Finding 8679 (2021-004)

Significant Deficiency
Requirement
A
Questioned Costs
-
Year
2021
Accepted
2024-01-16

AI Summary

  • Core Issue: The Association lacks effective internal controls for maintaining adequate time-and-effort documentation for payroll costs charged to the Head Start program.
  • Impacted Requirements: Federal regulations mandate accurate records reflecting actual work performed and compliance with the approved cost allocation plan.
  • Recommended Follow-Up: The Association should adhere to its documented controls to ensure proper time-and-effort documentation is prepared for payroll costs related to the federal grant.

Finding Text

Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Head Start Cluster Assistance Listing Number: 93.600 Pass‐through Agency: N/A Contract numbers: 10CH01029405C3 10CH01029406 10CH01204401 10HE00135801C5 10HE00135801C6 Contract periods: 01/2020‐06/2021 01/2021‐06/2021 07/2021‐12/2021 07/2021‐06/2023 07/2021‐06/2023 Type of Finding: Significant Deficiency in Internal Control Over Compliance ‐ Allowable Costs and Cost Principles Criteria: The Association’s procedures for processing expenditures, and primarily allocating expenditures to programs, should include controls that ensure expenditures are properly charged to program and allocated in accordance with the federal grant requirements. The objective of the Assistance Listing 93.600 Head Start program (including Early Head Start and Early Head Start Partnerships) is to promote school readiness of low‐income children (including American Indians, Alaska Natives and migrant and seasonal farm workers) by enhancing children’s cognitive, social and emotional development. During the fiscal year ending December 31, 2021, the Association expended $4,720,185 in federal funding. Federal regulations require award recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations require the Association to have adequate time‐and‐effort documentation to support all payroll costs charged to the Head Start awards. 2 CFR 200.430, Compensation – personal services, states, in part: “(i) Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (ii) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated…” Depending on the number and types of activities employees perform, time and effort documentation can be in the form of semi‐annual certification or monthly personnel activity reports, such as a timesheet. Condition: The Association’s controls were not effective to ensure it maintained adequate time and effort documentation, as required by federal regulations and the grantor. During review of payroll costs for the year ended December 31, 2021, the following was noted: • Payroll costs were charged according to budgeted time rather than reconciling to actual hours worked. • Two payroll disbursements were not allocated in compliance with the Associations approved cost allocation plan. This internal control deficiency is considered to be a significant deficiency. Questioned Costs: None. Context: Procedures included examining payroll charges for 40 randomly selected employees for January through December 2021. Cause: The Association changed the software used for payroll processing from QuickBooks to MIP in July 2020. They then changed their fiscal accounting software from QuickBooks to MIP in January 2021. The new software implementation was fraught with many challenges, one of which being implementing electronic processes that met the time and effort requirements outlined in the Association’s policy manual. Effect: By not keeping proper time‐and‐effort records, the Association cannot demonstrate compliance with grantor’s requirements that require support for payroll costs charged to the federal program. The Association provided alternate documentation that demonstrated the payroll costs charged to the program were allowable. Therefore, we are not questioning costs. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: The Association follow its own documented controls to ensure it prepares adequate time‐ and‐effort documentation to support payroll costs charged to the federal grant. View of Responsible Officials: There is no disagreement with this audit finding.

Corrective Action Plan

Head Start Cluster ‐ Assistance Listing Number 93.600 Recommendation: The Association follow its own documented controls to ensure it prepares adequate time‐and‐effort documentation to support payroll costs charged to the federal grant. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: Containment Supervisors have had long‐time systems in place to review activity logs and their alignment with electronic time sheets. OCCDA policy changes in 2020 are documented in the staff handbook, which states that timesheets are submitted and approved electronically in EWS. In October 2023, a statement was added to the timekeeping system that states, “Submission of this electronic form constitutes your signature on the form. By electronically signing this form you are attesting to the accuracy of the information contained therein and the submission is authorized by you.” Root Cause Due to a lack of knowledge of the new system, fiscal staff could not pull reports out of the timekeeping system. Action Taken Upon implementation of the new timekeeping system in previous years, the staff handbook was updated to reflect the procedure of electronic submission of timesheets but the fiscal policy will be updated to accurately reflect procedures by February 2024. Beginning in 2023, the staff allocations have been uploaded on a shared document where the Fiscal Manager and payroll both have access. Allocations are reviewed whenever there are any changes in duties or funding and at a minimum of quarterly. When there are changes, a formal status change is completed by HR and sent to payroll for processing and updates in the spreadsheet and the software. Beginning in January 2024 timesheets will be entered into the timekeeping system by staff indicating the number of hours spent in each funding program allowing for real time, accurate allocation of time. Time entry will continue to be reviewed by supervisors or the next in the chain of command when the supervisor is unavailable and paid based on the entered time. Quarterly allocations will be reviewed in the payroll system to ensure that we are staying within the budget. Name(s) of contact person(s) responsible for corrective action: Fiscal Manager Planned completion date for corrective action plan: March 2024 (Q1)

Categories

Allowable Costs / Cost Principles Internal Control / Segregation of Duties

Other Findings in this Audit

  • 8676 2021-001
    Material Weakness
  • 8677 2021-002
    Significant Deficiency
  • 8678 2021-003
    Significant Deficiency
  • 8680 2021-001
    Material Weakness
  • 8681 2021-002
    Significant Deficiency
  • 8682 2021-003
    Significant Deficiency
  • 8683 2021-004
    Significant Deficiency
  • 8684 2021-001
    Material Weakness
  • 8685 2021-002
    Significant Deficiency
  • 8686 2021-003
    Significant Deficiency
  • 8687 2021-004
    Significant Deficiency
  • 8688 2021-001
    Material Weakness
  • 8689 2021-002
    Significant Deficiency
  • 8690 2021-003
    Significant Deficiency
  • 8691 2021-004
    Significant Deficiency
  • 8692 2021-001
    Material Weakness
  • 8693 2021-002
    Significant Deficiency
  • 8694 2021-003
    Significant Deficiency
  • 8695 2021-004
    Significant Deficiency
  • 585118 2021-001
    Material Weakness
  • 585119 2021-002
    Significant Deficiency
  • 585120 2021-003
    Significant Deficiency
  • 585121 2021-004
    Significant Deficiency
  • 585122 2021-001
    Material Weakness
  • 585123 2021-002
    Significant Deficiency
  • 585124 2021-003
    Significant Deficiency
  • 585125 2021-004
    Significant Deficiency
  • 585126 2021-001
    Material Weakness
  • 585127 2021-002
    Significant Deficiency
  • 585128 2021-003
    Significant Deficiency
  • 585129 2021-004
    Significant Deficiency
  • 585130 2021-001
    Material Weakness
  • 585131 2021-002
    Significant Deficiency
  • 585132 2021-003
    Significant Deficiency
  • 585133 2021-004
    Significant Deficiency
  • 585134 2021-001
    Material Weakness
  • 585135 2021-002
    Significant Deficiency
  • 585136 2021-003
    Significant Deficiency
  • 585137 2021-004
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
93.505 Affordable Care Act (aca) Maternal, Infant, and Early Childhood Home Visiting Program $110,512
93.600 Head Start $104,574
10.558 Child and Adult Care Food Program $14,144