SUMTER COUNTY OPPORTUNITY, INC

2021-001 Finding Type ? Material Weakness in Internal Control over Procurement Procedures and Conflict of Interest (Prior Year) Criteria. SCO did not use its own documented procurement procedures and did not ensure that an employee, officer, or agent participating in the administration of a federal contract, had no real or apparent conflict of interest. Condition. SCO failed to ensure that it followed its procedures and avoided its conflict of interest policy when hiring two (2) employees/contractors and awarding contracts. Cause. This condition was caused by the agency's lack of monitoring and oversight of awarding contracts to individuals that were possibly a conflict of interest and violations of the procurement procedures of SCO. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight of its documented procurement procedures and its conflict of interest policy. Questioned Cost: $62,300.00 Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and apply its own documented procurement procedures and avoid the possible conflict of interest violation. View of Responsible Officials. SCO will include in its sole source policy that if a person has a skill that is not available in your local community, the conflict-of-interest policy still applies to a sole source. The agency will establish a committee to review and approve or deny all contracts before making awards. The agency recommends that these two contracts are immediately dissolved. The agency will also establish a finance committee to provide oversight of all fiscal activities. SCO has revised the policy and procedures to include three layers of individuals to ensure that the conflict-of-interest policy is never violated for any contracts including sole source contracts. The two individuals with the contracts were immediately released. The Fiscal Compliance Committee has been developed and established to review all contracts including those that are a sole source to ensure that the conflict of interest is never breached. This Committee is responsible for ensuring that all required reports and activities are submitted timely and correctly and that all regulations are complied with.

2021-002 Finding Type ? Material Weakness in Internal Control over Reasonable Compensation For Employees Engaged in Work on Federal Awards (Prior Year) Criteria. SCO did not demonstrate that it compensated its employees for work on its Federal Awards in the amount consistent with the amount paid for similar work on non-Federal activities. Condition. SCO failed to distinguish between contract labor and an employee. SCO failed to follow its procedure in classifying employees as independent contractors to make lump-sum payments to designated employees in addition to their regular salary. The amount paid to employees with accounts payable checks amounted to $289,574.16 which was paid without income taxes withheld and paid. Cause. This condition was caused by the agency's lack of monitoring and oversight of distinguishing between contract labor and an employee. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight distinguishing between contract labor and an employee. Questioned Cost: $289,574.16 Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and properly distinguish between contract labor and an employee. View of Responsible Officials. SCO needs to review and revise its policies on contracts and employees. All payments to employees should be reviewed to ensure that employees are not receiving payments for independent contract work. There should be a monitoring team to ensure that this finding never arises in the future. SCO established a Fiscal Compliance Team to monitor all payments, and the submission of all required reports and activities to ensure that all regulations are met through the agency?s policies and procedures. Fiscal policies and procedures were revised and approved to indicate that employees cannot be independent contractors as well.

2021-003 Finding Type ? Compliance and Other Matters ? Timeliness of Reporting (Prior Year) Criteria. Recipients of federal awards are required to submit timely and accurate reports to the awarding agency in accordance with federal compliance requirements and/or pass-through agency grant agreements. Condition. SCO did not submit the Data Collection Form within the required time frame as specified by the grant agreement. SCO did not consistently submit quarterly financial status reports within the required timeframe, as specified by the grant agreement. Cause. This condition appears to be caused by limited oversight by the governing body to review annual, monthly, and periodic reports. Effect. Because of this condition, the Agency did not fully comply with certain requirements of this program and was exposed to the risk of jeopardizing future federal funding. Questioned Costs. N/A. Recommendation. Recommend that the Agency implement controls to ensure that all necessary reports have been completed and submitted by the required due date. SCO's governing body and financial staff should receive annual training on grant requirements governing the submission of timely and accurate reports, allowable costs, grant monitoring, and grant closeout procedures. View of Responsible Officials. SCO has revised the policy and procedures to include three layers of individuals to ensure that the Data Collections form is completed timely and accurately and filed in the payment system time as well. Annually, a calendar will be developed for all required financial reports and the due date included. The Fiscal Compliance Committee has been developed and established for fiscal operations. This Fiscal Compliance Committee is responsible for ensuring that all required reports and activities are submitted timely and correct.

2021-004 Finding Type - Significant Deficiency in Internal Control over Special Tests and Provisions - Program Governance Requirements (Prior Year) Criteria. SCO did not make available all of the board minutes for the period May 1, 2020, through December 28, 2022. We received minutes for the period February 2022 through June 2022 on January 9, 2023. SCO could be in noncompliance with the Head Start Program Performance Standard 45 CFR Part 1301. Condition. SCO did not make available board minutes to support the actions of the Board of Directors during the audit period that disclosed the activities specified in Section 642 of the Act and the ongoing monitoring of the HSA as required by Performance Standard 45 CFR 1301. Cause. This condition was caused by the agency's lack of monitoring and oversight of the Program Governance required by the Performance Standard 45 CFR 1301. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight of Program Governance required by the Performance Standard 45 CFR 1301. Questioned Costs. N/A. Recommendation. Recommend that the agency ensure that board meeting minutes are prepared and maintained for each scheduled meeting during the program?s year addressing the activities and the ongoing monitoring of the HSA as required by the Performance Standard 45 CFR 1301. The board minutes at a minimum should address the identity of legal representation with familiarity with Head Start issues, representation with fiscal management or accounting for Head Start, the presentation of monthly financial statements and credit card charges, approval of monthly major financial expenditures, approval of all funding applications, selection of the independent auditor, status of any unresolved corrective actions on any audit finding, availability of annual financial report to the public and documenting the training and technical assistance received by the board. View of Responsible Officials. SCO did submit Board Minutes for that period. However, the minutes did not all include the bank statements because the finance department was plagued with issues such as changing the software because they found that the software, we were using could not generate the information that the board needed. The agency recommends the hiring of a Head Start Fiscal Contractor who has the expertise in generating bank statements and any other reports required reports from the fiscal system. To ensure that the board agendas and minutes will continue to acquire timely bank statements the Executive Director wants to create the Fiscal Compliance Committee to ensure that all required reports are generated on time and that the Board of Directors receives their reports on a timely basis. SCO has revised the policy and procedures to include three layers of individuals to ensure that the board minutes are prepared timely and accurately. Annually, a calendar will be developed for all required board minutes meetings and agendas. The Fiscal Compliance Committee has been developed and established for operations. This Committee is responsible for ensuring that all board minutes, agendas, required reports, and activities have been prepared and reviewed.

2021-005 Finding Type - Significant Deficiency in Internal Control over Equipment/Real Property Management (Prior Year) Criteria. SCO did not update the property records for equipment acquired under a federal award that include a description of the property, a serial number or other identification numbers, the source of funding for the property (including the FAIN), who holds the title, the acquisition date, and cost of the property, 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. And, a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (Performance Standard 45 CFR 74.34(f)) Condition. SCO failed to comply with the Performance Standard 45 CFR 74.34(f). Cause. This condition was caused by the agency's lack of monitoring and oversight of preparing and maintaining inventory records in compliance with Performance Standard 45 CFR 74.34(f). Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight of preparing and maintaining inventory records in compliance with Performance Standard 45 CFR 74.34(f). Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and properly oversee the updating and maintenance of inventory records in compliance with the Performance Standard 45 CFR 74.34(f). View of Responsible Officials. SCO did have a physical inventory of the property. It was done annually on buses, vehicles, playground equipment, kitchen equipment, copiers, and computers. The document was incomplete. A review of the policy and procedures regarding inventory was revisited and revised to include three layers of individuals to complete physical inventory every two years and reconcile the results with the property records. The Fiscal Compliance Committee will monitor this activity to ensure its accuracy and timeliness. SCO reviewed and revised the fiscal policies and procedures that addressed Equipment/real Property Management to include three layers of individuals to complete the physical inventory in its entirety to ensure accuracy, completeness, and timeliness. The Fiscal Compliance Committee was also established to ensure that all financial regulations and all required reports and activities are completed on time and accurately.

2021-006 Finding Type - Significant Deficiency in Internal Control over Reporting - Protection of Federal Interest (Prior Year) Criteria. SCO did not accurately prepare and submit the required Form SF-429A (Annual Real Property Status Report). Condition. SCO failed to file the required Form SF-429A in Grants Solution Systems. Cause. This condition was caused by the agency's lack of monitoring and oversight of preparing an accurate SF-429A and filing the SF-429A on time through Grant Solutions Systems. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight to prepare an accurate SF-429A and submission on time. Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and properly oversee the preparation and accuracy of the SF-429A and that it is filed on a timely basis. View of Responsible Officials. SCO has revised the policy and procedures to include three layers of individuals to ensure that the SF-429A is completed timely and accurately and filed in Grants Solutions Systems timely as well. Annually, a calendar will be developed for all required financial reports and the due date included. The Fiscal Compliance Committee has been developed and established for operations. This Committee is responsible for ensuring that all required reports and activities are submitted timely and correctly.

2021-007 Finding Type - Significant Deficiency in Internal Control over Reporting - Financial Status Reports and Protection of Federal Interest (Prior Year) Criteria. SCO did not submit the required Forms SF-425 (Federal Financial Report) and SF-429A (Annual Real Property Status Property) in a timely manner. Condition. SCO failed to file timely the required Forms SF-425 and SF-429A. Cause. This condition was caused by the agency's lack of monitoring and oversight of submitting Forms SF-425 and SF-429A in a timely manner. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight to submit Forms SF-425 and SF-429A in a timely manner. Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and properly oversee the submission of Forms SF-425 and SF-429A on a timely basis. View of Responsible Officials. SCO recommends that the monitoring systems are reviewed, and revised and that three layers of individuals are responsible for the filing and submission of the SF-425 into the payment system and the SF-429A is completed timely and accurately filed in the Grants Solutions Systems timely as well. The policy and procedure will be reviewed and revised to ensure that this requirement is not a future finding. A calendar will be completed to include when all required reports are due. Also, the development of a Fiscal Compliance Committee will provide oversight for all fiscal activities and will ensure that the SF-425 and SF-429A are completed and submitted timely.

2021-008 Finding Type ? Material Weakness in Internal Control over Allowable Costs/Cost Principles Criteria. SCO did not make available all of the sufficient supporting documentation relating to credit card statements, contractors' agreements, and other documentation supporting the review and approval of certain tested transactions for the year ending April 30, 2021. SCO could be in noncompliance with the Head Start Program Performance Standard, Notice of Award, and the Uniform Guidance Compliance Supplement relating to allowable costs. Condition. SCO did not make available all of the credit statements, contractors? agreements, and missing documentation from the files during the audit period that adequately supported the disbursements of the agency. Cause. This condition was caused by the agency's lack of controls to ensure that all of the assets and records are properly safeguarded and used solely for authorized purposes. Effect. As a result of this condition, the agency lacks internal controls over the accountability for, all funds, property, and other assets. Known Questioned Costs (Compliance Test) $161,182.04 Known Questioned Cost ( Contractors Agreement) $359,586.52 Known Questioned Cost (Credit Card Statements) $288,490.10 Likely Questioned Cost. $2,042,214.25 Recommendation. Recommend that the agency ensure that the implemented controls are effective, and accountable for, all funds, property, and other assets. And the agency must adequately safeguard all assets and assure that they are used solely for authorized purposes. View of Responsible Officials. SCO will improve its record-keeping and reporting system. The agency will review and revise the policies and procedures to include three layers of individuals to ensure that all agreements and documentation are attached and included within the batch. The system also requires monitoring to ensure that the documentation is in the files upon completion of any fiscal activity. SCO has revised the policy and procedures to include three layers of individuals to ensure that the record-keeping-reporting policy is never a finding because documentation is not attached to the contracts or other payables The two individuals with the contracts were immediately released. The Fiscal Compliance Committee has been developed and established to review all records periodically to ensure that all documents are in the records to support all contracts and all purchases. The Fiscal Compliance Committee is also responsible for ensuring that the record-keeping and reporting system is effective and efficient,

2020-001 Finding Type - Material Weakness in Internal Control over Procurement Procedures and Conflict of Interest Criteria. SCO did not use its own documented procurement procedures and did not ensure that an employee, officer, or agent participating in the administration of a federal contract, had no real or apparent conflict of interest. Condition. SCO failed to ensure that it followed its procedures and avoided its conflict of interest policy when hiring two (2) employees/contractors and awarding contracts. Cause. This condition was caused by the agency's lack of monitoring and oversight of awarding contracts to individuals that were possible conflict of interest and violations of the procurement procedures of SCO. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight of its documented procurement procedures and its conflict of interest policy. Questioned Cost: $69,615.94 Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and apply its own documented procurement procedures and avoid the possible conflict of interest violation. View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls over the monitoring and oversight of its documented procurement procedures and conflict of interest policy. The Board of Directors and the Policy Council have implemented a monthly report to address this finding at its regular meetings.

2020-002 Finding Type - Material Weakness in Internal Control over Reasonable Compensation For Employees Engaged in Work on Federal Awards Criteria. SCO did not demonstrate that it compensated its employees for work on its Federal Awards in the amount consistent with the amount paid for similar work on non-Federal activities. Condition. SCO failed to distinguish between contract labor and an employee. SCO failed to follow its procedure in classifying employees as independent contractors to make lump-sum payments to designated employees in addition to their regular salary. The amount paid as independent contractors to employees was $263,704 per Forms 1099. Cause. This condition was caused by the agency's lack of monitoring and oversight of distinguishing between contract labor and an employee. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight distinguishing between contract labor and an employee. Questioned Cost 2019: $263,704.00 Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and properly distinguish between contract labor and an employee. View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls over the monitoring and oversight of distinguishing between contract labor and an employee. The Board of Directors and the Policy Council have implemented a monthly report to address this finding at its regular meetings.

2020-003 Finding Type - Significant Deficiency in Internal Control over Financial Reporting Preparation of Financial Statements (Prior Year) Criteria. SCO is required to prepare financial statements in accordance with generally accepted accounting principles (GAAP). This is the responsibility of the agency's management. The preparation of financial statements in accordance with GAAP requires internal controls over both (1) recording, processing, and summarizing accounting data (i.e., maintaining internal books and records), and (2) reporting agency-wide and fund financial statements, including the related footnotes, and proper reconciliation of funds expended and requested from the funding sources (i.e., external financial reporting SF 425-Federal Financial Report and SF 429A - Real Property Status Report). Condition. As is the case with many smaller and medium-sized entities, the agency has historically relied on outside assistance to assist in the annual preparation of the agency-wide financial statements and footnotes as part of its external financial reporting process. Accordingly, the agency's ability to prepare financial statements in accordance with GAAP is based, in part, on its reliance on outside assistance, which can by definition, be considered a part of the agency's internal controls. The SF 425 was not reconciled to the general ledger each quarter to ensure that all funds requested agreed to the general ledger for the period requested. Cause. This condition was caused by the agency's decision that it is more cost-effective to outsource the preparation of its financial statements, notes to the financial statements, and other required reports and schedules to an outside CPA than to incur the time and expense of obtaining the necessary training and expertise required for the agency to perform this task internally. Effect. As a result of this condition, the agency lacks internal controls over the preparation of financial statements in accordance with GAAP and instead relies, on an outside CPA for assistance with this task. Recommendation. Recommend that the agency ensure that members of management responsible for the accounting and reporting function receive appropriate training and assistance to ensure that they can apply generally accepted accounting principles in preparing the Agency's financial statements, even if it intends to continue to outsource the actual preparation of these statements to an outside CPA. Reconciliations must be made for each SF 425 submitted. View of Responsible Officials. SCO has obtained the services of an outside CPA to establish internal controls over the preparation of financial statements in accordance with GAAP, notes to the financial statements, budgets, the schedule of expenditures of federal awards, Form 990, and other required schedules and reports to present to management, the Board of Directors, and the Policy Council regularly. Also, the Board of Directors and the Policy Council have implemented a monthly report to address this finding at its regular meetings.

2020-004 Finding Type - Significant Deficiency in Internal Control over Section 653 of the Head Start Act Comparability of Wages (b) Limitation Criteria. SCO did not ensure that Federal funds were not used to pay any part of the compensation of an individual employed by a Head Start agency if such compensation, including non-federal funds, exceeds an amount equal to the rate payable for the Level II of the Executive Schedule under section 5313 of Title5, United States Code. Condition. Beginning May 10, 2019, SCO started making lump-sum payments to the ED as an independent contractor in addition to the regular salary. As a result, the ED was compensated over the applicable Executive Level II 2019 limitation of $192,300. Based upon the 2019 W2 and 1099 issued, the ED received total compensation of $210,425 thus exceeding the salary limit by $18,125. Cause. This condition was caused by the agency's lack of monitoring and oversight of the annual compensation of individuals employed which could result in noncompliance with Level II of the Executive Schedule under section 5315 of Title 5, United States Code. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight of Section 653 Comparability of Wages (b) Limitation as disclosed in the Notice of Award. Questioned Cost: $18,125 Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor the annual compensation of individuals with Section 653 Comparability of Wages (b) Limitation regularly. View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls over the monitoring and oversight of the annual compensation of individuals that may result in noncompliance with Section 653 Comparability of Wages (b) Limitation. The Board of Directors and the Policy Council have implemented a monthly report to address this finding at its regular meetings.

2020-005 Finding Type ? Other Matters in Internal Control over Health and Safety Certification Criteria. SCO did not submit the Health and Safety Certification to the Office of Head Start (OHS) as required in Attachment 2 of the Notice of Award. SCO did not conduct a screening of the health and safety environment of each center within 45 days of the start of the program year. Condition. SCO did not conduct the screening within the 45 days start of the program year and complete the certification of compliance with all Office of Head Start (OHS) health and safety requirements within 75 days of the start of the program year. Cause. This condition was caused by the agency's lack of monitoring and oversight of the Health and Safety Certification required and stated in the Notice of Award. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight of the Health and Safety Certification required and stated in the Notice of Award. Questioned Costs. N/A. Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor the Health and Safety Certification required and stated in the Notice of Award. View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls over the Health and Safety Certification required and stated in the Notice of Award. The Board of Directors and the Policy Council have implemented a monthly report to address this finding at its regular meetings.

2020-006 Finding Type ? Other Matters in Internal Control over Governance Certification Criteria. SCO did not submit the Governance Certification to the Office of Head Start (OHS) as required in Attachment 2 of the Notice of Award. SCO did not conduct a screening of the organization?s governance and leadership capacity within 60 days of the start of the project period. Condition. SCO did not conduct the screening within the 60 days start of the program year and complete the certification of compliance with all Office of Head Start (OHS) that the governance and leadership capacity screening was conducted and a training plan was developed within 75 days of the start of the project period. Cause. This condition was caused by the agency's lack of monitoring and oversight of the Governance Certification required and stated in the Notice of Award. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight of the Governance Certification required and stated in the Notice of Award. Questioned Costs. N/A. Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor the Governance Certification required and stated in the Notice of Award. View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls over the Governance Certification required and stated in the Notice of Award. The Board of Directors and the Policy Council have implemented a monthly report to address this finding at its regular meetings.

2020-007 Finding Type - Material Weakness in Internal Control over Allowable Costs Criteria. SCO did not make available all of the supporting documentation relating to contractors' agreements and missing documentation for the year ended April 30, 2020. SCO could be in noncompliance with the Head Start Program Performance Standard, Notice of Award and the Uniform Guidance Compliance Supplement relating to allowable cost. Condition. SCO did not make available all of the contractors? agreements and missing documentation from the files during the audit period that adequately supported the disbursements of the agency. Cause. This condition was caused by the agency's lack of controls to ensure that all of the assets and records are properly safeguarded and are used solely for authorized purposes. Effect. As a result of this condition, the agency lacks internal controls over the accountability for, all funds, property, and other assets. Known Questioned Costs (Compliance Test) 8,645.79 Known Questioned Cost ( Contractors Agreement) $213,036.02 Likely Questioned Cost. $115,027.72 Recommendation. Recommend that the agency ensure that the implemented controls are effective, and accountable for, all funds, property, and other assets. And the agency must adequately safeguard all assets and assure that they are used solely for authorized purposes. View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls that all transactions related to the Agency are properly supported, reviewed and approved with the required supportive documentation. The Board of Directors and the Policy Council are currently implementing the procedures to address this finding at its future regular meetings.

2020-008 Finding Type - Significant Deficiency in Internal Control over Equipment/Real Property Management Criteria. SCO did not update the property records for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds the title, the acquisition date, and cost of the property, 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. And, a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (Performance Standard 45 CFR 74.34(f)) Condition. SCO failed to comply with the Performance Standard 45 CFR 74.34(f). Cause. This condition was caused by the agency's lack of monitoring and oversight of preparing and maintaining inventory records in compliance with the Performance Standard 45 CFR 74.34(f). Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight of preparing and maintaining inventory records in compliance with the Performance Standard 45 CFR 74.34(f). Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and properly oversee the updating and maintenance of inventory records in compliance with the Performance Standard 45 CFR 74.34(f). View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls over the monitoring and oversight of preparing and maintaining inventory records in compliance with the Performance Standard 45 CFR 74.34(f). The Board of Directors and the Policy Council have implemented a monthly report to address this finding at its regular meetings.

2020-009 Finding Type - Significant Deficiency in Internal Control over Protection of Federal Interest Criteria. SCO did not accurately prepare and submit the required Form SF-429A (Annual Real Property Status Report). Condition. SCO failed to file the required Form SF-429A in Grants Solution Systems. Cause. This condition was caused by the agency's lack of monitoring and oversight of preparing an accurate SF-429A and filing the SF-429A on time through the Grant Solutions Systems. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight to prepare an accurate SF-429A and submission on time. Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and properly oversee the preparation and accuracy of the SF-429A and that it is filed on a timely basis. View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls over the monitoring and oversight of filing accurate SF-429-A on a timely basis. The Board of Directors and the Policy Council have implemented a monthly report to address this finding at its regular meetings.

2020-010 Finding Type - Significant Deficiency in Internal Control over Financial Status Reports Criteria. SCO did not submit the required quarterly Forms SF-425 (Federal Financial Report) in a timely manner. Condition. SCO failed to file the required quarterly Forms SF-425. Cause. This condition was caused by the agency's lack of monitoring and oversight of submitting the quarterly Forms SF-425 in a timely manner. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight to submit the quarterly Forms SF-425 in a timely manner. Recommendation. Recommend that the agency ensure that members of management and the Board of Directors monitor and properly oversee the submission of the quarterly Forms SF-425 on a timely basis. View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls over the monitoring and oversight of submitting the quarterly Forms SF-425 on a timely basis. The Board of Directors and the Policy Council have implemented a monthly report to address this finding at its regular meetings.

2020-011 Finding Type - Significant Deficiency in Internal Control over Program Governance Requirements Criteria. SCO did not make available board minutes for the period February 1, 2020, through April 30, 2022. SCO could be in noncompliance with the Head Start Program Performance Standard 45 CFR Part 1301. Condition. SCO did not make available board minutes to support the actions of the Board of Directors during the audit period that disclosed the activities specified in Section 642 of the Act and the ongoing monitoring of the HSA as required by the Performance Standard 45 CFR 1301. Cause. This condition was caused by the agency's lack of monitoring and oversight of the Program Governance required by the Performance Standard 45 CFR 1301. Effect. As a result of this condition, the agency lacks internal controls over the monitoring and oversight of Program Governance required by the Performance Standard 45 CFR 1301. Questioned Costs. N/A. Recommendation. Recommend that the agency ensure that board meeting minutes are prepared and maintained for each scheduled meeting during the program?s year addressing the activities and the ongoing monitoring of the HSA as required by the Performance Standard 45 CFR 1301. The board minutes at a minimum should address the identity of legal representation with a familiarity of Head Start issues, representation with fiscal management or accounting for Head Start, the presentation of monthly financial statements and credit card charges, approval of monthly major financial expenditures, approval of all funding applications, selection of the independent auditor, status of any unresolved corrective actions on any audit finding, availability of annual financial report to the public and documenting the training and technical assistance received by the board. View of Responsible Officials. SCO has taken prompt action and obtained the services of an outside CPA to establish internal controls over the Program Governance required and stated in the Performance Standard 45 CFR 1301. The Board of Directors and the Policy Council are currently implementing the procedures to address this finding at its future regular meetings.

2020-012 Finding Type ? Other Matters in Internal Control over Compliance ? Timeliness of Reporting (Prior Year) Criteria. Recipients of federal awards are required to submit timely and accurate reports to the awarding agency in accordance with federal compliance requirements and/or pass-through agency grant agreements. Condition. SCO did not submit the Data Collection Form within the required time frame as specified by the grant agreement. SCO did not consistently submit quarterly financial status reports and other periodic reports within the required timeframe, as specified by the grant agreement. Cause. This condition appears to be caused by limited oversight by the governing body to review annual, monthly, and periodic reports. Effect. Because of this condition, the Agency did not fully comply with certain requirements of this program and was exposed to the risk of jeopardizing future federal funding. Questioned Costs. N/A. Recommendation. Recommend that the Agency implement controls to ensure that all necessary reports have been completed and submitted by the required due date. SCO's governing body and financial staff should receive annual training on grant requirements governing the submission of timely and accurate reports, allowable costs, grant monitoring, and grant closeout procedures. View of Responsible Officials. SCO has hired the services of an outside CPA who will assist management with the accumulating financial information into the required format for quarterly and annual reporting in accordance with the Single Audit requirements. The outside CPA will assist SCO with creating a tracking mechanism to monitor all reporting due dates related to its federal grants. Appropriate members of management should be assigned the responsibility for utilizing and reviewing this tracking mechanism to ensure required reports are submitted timely.

Criteria. SCO is required to prepare financial statements in accordance with generally accepted accounting principles (GAAP). This is the responsibility of the agency's management. The preparation of financial statements in accordance with GAAP requires internal controls over both (1) recording, processing, and summarizing accounting data (i.e., maintaining internal books and records), and (2) reporting agency-wide and fund financial statements, including the related footnotes, and proper reconciliation of funds expended and requested from the funding sources. Condition. As is the case with many smaller and medium-sized entities, the agency has historically relied on its independent external auditors to assist in the preparation of the agency-wide financial statements and footnotes as part of its external financial reporting process. Accordingly, the agency's ability to prepare financial statements in accordance with GAAP is based, in part, on its reliance on its? external auditors, who cannot by definition, be considered a part of the agency's internal controls. Cause. This condition was caused by the agency's decision that it is more cost-effective to outsource the preparation of its annual financial statements to the auditor than to incur the time and expense of obtaining the necessary training and expertise required for the agency to perform this task internally. Effect. As a result of this condition, the agency lacks internal controls over the preparation of financial statements in accordance with GAAP and instead relies, in part, on its external auditors for assistance with this task. Recommendation. Recommend that the agency ensure that members of management responsible for the accounting and reporting function receive appropriate training to ensure that they are able to apply generally accepted accounting principles in preparing the Agency's financial statements, even if it intends to continue to outsource the actual preparation of these statements to its independent auditors. View of Responsible Officials. SCO has evaluated the cost vs. benefit of establishing internal controls over the preparation of financial statements in accordance with GAAP and determined that it is in the best interests of the agency to outsource this task to its external auditors and to carefully review the draft financial statements and notes prior to approving them and accepting responsibility for their content and presentation.

Criteria. Recipients of federal awards are required to submit timely and accurate reports to the awarding agency in accordance with federal compliance requirements and/or pass-through agency grant agreements. Condition. SCO did not submit the Data Collection Form within the required time frame as specified by the grant agreement. SCO did not consistently submit quarterly financial status reports within the required timeframe, as specified by the grant agreement. Cause. This condition appears to be caused by limited oversight by the governing body to review annual, monthly, and periodic reports. Effect. Because of this condition, the Agency did not fully comply with certain requirements of this program and was exposed to the risk of jeopardizing future federal funding. Questioned Costs. N/A. Recommendation. Recommend that the Agency implement controls to ensure that all necessary reports have been completed and submitted by the required due date. SCO's governing body and financial staff should receive annual training on grant requirements governing the submission of timely and accurate reports, allowable costs, grant monitoring, and grant closeout procedures. View of Responsible Officials. SCO will assign a responsible official for accumulating financial information into the required format for quarterly and annual reporting in accordance with the Single Audit requirements. SCO should create a tracking mechanism to monitor all reporting due dates related to its federal grants. Appropriate members of management should be assigned with the responsibility for utilizing and reviewing this tracking mechanism to ensure required reports are submitted timely.

Criteria. Prior written approval must be obtained for the purchase of equipment and other capital expenditures as described in 45 C.F.R Section 75.439(a). Prior written approval must also be obtained under 45 C.F.R Section 75.439(b)(3) and 45 C.F.R. Part 1303 Subpart E ? Facilities to use Head Start grant funds for the initial or ongoing purchase, construction, and major renovation of facilities. No Head Start grant funds may be used toward the payment of one-time expenses, principal and interest acquisition, construction or major renovation of a facility without the prior written approval of the Administration for Children and Families (ACF). Condition. SCO did not obtain prior written approval from ACF for the purchase of equipment for the year ended April 30, 2019. However, it was discovered that a Supplemental Grant Request, Grant # OCH4723 was submitted for five (5) 2018 (66) passenger buses to transport preschool children for a cost of $423,435. Cause. This condition appears to be caused by limited oversight by the governing body to review annual, monthly, and periodic reports. Effect. Because of this condition, the Agency did not fully comply with certain requirements of this program and was exposed to the risk of jeopardizing future federal funding. Questioned Costs. $123,925 Recommendation. Recommend that the Agency implement controls to ensure that all purchase of equipment and other expenditures with an individual cost greater than $5,000, and a useful life greater than 1 year, obtain prior written approval from ACF. View of Responsible Officials. SCO will strengthen its internal control to make sure that all purchases of equipment and capital expenditures will have prior written approval from ACF. Also, SCO is following up on the Supplemental Grant Request.

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