Educare of West DuPage

CORRECTIVE ACTION PLAN March 16, 2021 Federal Audit Clearinghouse 1201 E. 10th Street Jeffersonville, IN 47132 Educare of West DuPage (FEIN 26-2259307) respectfully submits the following corrective action plan for the year ended June 30, 2020. Our independent public accounting firm is: Desmond & Ahern, Ltd 10827 S. Western Avenue Chicago, IL 60643 Phone: 773-779-4720 Audit Period: July 1, 2019 through June 30, 2020 The findings from the June 30, 2020 schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. 2020-001 Preparation of Generally Accepted Accounting Principles (GAAP) Financial Statements Criteria: This absence of fiscal monitoring controls and knowledge does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements in a timely manner. Condition: We noted an absence of monitoring and knowledge in the preparation of financial statements that are fairly presented in conformity with Generally Accepted Accounting Principles (GAAP). Cause: This material weakness is due to a combination of the accounting department needing additional training and a lack of monitoring due to COVID-19 which may have identified the additional journal entries required to present GAAP financial statements. Effect: Material adjusting entries were necessary to accounts including revenue, receivables, payables and expenses to present the financial statement and related footnotes in accordance with GAAP for the year ending June 30, 2020. Recommendation: We recommend that someone independent of the report?s preparation (who is knowledgeable of GAAP, including specific not for profit pronouncements) review the statements to ensure all transactions have been properly recorded. Grantee Response: The Leadership Team at Educare West DuPage will reassess the roles and responsibilities of current staff members to determine which areas of responsibility from the accounting department can be maintained by existing staff, who will directly report to the Director of Finance and Administration. Additionally, the Executive Director and Director of Finance and Administration plan to bring in an additional staff member with formal accounting training and fieldwork. While attempting to hire a full-time staff member, Educare West DuPage will use a professional placement firm with expertise in Accounting and Finance job placement, to fill the current vacancy with a temporary staff member. By spreading the existing work across multiple staff members, the Director of Finance and Administration will be able to more extensively focus on the accuracy of financial reporting, while ensuring the adherence to Generally Accepted Accounting Principles based on the Director?s Accounting qualifications and existing knowledge. As indicated in the Corrective Action Plan from the 2019 Audit, the Executive Director and Director of Finance and Administration will also participate in fiscal training in the form of webinars or seminars. Unfortunately, this plan was not able to be completed to the extent anticipated in response to the 2019 Audit, due to the COVID-19 pandemic. The Director of Finance and Administration, in collaboration with the Executive Director and Finance Committee will analyze the current processes that exist within the accounting department to evaluate the areas of greatest concern prior to contracting with a consultant who specializes in fiscal processes and procedures. Once the key areas of concern are identified, Educare West DuPage will hire the consultant on an as-needed basis to assist the Director of Finance and Administration in establishing improved accounting processes to ensure Generally Accepted Accounting Principles (GAAP) are being followed. Professional Development in regard to each staff member?s growth and education is at the core of Educare West DuPage?s quality improvement plan. Throughout each year, all staff members work with their supervisor to develop continuing education goals that support and enhance the school?s efforts in addressing all functional operations through ongoing, or as-needed assessment. 2020-002 Allowable Costs/Cost Principles Criteria: Reports reflecting the distribution of activity of each employee must be maintained for all staff members whose compensation is charged, in whole or in part, directly to awards, in accordance with Cost Principles for Non-Profit Organizations (2 CFR Part 230.8). The reports must reflect an after-the-fact determination of the actual activity of each employee. Condition: The Organization provided time records that account for the number of hours worked by the selected employees and the departments employees are charged to, however, details for the time worked in each individual program were not representative of actual time recorded per activity. Cause: The Organization asserts that time records are consistently maintained to support the allocation of staff time to different functions. However, the Organization experienced significant turnover within the accounting department during the fiscal year and as a result was unable to locate documentation as to measurable criteria used to allocate all employees? time. The Organization subsequently prepared a time study to ascertain that compensation costs charged to awards were reasonable and allocable. Effect: Inadequate documentation could result in unallowable costs being charged to awards. Questioned Costs: None Recommendation: We recommend that quarterly recaps of the time sheets be done and that the time analysis be compared to the actual percent being allocated. If necessary, the projected allocation percentages, including full time equivalents, should be changed to reflect the actual time spent as required under 2 CFR 230. Also, the previous quarter should also be adjusted if the revised percentages would cause the financials to be materially misstated. We further recommend that all employees receive additional training on filling out timesheets and that supervisors receive written procedures on reviewing the time sheets before approving to ensure that they are properly completed. Grantee Response: Educare West DuPage will employ an after-the-fact work determination process for staff members to allocate employee wages accurately at the end of each pay period. Administrative staff and any other staff members, whose time is not spent doing static activities such as teaching or family engagement, with a specific age group of students within the school, is required to track their actual work time using an excel spreadsheet. The spreadsheet requires the employees to indicate the specifics of each activity completed within a work day, including a description of the work, as well whether the activity supports a specific age group, or if it is related to an administrative or fundraising activity. The process described above was developed and implemented late within Fiscal Year 2020, with the management team hosting several meetings to educate staff members on the process of accurately completing the Excel time tracking process. The training focused on teaching staff members how to determine the accurate classification of their daily activities. Staff supervisors review the after-the-fact work determination detail and sign off once the information has been confirmed. This will be further enhanced by additional training for management team members. The fiscal policies and procedures, as well as the employee handbook, will be reviewed and updated to detail the new process and expectations. Finance staff will then allocate the time of staff members based on the indicated activities completed during the pay period. Finance staff will review average allocations for staff members on a quarterly basis based on actual allocations of each pay period. Due to the COVID-19 pandemic, the accounting department was not able to develop a process for completing a quarterly recap and analysis to accurately adjust salary and wage allocations based on the completed internal personnel activity reports, but anticipates finalizing this process by the end of the 3rd Quarter of Fiscal Year 2021. Once the analysis and quarterly recap process is implemented, the accounting department will review the average allocations to determine if the actual allocations are in alignment with the budgeted allocations, and per-pay-period allocations that have been recorded in the general ledger. If the actual allocations are not in alignment, the finance department will then create amended budgets for the grants that are impacted, and create a quarterly salary allocation true-up journal entry process, to adjust prior quarter allocations within the most recent accounting period. Once this process is implemented, it will become the responsibility of the accounting department to continue this process on a quarterly basis moving forward. The management team began looking into a different payroll vendor and has the options narrowed down to maintaining the current payroll vendor relationship with Paychex or entering into an agreement with Paylocity, or Trinet. The concept for researching alternative payroll administrators is to find a vendor that provides further technology advancement that will allow staff to accurately record their time as they switch between activities throughout the day, thus making the payroll review process less burdensome on the accounting department and supervisory staff members. Unfortunately, the completion of this project was temporarily postponed due to the COVID-19 pandemic, but a decision is anticipated to be put before the full Board of Directors and parent Policy Council within the first two quarters of Fiscal Year 2022. Sincerely,

Federal Audit Clearinghouse 1201 E. 10th Street Jeffersonville, IN 47132 Educare of West DuPage (FEIN 26-2259307) respectfully submits the following corrective action plan for the year ended June 30, 2019. Our independent public accounting firm is: Desmond & Ahern, Ltd 10827 S. Western Avenue Chicago, IL 60643 Phone: 773-779-4720 Audit Period: July 1, 2018 through June 30, 2019 The findings from the March 18, 2020 schedule of findings and questioned costs are discussed below. The finding is numbered consistently with the number assigned in the schedule. 2019-002 Allowable Costs/Cost Principles Criteria: Reports reflecting the distribution of activity of each employee must be maintained for all staff members whose compensation is charged, in whole or in part, directly to awards, in accordance with Cost Principles for Non-Profit Organizations (2 CFR Part 230.8). The reports must reflect an after-the-fact determination of the actual activity of each employee. Auditor?s Recommendation We recommend the Organization submit its Single Audit Reporting Package to the FAC no later than 9 months after fiscal year-end. Grantee Response: The Organization is currently working on new policies and procedures to ensure that the finalization of the audit will comply with the deadline for the Single Audit Reporting Package. During fiscal year 2019 the Organization was able to submit the FY18 Single Audit Package on time. Condition: The Organization provided time records that account for the number of hours worked by the selected employees and the departments employees are charged to, however, details for the time worked in each individual program were not representative of actual time recorded per activity. Cause: The Organization asserts that time records are consistently maintained to support the allocation of staff time to different functions. However, the Organization experienced significant turnover within the accounting department during the fiscal year and as a result was unable to locate documentation as to measurable criteria used to allocate all employees? time. The Organization subsequently prepared a time study to ascertain that compensation costs charged to awards were reasonable and allocable. Effect: Inadequate documentation could result in unallowable costs being charged to awards. Questioned Costs: None Recommendation: We recommend that quarterly recaps of the time sheets be done and that the time analysis be compared to the actual percent being allocated. If necessary, the projected allocation percentages, including full time equivalents, should be changed to reflect the actual time spent as required under 2 CFR 230. Also, the previous quarter should also be adjusted if the revised percentages would cause the financials to be materially misstated. We further recommend that all employees receive additional training on filling out time sheets and that supervisors receive written procedures on reviewing the time sheets before approving to ensure that they are properly completed. Grantee Response: A time study will be conducted on a quarterly basis to better determine where employees? time is being spent. The first-time study will be initiated on February 3, 2020. The management team is also looking into a different payroll vendor that will help in recording staff time more efficiently and accurately. Sincerely, Justin McGrath Director of Finance