Audit 367888

COCONDITION: Employee time and effort reports were not consistently completed, certified, and maintained in accordance with the grant requirements. The auditor's review of a sample of employee timesheets found discrepancies in how time was allocated and reported for federal projects versus the PALM’s internal records. CRITERIA: The PALM is required by federal grant guidelines, specifically 2 CFR 200.430, to maintain internal controls over all aspects of their federal awards. This includes accurate and consistent documentation of personnel activity reports, timesheets, and payroll distribution records to support the direct labor costs charged to federal awards. CAUSE: The PALM lacked a formal, documented policy and procedure for tracking, certifying, and approving employee time spent on grant-related activities. Insufficient training was provided to employees and supervisors regarding the specific documentation requirements for federal grants. This resulted in personnel recording their time using inconsistent methods, including estimations at the end of a pay period, which increased the risk of inaccurate billing. EFFECT: Inaccurate time allocation led to the questioning of $65,664 in costs charged to the federal award. Since the timekeeping records did not provide reliable assurance that employee compensation was accurately charged, a portion of the labor costs was unsupported. This finding exposes the PALM to the risk of having to repay the federal agency for unallowable costs and could impact future grant funding. RECOMMENDATION: We recommend that the PALM utilize a time management software which integrates with their payroll processing, to easily identify direct labor costs related to the federal program. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION: The PALM agrees with the finding, and started utilizing a new time management software in 2025 to prevent overbilling of direct labor costs. QUESTIONED COSTS: A total of $54,211 in salaries and $11,453 in benefits were calculated as questioned costs, based on annualized differences from testing.

CONDITION: During our testing of federal expenditures, we selected a sample of 25 transactions. For twelve of these transactions, totaling $3,003, the PALM could not provide the original or reconstructed vendor receipts. The payments were supported only by credit card statements, which did not include a detailed description of the goods or services purchased. CRITERIA: The PALM is required by federal grant guidelines, specifically 2 CFR 200.302, to maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. CAUSE: The primary cause is a breakdown in the PALM’s internal controls over procurement and record-keeping. The lack of a consistent process to ensure all staff members who make purchases submit timely and complete receipts has created a weakness that could lead to unallowable costs being charged to the federal award. EFFECT: The lack of supporting documentation prevents the auditor from determining if the costs were necessary, reasonable, and for the exclusive purpose of the federal award. This also increases the risk of fraud, waste, and abuse. The grantee is at risk of having these costs disallowed and potentially required to repay the federal agency for the undocumented expenditures. RECOMMENDATION: We recommend that management implement a more robust internal control system to ensure all federal expenditures are supported by proper documentation. This includes: • Mandating that all employees submit itemized receipts for purchases made on federal awards. • Creating a "Missing Receipt" form that requires a detailed explanation and supervisory approval when an original receipt cannot be located. • Providing mandatory training for staff on proper procurement and documentation procedures. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION: The PALM believes the expenses referred to were indeed for allowable costs for the federal program. They will start to maintain all proper source documentation regardless of dollar amount. QUESTIONED COSTS: A total of $3,003 is being questioned for twelve transactions lacking adequate documentation.