BOOKER T WASHINGTON CHILD DEVELOPMENT CENTER, INCNon-Profit

2025-101 – Allowable Costs/Costs Principles – (Significant Deficiency in Internal Controls over Compliance, Other 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: 161092-0; July 1, 2024 through June 30, 2025 Pass-through grantor: City of Phoenix Compliance Requirements: Allowable Costs/Costs Principles Questioned Costs: $102,814 Criteria: The Uniform Guidance requires the Organization consistently apply the cash basis of accounting or the accrual basis of accounting for expenses reported to the grantor for reimbursement, unless there is an allowed encumbrance period. Condition: In fiscal year 2025 the Organization reported $102,814 of disbursements to the grantor as expenses, even though these were recorded as prepaid expenses under U.S. generally accepted accounting principles at fiscal year-end, indicating that the goods or services have not been fully received by the Organization. These amounts consisted of annual or two-year contracts entered into by the Organization for periods beginning in fiscal year 2025 and extending through 2026 and 2027. Cause and Effect: The Organization submits all invoices along with billing request to the grantor. In addition, the Organization felt that these disbursements fell under the “Fiscal Year Clause” of the contract. As a result, the determination made by management was that these are allowable costs. However, the “Fiscal Year Clause” in the contract may not be clear and may not apply to these types of prepaid expenses and therefore, the Organization may have charged expenses to the grantor outside of the contract period of performance. Auditors’ Recommendations: The Organization should work with the grantor to obtain written clarification as to the allowability of prepaid amounts for reimbursement in the year of the payment rather than the year of the expense. Further, the Organization should ensure that billings to the grantor are on the modified accrual basis of accounting since the financial statements are reported on the accrual basis of accounting.

Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number and years: 161092-0; July 1, 2024 through June 30, 2025 Pass-through grantor: City of Phoenix Compliance Requirements: Allowable Costs/Costs Principles Questioned Costs: Unknown Criteria: The Pass-through Grantor, the City of Phoenix, requires that the Organization provides a 25% match (nonfederal share) of the federal funding. Condition: In fiscal year 2025 the Organization reported total federal amounts for the Head Start program of $5,072,777 which would require a nonfederal share (match) of $1,268,194 based on the 25% requirement. However, the Organization was only able to document a nonfederal match of $1,033,057, a shortfall of $235,137. Cause and Effect: The Organization did not analyze quarterly reports to determine if matching requirements were being met on an ongoing basis. As a result, the Organization is out of compliance with contract requirements. Auditors’ Recommendations: The Organization should establish policies where the required match is periodically summarized throughout the year and analyzed to ensure that the required match will be met by contract year end.

2024-101 – Reporting-Report Submission – (Significant Deficiency in Internal Controls over Compliance) 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: 152734, 152734-019; July 1, 2023 through June 30, 2024 Pass-through grantor: City of Phoenix Compliance Requirements: Reporting Questioned Costs: N/A Criteria: 200.512 of the Uniform Guidance requires that the Organization submit an annual single audit reporting package and submit the data collection form prior to nine months after the end of the audit period. Condition: The Organization did not submit its single audit reporting package or data collection form within the required deadline. Cause and Effect: The Organization had turnover in finance staff and had not established policies and procedures to ensure the annual single audit is completed timely. As a result, the Organization did not comply with federal requirements. Auditors’ Recommendations: Management should ensure that the annual single audit is completed within the required timeframe. This finding is similar to prior year finding 2023-102.

Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number and years: 152734, 152734-014; July 1, 2022 through June 30, 2023 Pass-through grantor: City of Phoenix Compliance Requirements: Allowable Costs/Cost Principles Questioned Costs: Unknown 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 the non-COVID-19 related contracts was $4,843,064 which would require a $1,210,766 match based on 25%. Of the match that Booker T. Washington Child Development Center was initially able to document, $192,182 related to meals provided by a school district for free to the Booker T. Washington children. The value of these free meals in total as calculated by the Organization was $796,647, but only $192,182 was needed to cover the shortfall from other categories. These free meals were not contemplated as part of the Budgeted match when the contract with the City of Phoenix was established, nor were these free meals included as part of the Quarterly Admin reports provided to the City. Cause and Effect: During the year, the Organization determined that $808,793 of the required match was met through expenses of other funding sources. However, it only $598,268 of these other funding sources was spent on program related items during fiscal year 2023, causing $192,182 of this reported match to not be legitimate. Due to this $192,182 shortfall, the Organization rethought its sources of matching funds and determined that they believe that the Organization received $796,647 in free meals provided to kids that could be used to make up for this $192,182 shortfall in the required match. These free meals were not specified in the quarterly reports submitted to the City of Phoenix because these free meals were considered part of the required match only after the auditors determined that the reported match categories that could be supported was short of the requirement by $192,182, Auditors’ Recommendations: The Organization should establish policies where the required match is periodically summarized throughout the year and analyzed to ensure that the required match will be met by contract year end.

Federal program information: Funding agency: U.S. Department of Health and Human Services Title: Head Start CFDA number: 93.600 Award number and years: 152734, 152734-014; July 1, 2022 through June 30, 2023 Pass-through grantor: City of Phoenix Compliance Requirements: Reporting Questioned Costs: N/A Criteria: 200.512 of the Uniform Guidance requires that the Organization submit an annual single audit reporting package and submit the data collection form prior to nine months after the end of the audit period. Condition: The Organization did not submit its single audit reporting package or data collection form within the required deadline. Cause and Effect: The Organization had turnover in finance staff and had not established policies and procedures to ensure the annual single audit is completed timely. As a result, the Organization did not comply with federal requirements. Auditors’ Recommendations: Management should ensure that the annual single audit is completed within the required timeframe. This finding is similar to prior year finding 2022-102

2022-101 ? Reporting (Significant Deficiency, Compliance Finding, Repeat Finding) Federal Funding Agency: U.S. Department of Health and Human Services Pass Through Agency: City of Phoenix Title: Head Start Assistance #: 93.600 Award Year: July 1, 2021 through June 30, 2022 Questioned Costs: N/A Criteria: Billings to the City of Phoenix were prepared throughout the fiscal year based on a modified cash basis of accounting. Condition: The Organizations final year end billing to the City of Phoenix was prepared on an accrual basis of accounting. Cause and Effect: Change in the final method of billing resulted in $21,181 in additional accrual related expenditures, that would not have been billed using the modified cash basis at fiscal year end. Auditors? Recommendations: Management should ensure that current billing procedures to the City of Phoenix are consistent and in line with its current method of accounting.

Federal Funding Agency: U.S. Department of Health and Human Services Pass Through Agency: City of Phoenix Title: Head Start Assistance #: 93.600 Award Year: July 1, 2021 through June 30, 2022 Questioned Costs: N/A Criteria: 200.512 of the Uniform Guidance requires that the County submit an annual single audit reporting package and submit the data collection form prior to nine months after the end of the audit period. Condition: The Organization did not submit its single audit reporting package or data collection form within the required deadline. Cause and Effect: The Organization had not established policies and procedures to ensure the annual single audit is completed timely. As a result, the Organization did not comply with federal requirements. Auditors? Recommendations: Management should ensure that the annual single audit is completed within the required timeframe.

2021-101 ? Activities Allowed Unallowed (Significant Deficiency, Repeat Finding) Federal Funding Agency: U.S. Department of Health and Human Services Pass Through Agency: City of Phoenix Title: Head Start Assistance #: 93.600 Award Year: July 1, 2020 through June 30, 2021 Questioned Costs: N/A Criteria or Specific Requirement: The Head Start Program requires that no more than 15% of the total costs of the program may be considered administrative. 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 appropriate costs are allocated to program versus administration services. Condition: Timesheets are completed and maintained for employees whose time is allocated to both direct program and the administrative budget. However, these timesheets are not periodically totaled to determine if the allocations to the administrative costs were for actual time. Cause and Effect: The Organization did not have adequate review policies and procedures in place to ensure that the actual payroll expenditures were properly allocated and recorded based on time supported by time sheets or a time study. If timesheets would have been accumulated and allocations adjusted to actual, the actual administrative costs may exceed the 15% maximum. Auditor?s Recommendation: The Organization should continue to establish review policies and procedures to ensure that all administrative payroll costs are identified and are recorded based on actual time worked or allocated by an appropriate allocation basis (i.e. time study) for the Head Start program. Timesheets should be periodically totaled to determine if the allocations to the administrative costs were for actual time.

2021-102 ? Reporting (Significant Deficiency, Compliance Finding) Federal Funding Agency: U.S. Department of Health and Human Services Pass Through Agency: City of Phoenix Title: Head Start Assistance #: 93.600 Award Year: July 1, 2020 through June 30, 2021 Questioned Costs: N/A Criteria: Billings to the City of Phoenix were prepared throughout the fiscal year based on a modified cash basis of accounting. Condition: The Organizations final year end billing to the City of Phoenix was prepared on an accrual basis of accounting. Cause and Effect: Change in the final method of billing resulted in $18,092 in additional accrual related expenditures, that would not have been billed using the modified cash basis at fiscal year end. Auditors? Recommendations: Management should ensure that current billing procedures to the City of Phoenix are consistent and in line with its current method of accounting.

2020-001 ? Activities Allowed Unallowed (Significant Deficiency, Repeat Finding)Federal Funding Agency: U.S. Department of Health and Human ServicesPass Through Agency: City of PhoenixTitle: Head StartCFDA: 93.600Award Year: July 1, 2019 through June 30, 2020Questioned Costs: N/ACriteria or Specific Requirement: The Head Start Program requires that no more than 15% of the totalcosts of the program may be considered administrative. For charges benefiting more than one function,such as salaries for administration versus program specific, systems and controls should be establishedto help ensure that only appropriate costs are allocated to program versus administration services.Condition: Timesheets are completed and maintained for employees whose time is allocated to bothdirect program and the administrative budget. However, these timesheets are not periodically totaled todetermine if the allocations to the administrative costs were for actual time.Cause and Effect: The Center did not have adequate review policies and procedures in place to ensurethat the actual payroll expenditures were properly allocated and recorded based on time supported bytime sheets or a time study. If timesheets would have been accumulated and allocations adjusted toactual, the actual administrative costs may exceed the 15% maximum.Auditor?s Recommendation: The Center should establish review policies and procedures to ensure that alladministrative payroll costs are identified and are recorded based on actual time worked or allocated byan appropriate allocation basis (i.e. time study) for the Head Start program.

2019-001 - Earmarking Administrative Allocation (Significant Deficiency) Federal Funding Agency: U.S. Department of Health and Human Services Pass Through Agency: City of Phoenix Title: Head Start CFDA: 93.600 Award Year: July 1, 2018 through June 30, 2019 Questioned Costs: N/A Criteria or Specific Requirement: The Head Start Program requires that no more than 15% of the total costs of the program may be considered administrative. 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 appropriate costs are allocated to program versus administration services. Condition: Appropriate allocation bases were established using children in specific programs and completed timesheets that were maintained to support the payroll allocation of various personnel who performed work for various federal and non-federal funding sources. A time study was performed in October 2018 and maintained to support the payroll allocation for both program and administrative service functions. For the three employees whose head start payroll cost are allocated between program and administrative services, the actual payroll cost were allocated and recorded based on budgeted estimates rather than the time study estimates for two of the three employees. The overall payroll cost were properly allocated in total to Head Start, however the improper allocation basis used resulted in higher administrative service cost recognized for wages and payroll taxes & benefits by $10,690 and $10,199, respectively.Cause and Effect: The Center did not have adequate review policies and procedures in place to ensure that the actual payroll expenditures were properly allocated and recorded based on the established allocation basis for program and administrative services supported by the time study performed. It appears that all of the payroll expenditures are allowable under the Head Start requirements and the administrative costs did not exceed the allowable administrative limit using the incorrect allocation basis. Using the correct allocation basis would still have resulted in the administrative limits not being exceeded. However, the lack of review that the supported allocation basis is properly applied for program and administrative services can led to errors in recording these costs and in the determination as to whether the allowable administration limit has or has not been exceeded. Auditor?s Recommendation: The Center should establish review policies and procedures to ensure that all administrative payroll costs are identified and are recorded based on actual time worked or allocated by an appropriate allocation basis (i.e. time study) for the Head Start program.

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