Finding Text
Information on the federal program:
Subject: Head Start Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Federal Agency: Department of Health and Human Services
Federal Program: Head Start Cluster
Assistance Listing Number: 93.600
Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Audit Finding: Material Weakness, Noncompliance
Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards in compliance with Federal statutes,
regulations, and the terms and conditions of the Federal award. These internal controls should be in
compliance with 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). . . ."
Condition: An effective internal control system was not in place at the Unit to ensure compliance with
requirements related to the grant agreement and the activities allowed or unallowed and allowable
costs/cost principle compliance requirements. The Unit did not have adequate documentation to support
expenditures.
Cause: The Unit's management had not developed a system of internal controls to ensure compliance with
the compliance requirements listed above.
Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance
with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal
control system could have also allowed noncompliance with the compliance requirements and allowed the
misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and
approvals over the activities of the programs.
Questioned Costs: $28,918
Context: During testing, we noted the following issues in a sample of thirteen head start cluster account
payable claims:
• One sample selection was not approved by a secondary individual.
• One sample selection was not supported by appropriate documentation. The selection was for the
purchase of gift cards for teachers to buy books for professional development. However, there was
no backup or support showing what the gift cards were used to purchase. The total of this purchase
was $27,001.
• The Unit paid $1,917 in sales tax on one sample selection which is an unallowable cost. The Unit
is tax-exempt as a governmental entity in the state and should not pay sales tax.
Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior
audit. The prior audit finding number was 2020-001.
Recommendation: We recommend that the Unit establish a documented, primary review of all head start
cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all
supporting documentation to show what the gift cards were used to purchase to ensure they are used for
allowable purposes.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.