Finding 43163 (2022-002)

Material Weakness
Requirement
B
Questioned Costs
$1
Year
2022
Accepted
2022-11-27
Audit: 44468
Organization: Youth & Family Services, Inc. (SD)

AI Summary

  • Core Issue: Audit adjustments revealed $55,615 in questioned costs due to improper recording of Head Start expenditures, risking financial misstatements.
  • Impacted Requirements: Compliance with allowable costs for federal programs, specifically regarding the treatment of prepaid expenses and grant periods.
  • Recommended Follow-Up: Adjust investments to actual, record prepaid contracts as assets, manage deferred revenue, and coordinate with Head Start to address the prepaid costs.

Finding Text

#2022-002 FINDING: Audit and SEFA Adjustments Federal Programs Affected: Head Start/ALN #93.600; Child and Adult Care Food Program (CACFP)/ALN #10.558 Compliance Requirement: Allowable Costs Questioned Costs: $55,615 known questioned costs. Condition and Cause: During the course of our engagement, we proposed material audit and SEFA adjustments. Criteria and Effect: These adjustments were not identified as a result of the Organization?s existing internal controls, and therefore, could have resulted in a material misstatement of the Organization?s consolidated financial statements or noncompliance with federal programs. One adjustment related to a Head Start expenditure for a cloud-based teaching curriculum subscription covering a 5-year period. Curriculum expenditures are allowable costs for Head Start, but Head Start agencies cannot charge 5 years of cost to one grant period. An audit adjustment was made to properly record the expenditure as a prepaid expense, and Head Start expenditures reported in the SEFA were also reduced by the $55,615 of prepaid costs. Repeat Finding from Prior Year: Yes, revision of prior year finding #2021-002. Recommendation: We recommend the following: ? Investments be adjusted to actual. ? Prepaid contracts be recorded as an asset upon payment and expensed over the life of the service contract. ? Record deferred revenue for unspent conditional funding ? The Organization work with Head Start representatives to return the funds drawn down for the prepaid costs or reduce future draw requests. Views of Responsible Officials: See Organization?s Corrective Action Plan

Corrective Action Plan

The Organization has communicated with OHS officials to confirm expectations regarding prepaid contracts. The Organization will follow the guidance of OHS and will record prepaid contracts according to GAAP rules. The Organization will receive and implement guidance from OHS to correct the draw and use of funds related to the current situation. Going forward, per the HHS Grants Policy Statement, the Organization will confirm with OHS if an exception related to handling a specific prepaid service contract is appropriate and allowed.

Categories

Questioned Costs Allowable Costs / Cost Principles Reporting Internal Control / Segregation of Duties

Other Findings in this Audit

  • 43164 2022-003
    Significant Deficiency
  • 43165 2022-002
    Material Weakness
  • 43166 2022-003
    Significant Deficiency
  • 43167 2022-002
    Material Weakness
  • 43168 2022-002
    Material Weakness
  • 43169 2022-002
    Material Weakness
  • 43170 2022-002
    Material Weakness
  • 619605 2022-002
    Material Weakness
  • 619606 2022-003
    Significant Deficiency
  • 619607 2022-002
    Material Weakness
  • 619608 2022-003
    Significant Deficiency
  • 619609 2022-002
    Material Weakness
  • 619610 2022-002
    Material Weakness
  • 619611 2022-002
    Material Weakness
  • 619612 2022-002
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
93.600 Head Start $1.08M
93.086 Healthy Marriage Promotion and Responsible Fatherhood Grants $1.03M
84.287 Twenty-First Century Community Learning Centers $257,332
10.559 Summer Food Service Program for Children $176,562
93.575 Child Care and Development Block Grant $166,393
16.888 Consolidated and Technical Assistance Grant Program to Address Children and Youth Experiencing Domestic and Sexual Violence and Engage Men and Boys As Allies $147,283
93.276 Drug-Free Communities Support Program Grants $143,008
93.243 Substance Abuse and Mental Health Services_projects of Regional and National Significance $127,861
16.575 Crime Victim Assistance $92,309
10.575 Farm to School Grant Program $50,000
10.558 Child and Adult Care Food Program $44,389
93.110 Maternal and Child Health Federal Consolidated Programs $43,057
14.218 Community Development Block Grants/entitlement Grants $6,961