Finding Text
Criteria – Management is responsible for the design and implementation of internal controls to ensure reporting is accurate, complete, and compliant with relevant regulations. Condition and Context – Audit procedures noted that several reports tested for federal and state agreements were not reviewed and approved before submission or lacked documentation that a review or approval occurred. Cause – Staff turnover and change of responsibilities has led to insufficient controls to ensure reporting review and approval documentation prior to submission. Effect – Audit procedures noted the semi-annual SF-425 report required by Head Start did not contain the recipient shares of expenditures. Without proper review and approval, there is a heightened risk that reports may be inaccurate, incomplete, or non-compliant with regulatory requirements. Questioned Costs – None Recommendations – We recommend that the Organization prioritize training for staff involved in the preparation and review of reports. Clear guidelines, defined responsibilities, and established deadlines should be implemented to support accuracy and accountability. Additionally, efforts should be made to ensure continuity of internal controls in the event of staffing or responsibility changes. Management should periodically test these controls to ensure they operate effectively, particularly following changes in key personnel involved in the process. Views of Responsible Officials and Planned Corrective Actions – Management concurred with the finding and implemented enhanced internal controls for FY2026 to strengthen the preparation, review, and submission of fiscal reports. Under the revised process, the Senior Accountant prepares the reports, program directors review and approve programmatic and fiscal reports for accuracy, completeness, and compliance before submission to the outsourced accounting provider for final fiscal review. Documentation of these reviews and approvals is maintained to demonstrate oversight. Written procedures have also been updated to clarify responsibilities, review timelines, and approval requirements, with periodic monitoring planned to assess the effectiveness of these controls, particularly during staff transitions. To further strengthen compliance with federal Head Start reporting requirements, the President/CEO, Head Start Director, and fiscal staff attended the Fiscal Accountability, Integrity, & Risk (FAIR) Forum in September 2026. The Organization’s Senior Accountant is also scheduled to attend the Head Start National Center on Program Management and Fiscal Operations (PMFO) Institute, which provides training on financial leadership, internal controls, financial reporting, cost allocation, audit readiness, and organizational accountability. These efforts are intended to improve staff understanding of federal reporting requirements, including the preparation of SF-425 reports and the reporting of recipient share of expenditures.