SUMMIT COUNTY CHILD CARE RESOURCE & REFERRAL AGENCY, INC

Regulatory Deadline for Submission of Schedule of Expenditures of Federal Awards

Repeat Finding: No

Condition: The Organization did not submit its SEFA and reporting package to the FAC within the required nine‐month deadline. For the year ended December 31, 2024, the reporting package was due by September 30, 2025, but the audit was not completed until May 4, 2026.

Criteria: Per 2 CFR 200.512(a), the auditee must submit the reporting package, which includes the financial statements, schedule of expenditures of federal awards (SEFA), and the auditor’s reports, to the Federal Audit Clearinghouse (FAC) within the earlier of 30 calendar days after receipt of the auditor’s report, or nine months after the end of the auditee’s fiscal year end. Timely submission is a condition of receiving and maintaining federal awards.

Cause: The delay occurred because the Organization did not have adequate procedures in place to ensure timely preparation and submission of the SEFA and reporting package in accordance with Uniform Guidance deadlines.

Effect: Failure to submit the SEFA and reporting package timely constitutes noncompliance with Uniform Guidance reporting requirements. This increases the risk that federal oversight agencies may delay or restrict future funding, and may affect the Organization’s risk classification under 2 CFR 200.520.

Questioned Costs: None noted.

Perspective Information: The condition noted applied to the reporting package for the year ended December 31, 2024, and represents noncompliance with the Uniform Guidance submission requirements.

Recommendation: We recommend that the Organization implement procedures to ensure timely completion and submission of the SEFA and reporting package to the FAC within the nine‐month deadline. This should include assignment of responsibility, a compliance calendar, and oversight by management or the governing body.

Reporting Views of Responsible Officials: Management agrees. The reporting package, including the SEFA, was not submitted to the Federal Audit Clearinghouse within the nine‐month deadline under 2 CFR 200.512(a). The delay stemmed from a late close and audit; management is compressing that timeline to meet the deadline going forward.

Accounting Policies and Procedures

Repeat Finding: No

Condition: The Organization has established written financial policies and procedures; however, the policies and procedures were not consistently implemented or followed during the year. The Organization did not have sufficient processes in place to ensure that policies for administering Federal awards were understood and consistently applied. The Organization's established policy provides for the allocation of certain indirect and shared costs based on full‐time equivalent employees (FTEs). However, certain indirect and shared costs were allocated to the Federal award based on grant budget amounts or predetermined allocation percentages rather than the methodology established by the Organization's written policy. We recalculated the applicable indirect and shared cost allocations using the Organization's established FTE methodology and determined that the resulting difference was not material to the Federal program. We also identified deficiencies related to the allocation and supporting documentation of personnel costs charged to the Federal award which are separately reported in Finding #2025‐003.

Criteria: Under 2 CFR § 200.303, the Organization is required to establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that Federal awards are managed in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. Effective internal control includes procedures to implement and monitor established policies and to ensure that personnel responsible for administering Federal awards understand and consistently apply those policies. Additionally, the Uniform Guidance establishes specific requirements applicable to the administration of Federal awards, including requirements related to allowable costs, procurement, cash management, property management, subrecipient monitoring, and other areas, as applicable to the Organization's Federal programs.

Cause: The Organization did not have sufficient procedures in place to communicate, implement, and monitor compliance with its established financial policies and procedures.

Effect: The failure to consistently implement and monitor established financial policies and procedures increases the risk that costs may be allocated or charged to Federal awards inconsistently and that transactions may not comply with applicable Federal requirements. Although the differences identified from recalculating the indirect and shared cost allocations under the Organization's established FTE methodology were not material to the Federal program, other deficiencies associated with personnel cost allocations resulted in separately reportable matters, as described in Finding #2025‐003. The broader lack of controls over implementation and monitoring of established policies increases the risk that additional noncompliance could occur and not be prevented, or detected and corrected, on a timely basis.

Questioned Costs: None attributable to the indirect and shared cost allocation matters described in this finding. Questioned costs associated with personnel cost allocations, if applicable, are reported in Finding #2025‐003.

Perspective Information: The Organization has established written financial policies and procedures; however, controls were not sufficient to ensure that those policies were consistently communicated, implemented, and followed. During the audit, instances were identified in which established allocation methodologies were not applied to indirect, shared, and personnel costs charged to the Federal award. For the indirect and shared costs addressed in this finding, the auditors recalculated the applicable allocations using the Organization's established FTE methodology and determined that the resulting difference was not material to the Federal program. Deficiencies specifically related to personnel cost allocations and supporting documentation are separately reported in Finding #2025‐003.

Recommendation: We recommend that the Organization establish procedures to ensure that its financial policies and procedures are effectively communicated, implemented, and consistently followed. Personnel responsible for administering Federal awards should be provided with the applicable policies and appropriate training regarding their responsibilities, including the methodologies required for allocating indirect, shared, and personnel costs to Federal awards. Management should periodically monitor compliance with established policies and document its review, including reviewing allocation methodologies and supporting documentation to determine whether costs charged to Federal awards are consistent with established policies and applicable Federal requirements. The Organization should also periodically review its financial policies and procedures to ensure they remain appropriate for its current operations and applicable Federal requirements. Any changes to established policies or allocation methodologies should be formally documented and approved before implementation.

Reporting Views of Responsible Officials: Management agrees with the finding and will develop and formally adopt written accounting and administrative policies and procedures addressing applicable Uniform Guidance requirements.

Payroll and Related Cost Allocations

Repeat Finding: No

Condition: The Organization did not maintain sufficient documentation to support the allocation of salaries for certain employees whose activities benefited both the Federal award and other activities of the Organization. Salary costs were generally charged to the Federal award using allocation percentages established as part of the grant budget. Management indicated that periodic evaluations of employee allocations were performed during the year; however, documentation of these evaluations was not maintained. The Organization's written financial policies provide for the use of timesheets to monitor and support employee cost allocations; however, timesheets were not utilized during the year and the Organization did not consistently adhere to its established payroll allocation policies. Certain employees performed activities benefiting multiple programs and grants. Sufficient records were not maintained to support the allocation of salary costs that should have been charged to the Federal award. Additionally, payroll taxes and employee benefits were not consistently allocated to the Federal award in a manner consistent with the allocation of the related salaries. Audit procedures identified $10,370 of payroll taxes and employee benefits charged to the Federal award in excess of the amounts supported by the allocation of the related salaries.

Criteria: Under 2 CFR § 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Such records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Budget estimates or other distribution percentages determined before services are performed may be used for interim accounting purposes; however, the Organization's system of internal controls must include processes to review the interim charges after the fact and make adjustments as necessary so that final amounts charged to Federal awards accurately reflect the work performed. In addition, costs charged to Federal awards must be allocable in accordance with the relative benefits received. Payroll taxes and employee benefits associated with compensation should be allocated to Federal awards on a reasonable and consistent basis in relation to the underlying compensation costs.

Cause: The Organization did not have sufficient controls in place to ensure that payroll allocations were adequately supported, that established payroll allocation policies were consistently followed, and that payroll taxes and employee benefits were allocated consistently with the related salary costs.

Effect: The lack of sufficient documentation supporting employee salary allocations increases the risk that payroll costs charged to Federal awards may not accurately reflect the work performed. Additionally, the inconsistent allocation of payroll taxes and employee benefits resulted in $10,370 of costs being charged to the Federal award in excess of the amounts supported by the allocation of the related salaries.

Questioned Costs: $10,370, related to payroll taxes and employee benefits that were not properly allocated based on the allocation of the related salaries. Questioned costs associated with salary allocations for employees working on multiple activities are undetermined due to the lack of sufficient records supporting the actual allocation of employee activity.

Perspective Information: For certain employees whose compensation was allocated among multiple activities, salary costs were charged to the Federal award primarily using allocation percentages established as part of the grant budget. Although management indicated that employee allocations were periodically evaluated, documentation of those evaluations was not maintained. Accordingly, sufficient evidence was not available to determine whether the final salary allocations accurately reflected the work performed or to quantify any resulting questioned salary costs. Separately, audit procedures identified $10,370 of payroll taxes and employee benefits that were not allocated consistently with the related salaries and were determined to be questioned costs.

Recommendation: We recommend that the Organization establish and consistently follow procedures to ensure that salaries, payroll taxes, and employee benefits charged to Federal awards are accurate, properly allocated, and adequately supported. As a best practice, the Organization should implement timesheets or similar personnel activity records for employees whose compensation is allocated among multiple Federal awards or other activities. Such records would provide contemporaneous documentation of employee activity and a direct basis for allocating compensation costs. While Uniform Guidance does not specifically require timesheets, a timekeeping system would strengthen the Organization's internal controls and would also bring its practices into conformity with its existing written financial policies. The Organization should also establish controls to ensure that payroll taxes and employee benefits are allocated consistently with the related salary costs and that payroll allocation calculations are periodically reviewed and documented by appropriate management personnel.

Reporting Views of Responsible Officials: Management agrees and concurs with the recommendation. The Organization is process of engaging a consultant to assist in revising financial policies and procedures to include additional procedures to evaluate payroll to ensure allocations of payroll charged to the grant is reasonable.

During our testing of indirect cost allocations for the Head Start program, SA identified that the Company did not apply its allocation methodology consistently across all program activities. While our testing indicated that the Company frequently undercharged the Head Start program for indirect costs, we identified specific transactions where the program was overcharged, resulting in known questioned costs of $1,200. Based on the results of our testing and the systemic nature of the inconsistency, SA determined the likely questioned costs to be $14,453.

During our cutoff testing of reimbursement grants, we noted that the Company's internal controls,did not effectively ensure proper period-end recognition. Specifically, certain grant transactions incurred in 2022 and 2023 were incorrectly recorded in the subsequent fiscal years (2023 and 2024, respectively).