Finding 391986 (2023-001)

Finding 2023-001: Accuracy of expenditures on the Schedule of Expenditures of Federal Awards and submission of special reports for the Head Start Program Cluster Name: Head Start Federal Awarding Agency: Department of Health and Human Services Award Name: Head Start and Early Head Start, COVID (P.L. 116-260) Award Number: 09CH010228-05-05, 09CH011831-02-03, 09HE000328-01-00 Award Years: 2019-2021, 2021-2022, 2021-2023 Assistance Listing Title: Head Start Assistance Listing Number: 93.600 Pass-through entities: Not applicable Criteria 2 CFR 200.510 Financial statements requires auditees to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. The information presented should be consistent with the accounting records and other federal guidance. 2 CFR Part 200 Appendix XI Part 3-L-1 Performance and Special Reporting notes that non-federal entities may be required to submit performance reports at least annually but not more frequently than quarterly, except in unusual circumstances, using a form or format authorized by OMB (2 CFR section 200.329). They also may be required to submit special reports as required by the terms and conditions of the federal award. Condition The following errors were identified related to funding that was improperly included in the fiscal year 2023 SEFA and have subsequently been corrected in the fiscal year 2023 SEFA by the University, as a result of our audit procedures: • In fiscal year 2023, $283 thousand in budgeted capital expenditures were charged to and drawn down on Head Start awards before actual expenditures were incurred by the University. Management identified the error in the subsequent year and credited the fiscal year 2024 SEFA for this amount. Additionally, management refunded the federal agency $159 thousand of the amount in November 2023 and is in the process of refunding the remaining balance plus imputed interest. • In fiscal year 2023, $67 thousand in actual expenditures were charged to a Head Start award after liquidation extensions associated with the award had expired. Management identified the error in the subsequent year but had not yet credited the amount in the SEFA. None of the funds were drawn down from the federal agency, and thus, a refund to the federal agency was not required. Of the three required federal reports selected for testing, two were not submitted until selected for testing and one has not yet been submitted. Cause The University has limited federal awards that are utilized to fund capital expenditures. As a result, management was not aware that budgeted capital expenditures were being charged to the Head Start program in advance of being incurred by the University’s Facilities Management Services Department. Additionally, while the University’s IT system prevents the draw down of funding from federal agencies for awards that have expired, it does not prevent expenditures from being charged to expired awards. Management’s manual expenditure reconciliation process for the Head Start program failed to identify that expenditures were charged to the award after the expiration date in a timely manner. Management lacks a formalized process for identifying and tracking submission of required reports under the Head Start program. Effect A SEFA that is not accurate could impact the scoping of an entity’s major programs and result in inaccurate information being provided to the federal government. Not submitting required federal reports results in the federal government not having the information it needs to inform improvements in program outcomes and productivity. Questioned Costs None noted. Recommendation We recommend that management reinforce its existing policies regarding the charging of expenditures to the Head Start program with all departments involved in administering federal awards. Additionally, we recommend that management more timely reconcile expenditures charged to the Head Start program so that any necessary adjustments are reflected in the appropriate fiscal year. We recommend management implement a formal process to identify and track submission of required reports under the Head Start program. Management’s Corrective Action Plan Management’s response is reported on “Management’s Views and Corrective Action Plan” at the end of this report.