Audit 369990

Criteria or specific requirement: Per 2 CFR part 200.430(g)(1), "Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed." Furthermore, 2 CFR 200.430(g)(1)(vi) indicates that these records must "support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on... a federal award and a non-federal award" and 2 CFR 200.430(g)(1)(vii)(C) requires that allocations to Federal awards based on budget estimates must be reviewed after-the-fact and that "all necessary adjustments must be made so that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition: In a statistically valid sample, 4 of 14 payroll expenditures tested, grant hours were not consistently tracked on the employees’ timesheet. The wages charged to the program were based on the budgeted estimates. Per 2 CFR 200.430(i)(1)(viii), this is not allowed without additional steps to ensure accuracy, allowability and proper allocation. Insufficient evidence was presented to support a reasonable reflection of employee federal and non-federal activity. The Organization does not have a written policy nor system of internal controls to review and true-up grant wages to actual. Questioned costs: $58,881 Context: A sample of 14 was made from a population of 116 transactions charged to the major program for salaries and benefit expenses. Of the 14 sampled costs, 4 were found to be out of compliance with the provisions for 2 CFR 200.430 Compensation - personal services of Uniform Guidance. The four transactions questioned were isolated to the Finance Director and Executive Director’s recording of time and effort and there was a misunderstanding in relation on how to charge their salaries and benefit expenses to the program. The grant allowed up to 25% of their salaries to be charged to the program, a different process from the other salaries and benefits allowable under the grant, and actual time and effort was not documented. The error of actual costs reported on the schedule of federal expenditures results in the likely questioned cost amount of $58,881. Cause: The employees did not code their programmatic time to a specific grant time charge code and there was not a process to make after-the-fact review/adjustments to applied budgeted allocations. Effect: Recording grant wages based on estimates rather than actual hours worked on the federal program may result in payroll-related amounts being booked to the program that do not reflect actual effort, which could lead to an overcharging or undercharging of the federal grant. Repeat finding: No Recommendation: We recommend that the Organization incorporate a system of internal controls that clearly documents the time and effort that each individual employee spends on each grant per month. This can be done by tracking time worked to federal programs via timesheets or by implementing look-back procedures to ensure estimated allocations of payroll costs are adjusted to reflect actual activities. Views of responsible officials: There is no disagreement with the audit finding.