Finding 400610 (2023-001)

Finding number: 2023-001 AL number: 93.600 AL title: Head Start Federal award identification number and year: 09CH011379-04-04 Name of federal agency: U.S. Department of Health and Human Services Name of pass-through entity: Direct Award Repeat finding: No Criteria: Under the Code of Federal Regulations, specifically 45 CFR section 1303.46, Organizations that use Head Start funds to purchase real property or purchase, construct, or renovate (major) a facility appurtenant to real property (either owned or leased) must record a Notice of Federal Interest. Condition: The Organization did not record a Notice of Federal Interest for the renovation work paid for in part with Head Start funds at its child care center located in Encinitas, California. Cause: Management was unclear on the compliance requirements and thought that the Notice of Federal Interest only needed to be recorded when federal funds were used to purchase real property. Effect: The Organization was not in compliance with the Equipment and Real Property Management and Special Tests and Provisions compliance requirements. Questioned cost: No questioned costs identified. Recommendation: Management should refresh its understanding of federal compliance requirements as they pertain to infrequently occurring activities such as this. Views of responsible officials: We agree with the finding. As soon as we were made aware of the noncompliance issue, we immediately began the process to record the Notice of Federal Interest. The Notice of Federal Interest is currently scheduled to recorded with the San Diego Recorders Office the week of May 13, 2024.