Center for Community and Family Services, Inc., Did Not Expend Head Start and Recovery Act Funds in Accordance With Federal Requirements

The Center for Community and Family Services, Inc. (the Center), located in California, operated a Head Start program. For the period July 1, 2009, through September 29, 2011, the Administration for Children and Families (ACF) awarded five grants to the Center, totaling approximately $27.4 million. The grants consisted of $23.4 million in Head Start funds to continue the Center's Head Start operations and $4 million in Recovery Act funds to expand enrollment and to make cost-of-living adjustments and Head Start quality improvements.

Our audit found that the Center did not maintain adequate financial records to support grant funds received from ACF and claimed costs that were unallowable. In total, we determined that the Center claimed $967,000 in unallowable costs, and we set aside $5.7 million for resolution by the Office of Head Start (OHS).

In addition, the Center did not maintain financial management systems and practices that complied with Federal requirements. Specifically, the Center did not maintain a financial management system that safeguarded assets, did not always maintain Federal funds in insured bank accounts, and did not maintain property management and procurement standards in accordance with Federal requirements.

We recommended that OHS (1) require the Center to refund $967,000 to the Federal Government and (2) work with the Center to determine the allowability of $5.7 million that we set aside and ensure that the Center refunds any amount that is determined to be unallowable. We are not making recommendations to address the Center's noncompliance with Federal requirements for financial management systems and practices because the Center relinquished its Head Start funds effective October 7, 2011. The Center generally disagreed with our findings; OHS agreed with our findings and said that it would evaluate the set-aside amount.