GREATER PHOENIX URBAN LEAGUE

2023-101 – Allowable Costs/Cost Principle and Reporting (Material Weakness, Compliance Finding) Repeat Finding Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number and years: 72609; July 1, 2022 through June 30, 2023 Pass-through grantor: City of Phoenix Compliance Requirements: Allowable Costs/Cost Principles Questioned Costs: $828,835 Criteria: The Pass-through Grantor, the City of Phoenix, requires that the Organization provide a 25% match (nonfederal share) of the federal funding. Condition: During fiscal year 2023, the total federal amounts reported for the Head Start program related to base and carryover funding was $7,542,594, which would require a $1,885,649 match based on 25%. Greater Phoenix Urban League was able to document a match of $1,056,814, a shortfall of $828,835. In addition, the sum of all in-kind/match reported on the expense reports requesting reimbursement from the City of Phoenix totaled $1,243,748 for fiscal year 2023, whereas the total match that could be supported totaled $1,056,814. Cause and Effect: Greater Phoenix Urban League did not adequately monitor the required match during the year, resulting in a reported match that was less than the required amount. Auditors’ Recommendations: Each quarterly report submitted to the granting agency should be analyzed to determine if the organization is meeting the required match. This finding is similar to prior year Finding 2022-101

Finding 2023-101 Allowable Costs/Cost Principle and Reporting (Material Weakness Compliance Finding) Repeat Finding Responsible Individuals: William Bridgeman Chief Fiscal Officer Natalie Alvarez- Chief Operating Officer Head Start Director Corrective Action Plan: Greater Phoenix Urban League has received great support from our community partners by providing in-kind space in 4 school districts and the abundance of parent volunteer support for our Head Start program, however, the program struggles to identify the in-kind match during the turn to full on campus instruction. COVID19 has had a considerable impact on the programs ’s ability to meet the non-federal share obligation as families and community volunteers are not allowed fully back onto Head Start Campuses and enrollment has declined. The program was unable to open several classrooms due to lack of qualified staff and low enrollment. In the past, Greater Phoenix Urban League Head Start has relied heavily on in-kind Space as the main source of program match and with the closing of classrooms in-kind was very difficult to collect. We believe we have worked towards meeting the challenge of program in-kind match. We have used ARPA funds to develop “A grow your own program.” Greater Phoenix Urban League Head Start has recruited parents and the community to participant in a workforce development program to train and hire new Head Start staff as classroom aides and teacher assistances. We also have contracted with an organization to provided contracted instructional support to open up temporarily closed classrooms. The program will continue to identify non-federal share to meet the obligations of the grant award. COVID will continue to have an impact on the programs ’s ability to meet non-federal share but it certainly opens new channels of identifying non-federal share. The following steps are in progress of being implemented in fiscal year 23-24 within the grantee: • An internal control process has been developed to review the current system to document the resources for non-federal share. A Data Assistant will review and analyze at our process in collecting in kind. • Revised Policies and procedures will be developed to assisted instructional staff to collect parent volunteer hours. • Parent Policy Committee will be trained on the non-federal share in-kind as it relates to their important role within the Head Start Program. • Greater Phoenix Urban League Head Start will continue to review the internal control process annually to ensure compliance with the Head Start Program Performance Standards, federal regulations, and City of Phoenix Grantee regulations. • Greater Phoenix Urban League Chief Fiscal Officer, fiscal staff, Program Director and Grantee Fiscal and Program staff will meet monthly to review fiscal reporting and requirements, to ensure grant obligations are on track. • Greater Phoenix Urban League will continue their efforts to identify citywide partners that can provide non-federal share to the Head Start Program. • Greater Phoenix Urban League Chief Fiscal Officer, fiscal staff, Program Director and Grantee Fiscal and Program staff will meet monthly to review fiscal reporting and requirements, to ensure grant obligations are on track. • All third-party appraisals will be conducted in May 2024 to reflect the current market value of space and real property. • The activities mentioned above will assist the Greater Phoenix Urban League-Head Start Program in meeting its obligations in the coming years. Anticipated Completion Date: Ongoing throughout the contract period on an annualized basis. May 1, 2024

2022-101

2023-102 - Allowable Costs/Cost Principle (Material Weakness, Compliance Finding) Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number and years: 72609; July 1, 2022 through June 30, 2023 Pass-through grantor: City of Phoenix Compliance Requirements: Allowable Costs/Cost Principles Questioned Costs: $92,129 Criteria: The Uniform Guidance requires nonfederal entities that receive federal funding to identify in its general ledger accounts the specific expenses that are paid for by each federal assistance program. To help ensure that grants receivable, deferred revenue and the expenses reported on the Schedule of Expenditures of Federal Awards are accurate, all expenses charged to federal and state contracts should be specifically identified in the general ledger system, through the use of funds or QuickBooks classes, and these specific identified expenses should be reconciled to the amounts reported to the grantor and reimbursed and further reconciled to the full award to ensure any grants receivable will ultimately be reimbursed from the grantor. Condition: The Organization does not fully track all expenses charged to each federal award within its accounting system or allocate costs specifically identified to a contract to a separate class or other distinguishing account code specific to each contract. Costs specifically reported for the Head Start program were identified in the general ledger and other spreadsheets for fiscal year 2023. However, costs associated with other federal and state programs, such as Assistance Listing No. 93.185 totaling $40,000 and part of the Assistance Listing No. 10.551 totaling $52,129 could not be identified by the Organization. It is therefore possible that the total unidentifiable costs associated with these two programs totaling $92,129 could have been part of the Head Start expenses reimbursed in addition to being funded by these other federal programs. The auditors were unable to verify that this $92,129 was not double charged during fiscal year 2023. The inability to track federal award expenditures directly in the general ledger also causes delays in the completion of the Single Audit, causing the Organization to not be able to issue its Single Audit reports by the required nine month deadline. Cause and Effect: The organization does not fully utilize its accounting system to track federal and state contract expenses on an ongoing basis throughout the fiscal year. In addition, reports submitted to the grantor are not annually reconciled to a complete list of allowable expenses incurred after all adjustments and to the total award and required match. If a specific account code structure is utilized to track specific program expenses, then reimbursement and other reports should be reconciled directly to the underlying general ledger accounts. Without tracking these expenses within the general ledger by program, errors in reporting to the grantor could be made and amounts reported as grants receivable and deferred revenue, and amounts reported on the Schedule of Expenditures of Federal Awards may not be accurate. Auditors’ Recommendations: The Organization should establish separate classes within QuickBooks or utilize fund accounting for each federal and state contract and each request for reimbursement should be reconciled to the total of all expenses within this class. Further, an overall reconciliation should be performed where the total award amounts are compared to total reimbursements requested and to any required match.

Finding 2023-102 – Allowable Costs/Cost Principle (Material Weakness, Compliance Finding) Responsible Individual: William Bridgeman-Chief Fiscal Officer Corrective Action Plan: The organization tracks all revenue and expenses specifically and directly related to the Head Start Program CFDA 93.600 by individual general ledger. Each revenue and expenses account are supported with documentation. Classes within QuickBooks are available within the platform. However, using classes is optional and with the purchase of the more advance version of QuickBooks “QuickBooks Enterprise Platinum” it’s the intent of the organization to move to enhanced detail general ledger accounts (which will provide detail data relating to each individual transaction). As it relates to Assistance Listing No 93.185 National Urban League Vaccine Equity 2021-22 in the amount of $40,000 and Assistance Listing no. 10-551 in the amount of $52,129 is not affiliated with Head Start from a program perspective. No staff time or expenses of the two grants are related to the Head Start Program. Each of the reference programs are stand-alone funded through a third-party pass through grantee and not a direct grant from a federal agency. However, the organization will establish separate classes within QuickBooks Enterprise Platinum for each federal and state contract. The implementation of the vertical classes within the QuickBooks Enterprise Platinum platform will consist of the reconciliation of cost reimbursements with a separate and dedicated “in kind” calculation of 25% within the class where applicable as per grantee requirement. Implementation Date: July 1, 2024

Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number and years: 72609; July 1, 2021 through June 30, 2022 Pass-through grantor: City of Phoenix Compliance Requirements: Allowable Costs/Cost Principles Questioned Costs: $82,225 Criteria: The Pass-through Grantor, the City of Phoenix, requires that the Organization provide a 20% match of the federal funding. Condition: During fiscal year 2022, the total federal amounts reported for the Head Start program was $6,788,623, which would require a $1,357,725 match based on 20%. Greater Phoenix Urban League was able to document a match of $1,275,500, a shortfall of $82,225. Cause and Effect: Greater Phoenix Urban League did not adequately monitor the required match during the year, resulting in a reported match that was less than the required amount. Auditors? Recommendations: Each quarterly report submitted to the granting agency should be analyzed to determine if the organization is meeting the required match.

Finding 2022-101 Responsible Individual: William Bridgeman, Natalie Alvarez Corrective Action Plan: Greater Phoenix Urban League (Delegate Agency) will collaborate with the City of Phoenix (Grantee) in evaluating year-to-date cumulative in-kind match on a quarterly basis to ensure the year- to- date is tracking at a level to meet the required 20% match based upon the anticipated actual funding. At the end of each quarter, if Greater Phoenix Urban League determines that it will be unable to meet the required match on an annualized basis the delegate agency will utilize the projected analysis year-to-date forecast. The Greater Phoenix Urban League will notify the grantee in writing requesting a review of anticipated revenue and develop an action plan to meet the 20% match or request a waiver following the Head Start Performance Standards Guidelines. Anticipated Completion Date: Ongoing throughout the contract period on an annualized basis. June 30, 2023

Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number and years: 72609; July 1, 2021 through June 30, 2022 Pass-through grantor: City of Phoenix Compliance Requirements: Allowable Costs/Cost Principles Questioned Costs: $46,107 Criteria: The Uniform Guidance requires that for charges benefiting more than one function, such as finance consultants, systems and controls should be established to help ensure that only actual costs are allocated to the Head Start program. Condition: During fiscal year 2022 the organization incurred $69,980 of consultant costs relating to the outsourced CFO. Of this total, $46,107 was billed to the Head Start program based on allocations indicated on the consultant?s invoices. However, since the outsourced consultant functions similarly to an employee, costs allocated to Head Start should be supported by detailed time reports. During a financial review performed by the grantor it was also determined that Greater Phoenix Urban League did not have proper procurement documentation relating to the sole source procurement of the outsourced CFO. Cause and Effect: Greater Phoenix Urban League determined subsequent to fiscal year end that the costs should not have been charged to the Head Start program and reimbursed the grantor $46,107 in March 2023. Auditors? Recommendations: Administrative costs charged directly to the program should be specifically allowed by the grantor and supported by detailed time reports before allocating costs to the federal program.

Responsible Individual: William Bridgeman, George Dean Corrective Action Plan: Greater Phoenix Urban League didn?t agree with the recommendation reference in the monitoring report produced by the grantee?s monitoring contractor ?The Pun Group? The entire $69,980 of consultant cost was supported by invoices detailing the hours/cost charged to Head Start ($46.107) and Central Office ($23,873) by billing cycle. Each invoice was reviewed and approved by the President/CEO prior to payment. The invoices submitted were based upon ?actual? time and effort? and not on an ?allocation methodology. A check in the amount of $46,107 was submitted to the City of Phoenix reimbursing the grantee to resolve the issue. Anticipated Completion Date: February 23, 2023

2021-101 - Activities Allowed or Unallowed (Significant deficiency, Compliance Finding, Repeat Finding) Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number and years: 143046; July 1, 2020 through June 30, 2021 Pass-through grantor: City of Phoenix Compliance Requirements: Activities Allowed or Unallowed Questioned Costs: N/A Criteria: The Head Start Program requires that development and administrative costs of the program may not exceed 15% of the total costs of the program. For charges benefiting more than one function, such as salaries for administration versus program specific, systems and controls should be established to help ensure that only actual costs are allocated to program services versus administration services. Condition: During fiscal year 2021 payroll and related costs were allocated to the administrative budget of the Head Start program based on allocation percentages approved by the City of Phoenix. The salary and related amounts allocated to the administrative budget are as follows: Direct Head Start personnel, including Director, Administrative Assistant, Secretaries, and others $188,874 Various finance personnel 128,241 Total salaries and related allocated to Head Start administrative budget $317,115 The above allocation of payroll and related costs to the administrative budget versus program for Head Start personnel and the allocation to the administrative budget versus non-federally funded sources for finance personnel were based on budgeted allocation percentages. The Organization began performing periodic time studies in 2021 but did not compare the percentage of time spent on functions as indicated on time reports to the percentages being allocated. Cause and Effect: Through discussions with the City of Phoenix, the Organization was under the assumption that the approved budgeted allocations were sufficient support for allocated time. The Organization also did not follow its cost allocation plan which requires budgeted time to be adjusted to actual based on quarterly time studies or actual time reports. As a result, it is possible that for direct Head Start employees, more time was spent on administrative duties than was allocated and costs could be charged to the program for finance employees? time that is in excess of the actual time spent on the program. Auditors? Recommendations: An analysis of actual timecards was started in 2021. These time study reports should be performed at least quarterly and analyzed. Adjustments should be made, if necessary, to the amounts being charged to the Head Start program administrative budget.

Greater Phoenix Urban League (Delegate Agency) will collaborate with the City of Phoenix ? Head Start (Grantee) to enhancing the current written allocation plan. The process will include defining the analytical phase and the monitoring of actual time/cost versus budgeted cost. The overall objective of the process improvement will be to meet the quarterly reporting requirements of the City of Phoenix and the grantee/ delegate agency administrative budget and the reporting requirements of the grantee (City of Phoenix). Each employees where their work duties require that their time be shared between administrative and program will report each portion of their actual daily schedule. The time sheet will be the source document to report the actual in one hour?s increment allocated between administrative and program. The actual reporting on the time sheets by category, administrative vs program will be verified by the site supervisor as verification of actual time that?s reported. The Director of Head Start will develop a predefined definition of duties that are considered administration versus program for guidance in consistency in reporting of hours on the time sheets.

2020-101

2020-101- Activities Allowed or Unallowed (Significant deficiency, Compliance Finding) Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number and years: 143046; July 1, 2019 through June 30, 2020 Pass-through grantor: City of Phoenix Compliance Requirements: Activities Allowed or Unallowed Questioned Costs: N/A Criteria: The Head Start Program requires that development and administrative costs of the program may not exceed 15% of the total costs of the program. For charges benefiting more than one function, such as salaries for administration versus program specific, systems and controls should be established to help ensure that only actual costs are allocated to program services versus administration services. Condition: During fiscal year 2020 payroll and related costs were allocated to the administrative budget of the Head Start program based on allocation percentages approved by the City of Phoenix. The salary and related amounts allocated to the administrative budget are as follows: Direct Head Start personnel, including Director, Administrative Assistant, Secretaries, and others $156,476 Various finance personnel 123,698 Total salaries and related allocated to Head Start administrative budget $280,174 The above allocation of payroll and related costs to the administrative budget versus program for Head Start personnel and the allocation to the administrative budget versus non-federally funded sources for finance personnel were based on budgeted allocation percentages. The Organization did not perform periodic time studies by comparing percentage of time spent on functions as indicated on time reports to the percentages being allocated. Cause and Effect: Through discussions with the City of Phoenix, the Organization was under the assumption that the approved budgeted allocations were sufficient support for allocated time. The Organization also did not follow its cost allocation plan which requires budgeted time to be adjusted to actual based on quarterly time studies or actual time reports. As a result, it is possible that for direct Head Start employees, more time was spent on administrative duties than was allocated and costs could be charged to the program for finance employees? time that is in excess of the actual time spent on the program. Auditors? Recommendations: An analysis of actual timecards or time study reports should be performed at least quarterly and adjustments should be made if necessary to the amounts being charged to the Head Start program administrative budget.

Audit Finding: 2020-101 Person(s) Responsible: William Bridgeman Estimated Completion Date: March 15, 2021 Corrective Action Plan: Greater Phoenix Urban League (Delegate Agency) will collaborate with the City of Phoenix ? Head Start (Grantee) to enhancing the current written allocation plan. The process will include defining the analytical phase and the monitoring of actual time/cost versus budgeted cost. The overall objective of the process improvement will be to meet the quarterly reporting requirements of the City of Phoenix and the grantee/ delegate agency administrative budget and the reporting requirements of the grantee (City of Phoenix). Each employees where their work duties require that their time be shared between administrative and program will report each portion of their actual daily schedule. The time sheet will be the source document to report the actual in one hour?s increment allocated between administrative and program. The actual reporting on the time sheets by category, administrative vs program will be verified by the site supervisor as verification of actual time that?s reported. The Director of Head Start will develop a predefined definition of duties that are considered administration versus program for guidance in consistency in reporting of hours on the time sheets.