Youth Development, Inc.Non-Profit

2022-002 ? Reporting Federal program information: Funding Agency: U.S. Department of Health and Human Services Title: Head Start and Early Head Start Assistance Listing Number : 93.600 Award Number: 06CH011997 Award Period: July 1, 2021 ? December 31, 2021 Criteria: Quarterly and semi-annual interim SF-425 Federal Financial Reports reports shall be submitted no later than 30 days after the end of each reporting period. Annual reports shall be submitted no later than 90 days after the end of each reporting period. Final reports shall be submitted no later than 120 days after the end of each reporting period. Condition: The budget and project period for this grant award was from July 1, 2021 through December 31, 2021. YDI filed the annual SF-425 report and the semi-annual SF-425 after the required due date. Questioned Costs: None. Context: One semi-annual report and one annual report, which were submitted on July 24, 2022. Cause and Effect: YDI experienced significant turnover in the Budget Analyst position during 2022. As a result, Head Start and Early Head Start programs are not in compliance with reporting requirements. Auditor?s Recommendation: All reports should be submitted as specified in the grant agreements. The directors and grant accounting personnel should utilize the detailed calendar that is in place to ensure reports are submitted in accordance with the grant agreements. Reports should be reviewed by an appropriate independent person. Management?s Response: YDI concedes the agency was delinquent in reporting for the SF-425 annual report due January 30, 2022. This report was filed on July 24, 2022. YDI can report the SF-425 semi-annual report due October 30, 2021 was submitted October 29, 2021; the SF-425 final report due April 30, 2022 was filed on April 29, 2022; the SF-425 semi-annual report due July 30, 2022 was filed on July 15, 2022; and the SF-425 final report due on April 30, 2023 was filed on March 31, 2023. For the last 36 months, YDI has experienced shortage of qualified personnel in most facets of its business due to COVID impacts, the ?great resignation? of employees who left looking for better pay and advancement. YDI?s Finance Department was no exception to this situation in the position of Budget Analyst for Head Start, having four people assigned from March 2020 to February 2022. The current Budget Analyst began his work in February 2022 and he has been instrumental in addressing and correcting this finding.

2021-002 ? Cash Management Federal program information: Funding Agency: U.S. Department of Agriculture Title: Child and Adult Care Food Program (CACFP) CFDA number: 10.558 Award number: 206NM326N1099 and 206NM346N2020 Award period: October 1, 2020 ? September 30, 2021 Criteria: In accordance with 7 CFR sections 226.16(g) and (h) a sponsoring organization must disburse advance and meal reimbursement payments to centers and day care homes under its sponsorship within five working days of receiving them from its state agency. Condition: For four of fourteen cash receipts reviewed, YDI did not pay the providers within five working days of receiving the monies. Questioned Costs: None. Context: Four of fourteen cash receipts recorded. Cause and Effect: This occurred during the early stages of the COVID-19 pandemic, while employees were working from home, and the individual processing checks was not notified of when the grant funds were actually received. Therefore, provider checks were not processed within five working days of receiving the money. YDI was not in compliance with the cash management timeliness requirement of issuing checks within five days of cash receipts as payments were five days late for the four items mentioned above. Auditor?s Recommendations: Ensure proper communication is maintained so when grant funds are received, the budget analyst can process provider payments on a timely basis. Management?s Response: As mentioned earlier, COVID-19 induced challenges and changes in the normal day-to-day YDI finance department workflows. YDI personnel were learning how to work remotely and align the workflows for accounts payable entry, budget entry and tracking of expenses within programs, cash receipts and physical cash flow throughout each month. These challenges were a direct cause of the occurrence of the late payments to providers. As YDI personnel were required to return to the office to work in person, communication was greatly improved. YDI improved its accounting staff in key positions and as a result a true accounting closing schedule was implemented, as all general ledger entries are reviewed prior to posting in the general ledger software. A daily cash report is completed by the financial specialist and then reviewed by the CFO daily. Cash needs and cash availability are reviewed during this process. This process has improved YDI?s overall cash management and keeps us in compliance.

2021-003 ? Reporting Federal program information: Funding Agency: U.S. Department of Health and Human Services Title: Head Start and Early Head Start CFDA number: 93.600 Award number: 06CH010436 and 06HP0042101 Award period: 1/1/20 ? 12/31/20 and 1/1/21 ? 06/30/21 Criteria: For Head Start and Early Head Start, SF-425 reports are required on a semi-annual and annual basis. Condition: The budget and project period was from January 1, 2021 through June 30, 2021. YDI did not file the required SF-425 for this period. Questioned Costs: None. Context: One of three reports reviewed for Head Start and one of two reports reviewed for Early Head Start. Cause and Effect: Internal control procedures have not been enforced to ensure SF-425 reports are being submitted. As a result, the programs described above are not in compliance with reporting requirements. Auditor?s Recommendation: All reports should be submitted as specified in the grant agreements. The directors and grant accounting personnel should utilize a detailed calendar to ensure reports are submitted in accordance with the grant agreements. Reports should be reviewed by an appropriate independent person. Management?s Response: Please note YDI has a very long record of completing all SF-425 reports in a timely manner. That said, YDI has experienced extraordinary staff turnover in its accounting department in 2021 and continuing through fiscal year ending 2022. As a result, YDI has not filed the required SF-425 reports in a timely manner. In spite of the internal controls in place, one YDI employee left YDI's employ without completing the work on the reports. YDI continues to work to fill finance positions with qualified professionals. YDI was not immune to the ?great resignation? and the toll on the number of employees was high. YDI had significant turnover in its finance department due to COVID-19 impacts, low pay, and a dearth of qualified job-seekers. YDI is looking to strategies to improve pay structure within all YDI departments. YDI is seeking technical assistance to complete these reports and have made them a priority with the replacement budget analyst. There is a calendar in place for these reports to ensure they are completed in a timely manner.

2020-003 ? Background Investigations Federal program information: Funding Agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number: 06CH010436 Award period: January 1, 2019 ? December 31, 2019 and January 1, 2020 - December 31, 2020 Criteria: The Head Start Act requires background checks prior to the hiring of staff. In addition, Head Start performance standards state that a program must conduct a complete background check for each employee, consultant, or contractor at least once every five years. Condition: One employee reviewed did not have their background check updated after five years. The employee?s last background check was completed in 2013. Questioned Costs: None. Context: One of thirty employees reviewed. Cause and Effect: The employee transferred from another program to the Head Start program and their file wasn?t coded properly. Internal controls were not in place to ensure background investigations are updated every five years. As a result, the program is not in compliance with background investigation requirements. Auditor?s Recommendations: Implement internal controls to ensure background investigations are updated every five years. In addition, ensure employees who transfer into the program are in compliance with these standards. Management?s Response: YDI management and the Human Resources Department acknowledge the results of the SJT audit team finding. This one incident was the result of an employee transferring from one non-federal program into another program (Head Start) within the organization. At the time of the transfer, the employee was in compliance with the regulation; however, the computerized HR system was not updated at the time of the transfer. Thus, the expiration of the background requirement was not identified. The employee?s background investigation including fingerprints was completed on October 06, 2020. This employee was assigned to a Head Start administrative position and did not have unsupervised access to children at any time. YDI Management, including the Human Resource Department, is reviewing the inter-department transfer procedure in order to make the revisions necessary to ensure compliance with the background investigation requirements prior to final approval of an employee?s transfer. In the case that was identified, the employee, started working for YDI in 2009 with a program providing services within Albuquerque Public Schools (APS). The employee completed a background check in 2009, and then again in 2013 with APS. The employee transferred into the Head Start program in 2017 with a background check that was current and valid per APS. So, YDI?s position was that the background check was not due until 2022, using the HR policies in place at that time. In addition, once the background check came into question by our auditors, the YDI HR department immediately had the employee complete a new background check and resolved the matter.

2020-004 ? Property and Equipment Federal program information: Funding Agency: U.S. Departments of Health and Human Services Title: Head Start CFDA number: 93.600 Award number: 06CH010436 Award period: January 1, 2019 ? December 31, 2019 and January 1, 2020 - December 31, 2020 Criteria: Property records shall be maintained accurately and provide for a description of the property; manufacturer's serial number or other identification number; acquisition date and cost; source of the property; percentage of Federal funds used in the purchase of property; location, use, and condition of the property; and ultimate disposition data including sales price or the method used to determine current fair market value if the grantee reimburses the bureau for its share. A physical inventory of property shall be taken and the results reconciled with the property records at least once every two years to verify the existence, current use, and continued need for the property. Condition: YDI has conducted an inventory count within the last two years; however, YDI personnel have not reconciled the inventory count with the detailed capital asset listing and the general ledger control totals. The detailed capital asset listing contains several items that appear to no longer exist but have not been removed from the listing. Questioned Costs: None. Context: Review of inventory and capital asset detailed records. Cause and Effect: Internal control procedures were not in place to ensure a physical inventory is conducted and reconciled to YDI?s detailed capital asset listing and general ledger control totals. As a result, YDI is not in compliance with property and equipment grant requirements. Auditor?s Recommendation: Complete a physical inventory count every two years. Once completed, reconcile the physical inventory documentation to YDI?s detailed inventory listing and the general ledger control totals. Items no longer in existence should be removed from the detailed capital asset listing. Management?s Response: YDI management, procurement personnel and the FAD acknowledge the lack of the reconciliation of the fixed assets inventory listing to the general ledger. As of January 2021, YDI has access to and will implement the fixed assets module from Abila, Inc. (YDI?s accounting software). YDI?s FAD personnel and procurement personnel have received training materials specific to the internal controls for fixed assets. This training includes suggested methodology for conducting the appropriate biennial inventory of the fixed assets listing to the associated YDI sites and to the general ledger control totals. The required inventory physical count and associated reconciliation will be completed by June 30, 2021.

2020-005 ? Allowable Costs Federal program information: Funding Agency: U.S. Departments of Health and Human Services Title: Head Start CFDA number: 93.600 Award number: 06CH010436 Award period: January 1, 2019 ? December 31, 2019 and January 1, 2020 - December 31, 2020 Criteria: Costs must meet general criteria for allowability, including being necessary and reasonable for the performance of the federal award, allocable thereto and adequately documented (45 CFR sections 75.403, 75.404, and 75.405). Shared and indirect costs attributable to common or joint use of personnel, facilities, or services by Head Start programs and other programs must be fairly allocated among the various programs that utilize such services (42 USC 9839(c)). Payroll monies funded by federal grants should not also be used for PPP loan forgiveness. Condition: During fiscal year 2020, both the Head Start and Early Head Start programs reported revenues in excess of expenses. During 2020, Head Start reported revenues in excess of expenses of $771,117 (taking into account fixed asset purchases) and Early Head Start reported revenues in excess of expenses of $190,981. These are both federal cost reimbursement grants that should not have revenues exceeding expenses during the year. An audit adjustment of $962,098 was needed to reduce the excess of revenues over expenses at June 30, 2020. Questioned Costs: None. Context: Review of Head Start and Early Head Start account balances for fiscal year 2020. Cause and Effect: YDI incurred expenses for Head Start activities and then recorded revenue for the grant drawdowns recorded. Subsequent to the drawdowns, it appears YDI personnel made adjustments to reclass the Head Start and Early Head Start expenses to another fund, resulting in a revenues exceeding expenses as the expenses are no longer reported in the Head Start and Early Head Start funds. In addition, year-end adjustments may have been made erroneously. As a result, YDI is not in compliance with allowable cost grant requirements as costs were utilized to draw down monies and then the costs were subsequently moved to another fund/program. Auditor?s Recommendation: Ensure allowable expenses, that have been used to draw down federal grant monies, remain in their respective fund and are not used to cover multiple revenue sources. In addition, perform a retrospective review of entries to ensure their accuracy. Management?s Response: YDI Management and the FAD acknowledge the auditor?s finding. YDI received proceeds from a Payroll Protection Payment (PPP) Loan in May of 2020, as well as Federal COVID-19 funding. The guidance at the time from the federal government ? Small Business Administration (SBA) and YDI legal counsel was that YDI should continue to use PPP funds to cover all expenses allowable per the PPP guidance. In addition, YDI received authorization from Administration of Children and Families (ACF) per Informational Memoranda (IM?s) and Program Information (PI?s) communications from the Office of Head Start indicating that it was allowable to use Head Start and Early Head Start funds for COVID-19 related expenses until the COVID-19 funded grants were received. YDI adjusted expenses to account for the drawdown of federal funds, including PPP funds, which were drawn down during May and June 2020 to pay for employee salaries that were scheduled for layoff. This was necessary to retain employees for a Head Start summer program to meet the families? needs during COVID-19 and to provide services for essential workers in our community. YDI also had COVID-19 expenditures covered by the Head Start grant that were allowable under the guidance stated above. COVID-19 funds were received in July of 2020 (new YDI FY) which contributed to the necessary adjustments. The Head Start program is a calendar program year and YDI is on a fiscal year, the balance and expenses associated with Head Start were booked in the current FY (ie. June 30, 2020) and calendar year for the grant. The expenses were the result of a timing difference that did reverse within the Head Start grant period ending 12/31/2020 and YDI FY ending June 30, 2021. A YDI internal review/reconciliation supports that the reversal of said timing differences occurred prior to December 31, 2020 (end of grant year) demonstrating that expenses tied to revenues that were drawn down during the program grant year. In addition, when YDI prepared the required SF425 reports and in closing the Head Start and Early Head Start program year, YDI had all the expenses tied appropriately to the Head Start and Early Head Start grant award and funds were drawn down in accordance with grant award requirements. Furthermore, there were multiple contributing factors that required the need to post year-end adjustments: PPP funding, other federal COVID related funding and reporting requirements, along with FAD staff being deployed to work from home which resulted in adjustments being made after FY ending June 30, 2020. YDI management expenditure records at the close of Head Start and Early Head Start grant year (December 31, 2020) demonstrated that all Head Start/Early Head Start funds were used on allowable expenses. Finally, the corrective action taken to address the lack of general ledger reconciliations will give YDI management and the FAD the information needed to prevent this finding from reoccurring. YDI has implemented a monthly closing process, booking entries monthly, reconciling general ledger accounts and reporting financial statements internally and to its Board monthly.

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