Ability Connection Colorado, Inc.

Uniform Guidance (2 CFR 200.303) requires the entity to establish and maintain effective internal control over federal awards to provide reasonable assurance that federal award information is accurate, complete, and submitted in accordance with federal requirements. Program reports for the federal award are prepared and submitted without an independent review. No evidence of a supervisory or secondary review was identified prior to submission. Due to the Organization’s size and limited number of personnel involved in financial reporting, responsibilities for preparation and submission of program reports are concentrated among a small number of individuals. As a result, a formal independent review control has not been established. The lack of an independent review increases the risk that inaccurate or incomplete information may be submitted to the federal awarding agency, resulting in potential noncompliance with reporting requirements. The Organization should implement a formal review control over Federal reporting, such as requiring a qualified individual independent of preparation to review reports prior to submission, with evidence of review documented. If staffing limitations exist, management should consider involving Board or committee-level oversight to perform this review.

The Head Start Act and 45 CFR Part 1301 require the governing body to provide oversight of financial management. The Compliance Supplement (ALN 93.600 – Special Tests and Provisions) specifies that this oversight includes monthly review of financial statements, including budget-to-actual comparisons. The Organization does not have a formal control in place to ensure that financial statements are consistently provided to and reviewed by the governing body on a monthly basis. While financial information was reviewed monthly during the audit period by a subset of members of the governing body, this occurred due to other operational needs rather than as part of a defined and recurring governance process. Meetings at which financial statements are formally presented and reviewed are held periodically; however, these meetings are not scheduled on a consistent monthly basis. The Organization has not established a formal process or control to ensure that financial statements are provided to and reviewed by the governing body on a monthly basis. The absence of a formal control increases the risk that required monthly financial oversight may not occur in future periods, resulting in potential noncompliance with Head Start governance requirements. The Organization should establish and document a formal process to ensure financial statements are provided to and reviewed by the governing body on at least a monthly basis. This may include establishing a standing meeting schedule or formal reporting cadence, with evidence of review documented in Board or committee minutes.

Information on the Federal Programs: Assistance Listing Number 93.600 - Head Start, U.S. Department of Health and Human Services and Assistance Listing Number 96.008 - Work Incentives Planning and Assistance Program, Social Security Administration Compliance Requirements: Reporting Type of Finding: Noncompliance Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance or 2 CFR Part 200), Subpart F , requires Single Audit reporting to be submitted to the Federal Audit Clearinghouse within 30 days of receiving the completed reports or nine months after the entity's fiscal year end, whichever comes first. The June 30, 2024 single audit reports were not submitted to the Federal Audit Clearinghouse on a timely basis. The Organization was in consultation with a creditor regarding issues that would have a significant impact on the accounting and disclosures in the audited financial statements. The issue was resolved subsequent to the report submission deadline. Subsequently, the independent audit firm required additional time to complete engagement documentation to issue the audit reporting package. Failure to submit the necessary audit reports on a timely basis may lead to delayed or suspended funding and Organization will not be classified as a low-risk auditee in future years. The Organization was not in compliance with covenants pertaining to financial ratios in its bond agreements, which constitute a substantial amount of debt. The Organization contacted the bond agent regarding issuance of a waiver on the covenant compliance. The bond agent did not make a determination on issuance of the covenant waiver until the deadline on submitting the financial reporting package to the Federal Audit Clearinghouse had expired. After the waiver was received, the independent auditor required time to complete the audit documentation to be able to release the financial statements and Single Audit reports. We recommend that the Organization place a greater emphasis on identifying issues that may result in delays to facilitate timely resolution of situations with parties outside the Organization's control. The Organization concurs with the finding and will take corrective actions to ensure that the financial reporting package is submitted to the Federal Audit Clearinghouse within the prescribed deadlines. The Organization has a history of timely filings.