Audit 370147

Criteria: SEE must establish internal control procedures over compliance with provisions of 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), that require, among other things, that direct charges to federal awards be for allowable costs. To be an allowable cost, charges must be supported by appropriate documentation and be properly approved. The specific requirements for allowable activities are unique to each Federal Program and are found in the laws, regulations, and the provisions of each contract or grant agreement pertaining to the federal program. Section 200.340(8)(i) of the Uniform Guidance, Standards for Documentation of Personnel Expenses, states, “(1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.” Condition/context: During our audit, we noted that the allocation methodology used to distribute payroll and payroll-related expenses across programs and funding sources was not adequately documented or supported. There was an inconsistency of formal effort reports for this specific grant to substantiate the basis for the allocations of expenses charged to the federal programs. Our testing noted that, for 13 of the 40 payroll transactions sampled for ALN 21.027, timesheets did not adequately support the charges to grants. Additionally, in the 15 payroll transactions tested for ALN 66.615, there was no sufficient documentation to support the total fringe benefit amounts charged to the grants. These deficiencies limit our ability to verify that salary and total fringe benefits charged to the grants are based on actual time and effort spent. The samples selected for testing were not chosen using a statistical sampling technique. Cause: This deficiency appears to result from insufficient controls over payroll cost allocation and documentation. SEE needs to enforce a formalized process requiring all project level employees to document and certify their time and effort spent on grant-related activities, similar to SEE Operations employees. Questioned Costs: Unknown Effect: Unsupported payroll allocations increase the risk of noncompliance with grant requirements and may lead to questioned costs during audits. The absence of supporting HR documentation increases the risk of unauthorized or inaccurate salary payments. Recommendation: We recommend that SEE implement a formal time and effort reporting system that requires employees to document and certify the percentage of time spent on grant-funded activities. Repeat Finding: Yes. See Finding 2023-003. Views of Responsible Officials: Management agrees with the finding and procedures have been implemented to address the related issues.