Finding Text
FINDING 2022-002
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
Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles
Audit Finding: Material Weakness, Noncompliance, Other Matters
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: $35,110.
Section III – Federal Award Findings and Questioned Costs (Continued)
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.
• One sample selection was not supported by appropriate documentation. The selection was for the purchase of gift cards for teachers to buy books for professional development and supplies for the classroom. However, there was no backup or support showing what the gift cards were used to purchase. The total of this purchase was $35,000.
• The amount paid to one employee did not agree to the employee’s approved contract. The amount charged to the grant as $110 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 2021-002.
Recommendation: We recommend that the Unit establish a documented, primary review of all head start cluster account payable claims before they are paid. Additionally, we recommend the Unit maintain all supporting documentation to show what the gift cards were used to purchase to ensure they are used for allowable purposes.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.