health and Human Services on May 29, 2025. Questioned Costs – $131,852 related to items expanding across fiscal years 2019 – 2024. Recommendation – Management should review internal controls and ensure all expenditures are reviewed, approved and supported by appropriate documentation. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.