Finding Text
Criteria: The Association’s procedures for processing expenditures, and primarily allocating expenditures to programs, should include controls to ensure that expenditures are charged to proper programs and allocated in accordance with the cost allocation plan.
Condition: Expenditures were not properly charged to programs or allocated in accordance with the cost allocation plan. Five of the forty general disbursements tested did not agree to the cost allocation plan.
Questioned Costs: None.
Context: Our procedures included examining 40 general disbursements from the year under audit. We examined allocation percentages and vendor invoices. We found there were five transactions with allocations that did not agree to the Association’s 2022 cost allocation plan. The transactions tested resulted in an immaterial over-charging to the Head Start program. The effect was not material to the financial statements or to the major program.
Cause: The Association experienced challenges in implementing a new financial reporting system in 2021 that continued throughout the 2022 fiscal year. As part of this, the cost allocation plan was not always correctly applied to payments, ensuring that the appropriate program was charged its correct applicable share. In addition, there was no subsequent review to ensure that the cost allocation plan was applied correctly or that subsequent federal reports were revised.
Effect: Expenditures were not charged to programs or allocated correctly.
Recommendation: We recommend the Association ensure that expenditures are properly charged to the programs or allocated in accordance with the cost allocation plan. We also recommend the Association re-evaluate and consider simplifying their cost allocation methodology.
View of Responsible Officials: There is no disagreement with this audit finding.