Bright Beginnings, Inc.Non-Profit

2019-001 - Allowable Costs/Cost Principles - Compensation Program: CFDA 93.600, U.S. Department of Health and Human Services/Head Start and Early Head Start Programs Criteria: Costs of compensation are allowable to the extent that they satisfy specific requirements including 1) the total compensation for individual employees is reasonable for the services rendered 2) is based on records that accurately reflect the work performed and are supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated and 3) the controls are consistently applied to both Federal and non-Federal activities. In addition, according to the Organization?s Financial Roles and Responsibilities Manual time is allocated to specific projects based on a bi-weekly timesheet. Condition and Context: Bright Beginnings, Inc. administers Head Start and Early Head Start Programs. The Head Start and Early Head Start grants are discretionary grants that provides payment of direct and indirect costs on a cost reimbursable basis. During our testing of payroll expense allocation to the Federal award, we noted that Bright Beginnings, Inc. did not maintain timesheets to record staff hours, but rather labor hours and related wages are allocated based on the employee?s set compensation rate and according to allocation percentages of his/her role, administrative or program related, adjusted on an as-needed basis by program management. Effect: Cost principles detailed in the Code of Federal Regulations establish requirements specific to the financial management of federal grant funds. Generally, the reimbursement of salaries and compensation requires that the time charged be supported by complete and accurate records of employee time and effort in accordance with The Organization?s stated policies. Accordingly, Bright Beginnings, Inc?s process in place does not comply with the stated requirements. Within a federal program, failure to properly allocate payroll to cost objectives in accordance with actual activities can result in unallowable costs. Cause: Bright Beginnings, Inc. did not utilize a timesheet system for tracking labor costs charged to programs. 2019-001 Allowable Costs/Costs Principles ? Compensation (continued) Questioned Costs: None Recommendation: Bright Beginnings, Inc. should follow its stated policies or modify its policies to reflect the cost allocation plan that is currently being utilized. Management?s Response: BBI has reviewed 45 CFR 95, which dictates the need for a cost allocation plan to be approved by the BBI Board of Directors annually. BBI?s Board of Directors approved a new cost allocation plan at their March 2020 Board meeting. Under this new plan, Head Start is only charged salaries for Head Start program staff dedicated to the Head Start program. Under this new plan, program staff allocated to multiple programs are not allocated to the Federal Head Start program at all, which eliminates the need for timekeeping. BBI's Finance Committee reviews adjustments to the BBI Cost Allocation plan and recommends them to BBI's Board of Directors for approval before the Head Start budgets are submitted.

Finding 2019-002 ? Eligibility/ Enrollment Compliance Program: CFDA 93.600, U.S. Department of Health and Human Services/Head Start and Early Head Start Programs Criteria: The Organization is required to follow criteria set by the Office of Head Start to identify eligible children and families to participate in the Early Head Start and Head Start programs. In addition, for enrollment compliance purposes, an eligibility verification should be performed on an annual basis on enrolled children and families. Condition and Context: During our testing, 6 out of 24 children selected for testing in the home-based program were temporarily enrolled based on an interview, without review of the required documentation to declare them eligible. The Organization did not receive the required documentation to verify eligibility, and the children were not enrolled in the program. These potential enrollees were kept on the Organization?s eligibility listing and were not removed from the listing once documentation could not be verified. During our testing, it was noted that the Organization conducts eligibility verification once every 2 years for applicants without subsidy vouchers. Finding 2019-002 ? Eligibility/ Enrollment Compliance (continued) Cause/Effect: The Organization had oversight issues with regard to complying with eligibility requirements under the award. This oversight had the potential effect of misrepresenting the number of eligible, enrolled children reported to the agency as of a particular date. Question Costs: None Recommendation: We recommend that the Organization thoroughly verify the children?s eligibility by reviewing the necessary documentation prior to incorporating the potential enrollees in the eligibility records. In addition, eligibility verification should be performed annually to remain in compliance with the OHS requirements. Management Response: The collection and maintenance of documents is a challenge for many of the families that BBI serves. Since BBI serves families who are experiencing homelessness, documents are easily lost and often incomplete. As a result, BBI has invested in a Recruitment & Eligibility (ERSEA) Team. Previously, Bright Beginnings only had one full-time employee performing multiple recruitment, eligibility and enrollment functions. However, in the summer 2019, BBI expanded the ERSEA Team to have one full time employee focused on Head Start recruitment and ensuring parents are aware of all the documentation needed to enroll. This role supports parents in securing all documentation when families face barriers to acquiring required documentation. Another employee ensures that all Head Start eligibility, enrollment and attendance requirements have been met. The final role works specifically with parents to obtain eligibility information required for OSSE subsidy submission.

Finding 2019-003? Matching Compliance Federal Program: CFDA 93.600 ? U.S. Department of Health and Human Services/Head Start and Early Head Start Programs Criteria: The use of volunteer time as match must include the establishment of a wage scale based upon the grantee agency's internal scale or prevailing wages in the area. Salaries and wages used in meeting cost sharing or matching requirements on Federal awards must be supported in the same manner as salaries and wages claimed for reimbursement from Federal awards. Documentation should be maintained on a regular basis. Programs may choose to use a monthly time sheets for regular volunteers or daily time sheets for occasional volunteers. Condition and Context: During our testing of volunteer hours used for the federal grants match requirement, two out of the three entries selected lacked sufficient documentation. The sign-in sheets used for volunteers did not include the time in/ time out for all volunteers, and the rate used to calculate the dollar amount was outdated. Cause/Effect: The Organization had oversight issues with regard to documentation for matching compliance under the awards. The lack of such documentation has the potential effect of reporting incorrect matching funds to the agency. Question Costs: None Recommendation: We recommend that more detailed records be maintained and that rates used for matching funds include the establishment of a wage scale based upon the grantee agency's internal scale or prevailing wages in the area. Management Response: Previously, volunteers at our early learning centers were asked to sign in and sign out. If they did not sign out, the volunteer coordinator estimated the time that they left. BBI's volunteer coordinator maintained the paper volunteer log and provided the Finance Department with a monthly total. During, a staff transition, some of the logs were not located. Recently, Bright Beginnings implemented an electronic sign-in process that better enables BBI to track all volunteers. Bright Beginnings? Volunteer Coordinators will receive internal Head Start compliance training as part of their onboarding. For the fiscal year in question, BBI valued volunteer time at $23.07 per hour, the national hourly rate reported in 2014 in the attached volunteer time by state report. The 2018 rate, from the same table, is $25.43. BBI reported 1,822.50 hours of volunteer time in FY19, which was calculated at the 2014 rate of $23.07, for a total of $42,045.09. If the 2018 rate of $25.48 had been used, the total amount charged would have been $46,437.30, a difference of $4,392.21. Because volunteer time is only used for non-federal share, BBI used other non-federal funds to make up the difference. Based on the $23.07 rate used, BBI reported 30 hours of nonfederal share without proper documentation, again, from a departed employee. The value of those hours: $692. Conclusion: Volunteer hour tracking has been improved. Volunteer logs are kept and were presented for the sample requests. DHHS was charged less than an allowable amount for properly documented hours. We do not see this as a significant deficiency.

Finding 2019-004 ? Reporting Compliance Federal Program: CFDA 93.600 ? U.S. Department of Health and Human Services/Head Start and Early Head Start Programs Criteria: Per the Office of Head Start Compliance Supplement, the Organization has financial and special reporting requirements due based on the budget periods of grants awarded. Condition and context: For awards with budget periods ending in 2019, the financial reporting forms SF-425s and special reporting forms SF-429s were later than the prescribed due dates. Cause/Effect: The Organization had oversight issues with regard to reporting compliance under the award. Question Costs: None Recommendation: We recommend that the Organization monitors its contract reporting timeline and due dates. The production and submission of reports should follow timeline specified on the grants. Management Response: The Form SF-425 at 9/30/19 was delayed due to employee sickness. BBI is expanding its Department of Finance, which will allow for the assignment of backup roles for critical functions, such as SF-425 form filings. Additionally, the Executive Director sends out an email to senior staff each week with deadlines for the next four weeks, including filing deadlines for the SF-425/428-429.

Finding 2019-005 ? Cost of Ownership Federal Program: CFDA 93.600 ? U.S. Department of Health and Human Services/Head Start and Early Head Start Programs Criteria: Per the HHS Grants Policy Statement: "Rental costs under a 'less-than-arms-length' arrangement is allowable only up to the amount that would be allowed under the applicable cost principles had title to the property been vested in the recipient.? In order for related party lease transactions to be allowable a ?cost of ownership? analysis must be performed by the Organization annually to ensure that rental costs incurred do not exceed the cost of ownership. Condition and context: The Organization had not performed a calculation for the year ended September 30, 2019. Cause/Effect: Costs in excess of allowable costs could have been charged to federal programs after the Organization occupied the new facility. Question Costs: None Recommendation: We recommend that the Organization prepare a cost of ownership calculation and update the calculation on a not less than annual basis. Management Response: Bright Beginnings took occupancy of its 3418 4th Street location in late September 2018 and began owing rent as of October 2018. For the fiscal year ended September 30, 2019, operating expenses at 4th Street were approximately $437,000, and Bright Beginnings charged $107,083 to Head Start for 4th Street rent - less than 25% of annual operating costs. BBI is performing a square footage analysis to support this calculation, but the percentage of Fourth Street facilities dedicated to the Head Start program is well over 50%. BBI is in the process of formalizing and documenting this analysis.