Finding 404123 (2023-002)

2023-002 Head Start Cluster – Federal Assistance Listing Number 93.600 – Significant Deficiency in Internal Control over Allowable Costs Criteria: According to federal regulations (2 CFR Part 200), costs charged to federal awards must be allowable, reasonable, allocable, and in the proper period of performance. Costs incurred relating to a future period of performance are to be recognized in that future period and should be deferred until then. Expenditures reported on HRCAP’s Schedule of Expenditures of Federal Awards (SEFA) are reported on the accrual basis of accounting. Condition: During our audit, we identified transactions for the Head Start Cluster included in the SEFA totaling $424,874 relating to the upcoming school year. These transactions were not recorded in the proper period per the terms of the grant. Cause: Internal controls were not effectively implemented to ensure proper recognition of grant terms. Effect or Potential Effect: The effect of errors identified are outlined above and have since been corrected by management. Questioned Costs: Head Start Cluster – Federal Assistance Listing Number 93.600 – $424,874. Identification of Repeat Findings: This is not a repeat finding. Recommendations: We recommend that HRCAP implement internal controls around expense cutoff to ensure all expenses relate to the appropriate period or in this case, school year. Views of Responsible Officials: See management’s accompanying views.