FAMILY SERVICE ASSOCIATION OF SAN ANTONIO, INC.

Section III – Federal Award Findings and Questioned Costs Finding #2023-001: Program Title: Early Head Start Childcare Partnership Assistance Listing: 93.600 Contract Grant Number:06-HP000201-03 Federal Award Years: July 1, 2022 to June 30, 2023 Federal Agency: U.S. Department of Health and Human Services Allowable Costs and Reporting Type of Finding: Questioned Cost and Other Noncompliance Criteria: The 2 CFR part 200 establishes costs principles for determining costs applicable to Federal Award and requires costs be adequately documented. In addition, 2 CFR section 200.328 establishes financial information be reported in accordance with terms and conditions of the federal award. This award is subject to the requirements set forth in 45 CFR Part 75, which defines unliquidated obligations as obligations incurred for direct and indirect expenses incurred but not yet paid or charged to the award and does not include a future commitment of funds for which an obligation or expense has not been incurred. Condition: Based on procedures performed, we identified expenditures recorded for future program expenses totaling $160,597 not yet obligated or incurred. As a result, amounts unspent were improperly reported as unliquidated obligations on the federal financial report for the budget period ended June 30, 2023. Questioned Costs: Based on review of accounting records and reconciliation of unused federal funds prepared by Family Service, we identified questioned costs totaling $160,597 for the Early Head Start program. Cause: Lack of documentation to support costs were obligated or incurred for direct or indirect program expense for Early Head Start prior to the end of the budget period. In addition, Family Service did not request an extension for additional time to use unspent funds on future program expenses. Effect: Noncompliance with Allowable Costs and Reporting compliance requirements of the Uniform Guidance and terms and conditions of the federal award. Repeat Finding: No Recommendation: We recommend Family Service improve procedures for tracking, reporting, and use of obligated and/or unspent funds to ensure compliance with the compliance requirements and terms and conditions of the federal award. Views of responsible officials: Management agrees with the recommendations to improve tracking and reporting of obligated and/or use of unspent funds to conform with the compliance requirements and terms and conditions of the federal award. Unfortunately, the advanced funds drawn for building remodeling and maintenance were unspent because of serious delays due to systemic problems with obtaining certificates of occupancy and permits in a timely manner.