COMMUNITY ACTION AGENCY OF SOMERVILLE, INC.Non-Profit

Material Weakness Allowable cost / cost principals Finding # 2020-001: Lack of sufficient internal control to provide reasonable assurance that federal awards are expended for allowable cost and that the cost is charged to federal awards in accordance with applicable cost principles. Program information: CFDA # 93.600 Head Start, Year ended November 30, 2020, U.S. Department of Health and Human Services. Criteria: 2 CFR Section 200.303 Condition: Lack of timely reconciliation of actual (incurred) shared staff cost to cost charged to the program that could lead to over- or under-charging of program cost. Cause: Supporting documentation of actual payroll cost incurred is not used as a basis of payroll drawdowns in timely manner. Effect: Increased risk of allocating unallowable shared payroll costs to federal programs. Recommendation: The Board of Directors put procedures in place to ensure management's review of supporting documentation (payroll reports, time cards, etc.) of allowable costs information and computations are checked for accuracy. Repeat finding: No Statistical sampling: No. Audit finding represents a systematic issue. Views of responsible officials: The agency agrees with findings. The Board of Directors will implement controls and procedures to ensure only allowable cost is charged to federal programs in compliance with federal program requirements. Cost allocations will be reviewed for accuracy.

Management Responsibilities Condition: The individual designated as the Director of Finance of the Organization for the year ended November 30, 2019 lacked the skills, knowledge and experience needed to oversee the financial reporting function of the Organization. Criteria: It is the Organization?s responsibility to designate an individual, preferably within senior management, who possesses suitable skill, knowledge, or experience to oversee financial statement reporting and audit services and to have internal controls in place to monitor the individual designated. Effect: As a result of the condition noted above, there was a lack of audit preparedness on behalf of management which caused significant delays in closing the fiscal year, difficulty responding to audit inquiries and several proposed audit adjustments to correct material misstatements. Recommendation: The Board of Directors put procedures in place to ensure the individual holding the position of Director of Finance has the necessary skills, knowledge and experience to oversee the financial reporting needs of the Organization. Views of Responsible Officials: The Organization agrees with the finding.

Unallowable Activities and Unallowable Costs Condition: The Organization charged the Head Start program for a significant portion of one-time salary adjustment paid to executive and administrative personnel accrued at November 30, 2019 and paid out in February 2020. Criteria: The payment of this one-time salary adjustment included individuals that were not educational personnel, family service workers, or child counselors. The cost of such compensation is not considered an allowable administrative cost necessary for Head Start program implementation. Effect: The Organization is not in compliance with the Federal program requirements. Recommendation: Procedures and internal controls over such procedures be put in place to ensure compliance with the requirements as noted above as criteria specifically with regards to executive compensation. Views of Responsible Officials: The Organization respectfully disagrees with the finding. Based on guidance from the Administration for Children & Families (ACF), the Organization takes the view that one-time salary adjustments for administrative or management staff are allowable and do not require prior approval to the extent that agency spending stays within the approved indirect rate.

Property and Equipment Tracking Condition: The Organization does not have the proper maintenance of equipment and real property records as required for Head Start programs by the Department of Health and Human Services, specifically: maintenance of a schedule, which shows property description, identification number, source of funding, title holder, acquisition date, cost of property, and percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property as required by Federal compliance requirements, and a physical inventory of the property being taken and the results reconciled with the property records at least once every two years. Criteria: It is Organization?s responsibility to ensure compliance with Federal program requirements with respect to equipment and real property management as noted above as condition. Effect: The Organization is not in compliance with the Federal program requirements. Recommendation: Procedures and internal controls over such procedures be put in place to ensure compliance with the requirements as noted above as criteria. Views of Responsible Officials: The Organization agrees with the finding.