South Carolina Generally Claimed Costs on Behalf of Wateree Community Actions, Inc., That Were in Accordance With the Grants and Applicable Federal Regulations, but Wateree Mismanaged Federal Funds

For fiscal years (FYs) 2012 and 2013, the South Carolina Office of Economic Opportunity (State agency) claimed costs on behalf of Wateree Community Actions, Inc. (Wateree), for Community Services Block Grant (CSBG) and Low-Income Home Energy Assistance Program (LIHEAP) grants that were allowable under the terms of the grants and applicable Federal regulations. However, Wateree used approximately $700,000 of CSBG and LIHEAP funds to lend money to its Head Start program and inappropriately carried forward unused LIHEAP funds totaling approximately $1.2 million and $850,000 in FYs 2011 and 2012, respectively. Additionally, Wateree did not resolve prior audit findings that were repeated year after year with the same management response and did not submit to the State agency the required independent audit report on time for 2013. These instances of improper management of Federal funds occurred because the State agency (1) was not aware of the regulation to notify the U.S. Department of Health and Human Services of unobligated LIHEAP funds and request that these funds be carried over into the next FY and (2) did not adequately monitor Wateree's management of Federal funds that it received from the State agency.