Southeast NM Community Action CorporationNon-Profit

2025-001 — Reporting Federal program information: Funding Agency: U.S. Department of Health and Human Services Title: Head Start Assistance Listing Number : 93.600 Award Year: July 1, 2024 – July 31, 2025 Criteria: The program is required to submit a semi-annual and an annual SF-425 report during the award period. Condition: The semiannual SF-425 report selected for testing was not prepared or submitted to the granting agency. Context: One of one semi-annual SF-425 report tested. Questioned Costs: None. Cause: Internal controls have not been implemented to ensure that the semiannual SF-425 report is submitted in a timely manner. Effect: SNMCAC is not in compliance with reporting requirements for the Head Start program. Auditor’s Recommendations: SNMCAC should develop internal controls to ensure that financial reports are properly completed and submitted to the granting agency by the required due dates. Documentation substantiating compliance with reporting requirements should be maintained. Such documentation should include reconciliations of amounts in the financial reporting forms to SNMCAC’s accounting records. Management’s Response: SNMCAC acknowledges the finding related to the semi-annual SF-425 reporting requirement. SNMCAC prepared and submitted the SF-425 report within the required timeframe. However, the report was not accepted by the Office of Head Start due to the pending approval of a waiver of non-federal matching. During this period, the Office of Head Start was affected by a federal shutdown and a reorganization of their regional offices that included the closure of the regional office overseeing the grant. This contributed to delays in communication and timely resolution.

2025-002 — Activities Allowed Federal program information: Funding Agency: U.S. Department of Health and Human Services Title: Head Start Assistance Listing Number : 93.600 Award Year: July 1, 2024 – July 31, 2025 Criteria: Funds may be used for development and administrative costs, subject to the limitation that no financial assistance shall be extended in any case in which the costs of developing and administering a program exceed 15 percent of the total costs, including the required nonfederal contributions to such costs. The term “development and administrative costs” means costs incurred in accordance with an approved Head Start budget that do not directly relate to the provision of program component services. Condition: Total administrative cost allocations and administrative salaries charged to the Head Start program totaled $1,526,131, which exceeded the 15% cap by approximately 4%. Context: Based on review of administrative costs and total costs charged to the program. Questioned Costs: None. Cause: Internal controls have not been implemented to ensure that SNMCAC is properly charging administrative costs to the program. Effect: SNMCAC is not in compliance with allowable activity requirements for the Head Start program. Auditor’s Recommendations: SNMCAC should review development and administrative costs charged to the program and develop internal controls to ensure they are meeting the 15% cap. All administrative costs charged should be reviewed and a determination should be made as to whether they fall under the definition of administrative costs. Documentation should be maintained evidencing program compliance. Management’s Response: SNMCAC acknowledges the finding related to administrative cost limitations under the Head Start program and accepts responsibility for ensuring compliance with the 15% administrative cost cap. During the grant period, SNMCAC followed guidance and direction provided by the Office of Head Start regarding the classification and allocation of certain program costs. This resulted in the inclusion of costs within administrative categories that contributed to exceeding the 15% threshold. While SNMCAC acted in accordance with guidance received from the granting agency, management recognizes that ultimate responsibility for compliance with federal cost limitations rests with the organization.

Other Findings Southeast NM Community Action Corporation Carlsbad, New Mexico DEPARTMENT OF HEALTH AND HUMAN SERVICES CFDA 93.600 HEAD START CLUSTER SCHEDULE REFERENCE NUMBER: 2020-001 (SIGNIFICANT DEFICIENCY) Compliance Requirement - G. Matching Condition: The Organization did not meet the 20% non-federal share match requirement per the Head Start Notice of Award and did not provide proof of approval of the waiver. Total federal share of expenditures as reported on the Organization's final Federal Financial Report are approximately $4,417,100. The required match would be 20% of the federal share or approximately $1,104,275. The Organization has met a non-federal share of approximately $978,333. Subsequent to those facts, the Organization provided us with notification that they are in the process of submitting a retroactive waiver; however, approval of the waiver for the grant under audit has not been approved and was not submitted within the time frame as required by the grant and discussed in the criteria paragraph below. Criteria: The Head Start grant is subject to Section 640 (b) of the Head Start Act and 45 C.F.R ? 1303.4 requiring a non-federal match of 20 percent of the total cost of the program. Organization is required to make a non-federal match of 20 percent and the limitation of 15 percent for development and administrative costs for the 07/01/2019-06/30/2020 budget period unless a waiver is approved. Any request for a waiver of the non-federal match, or a portion thereof, that meets the conditions under Section 640(b)(1)-(5) of the Head Start Act and 45 C.F.R ? 1303.4 or a waiver of the limitation on development and administrative costs that meets the conditions under 45 C.F.R ? 1303.5 must be submitted in advance of the end of the budget period. Any waiver request submitted after the expiration of the project period will not be considered. Questioned Costs: None Repeat findings No Cause: The Organization did not submit a request for a waiver for the in-kind match requirement on a timely basis. Effect: The Organization is not meeting the requirements of the Head Start grant and could potentially lose funding or be required to pay back amounts received. Recommendation: We recommend the Organization implement the appropriate procedures to reconcile and maintain up to date information on in-kind amounts throughout the year to meet the required 20% non-federal match by the end of the grant period, or apply for a waiver in advance of the end of the budget period as required by the grant terms. Agency Response: We are aware of the regulations cited above and acknowledge we did not meet the 20% nonfederal share match requirement. SNMCAC like most Head Start sites and communities, has been closed to on-site classes for several months. The ways in which SNMCAC has often met the in-kind requirement have not been available. Although we did not seek a non-federal share (NFS) match waiver in advance of the end of the budget period (06/30/2020) due to the unusual and unforeseen challenges brought about primarily by COVID-19 impacts, we did discuss the reasons for the delayed waiver request submission with our regional Head Start *Program Specialist who advised that we could submit a retroactive waiver request. Subsequent to this discussion, we submitted the request and are awaiting the outcome. The regional *Program Specialist?s response follows: ?The budget and project period to which you are referring is actually for the prior grant number which has ended. So the agency should submit as soon as possible for our consideration of a retroactive waiver. It looks like someone has already began this process in HSES under the prior grant number. Our federal fiscal year is different so we go by the fiscal year in HSES. While it is always preferred the waiver request is submitted within the budget period for which it is needed, the agency can submit an amendment Budget Revision (NFS Waiver Request) application for a prior period for us to consider. Upon receipt, we review the application and if all intact, then we move to process internally for management concurrence. In cases of retroactive waivers submitted, it is not always a quick turnaround. It could take several weeks??

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