Finding Text
FINDING 2023-001
Information on the federal program:
Subject: Head Start Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Federal Agency: Department of Health and Human Services
Federal Program: Head Start Cluster
Assistance Listing Number: 93.600
Federal Award Numbers and Years (or Other Identifying Numbers): 05CH011249, 05HP000285, 05HE000044
Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Audit Finding: Material Weakness, Noncompliance
Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ."
Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the activities allowed or unallowed and allowable costs/cost principle compliance requirements. The Unit did not have adequate documentation to support expenditures.
Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above.
Effect: The failure to establish an effective internal control system placed the Unit at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs.
Questioned Costs: $7,463
Context: During testing, we noted the following issues in a sample of sixty head start cluster account payable and payroll claims:
• Two sample selections were not approved by a secondary individual.
• The Unit paid $7,436 in sales tax on 5 selections which is an unallowable cost. The Unit is tax-exempt as a governmental entity in the state and should not pay sales tax.
• The amount paid to one employee did not agree to the employee’s approved contract. The amount charged to the grant as $27 more than what the employee’s approved personnel file stated.
Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior audit finding number was 2022-002.
Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. We recommend the Unit obtain the necessary documentation to show vendors the Unit is a tax-exempt entity.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.