Audit 377456

Finding Number: 2025-001 Finding Type: Immaterial noncompliance and significant deficiency in internal controls over compliance related to allowable costs Information on the Federal Program: Program Name: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) (ALN 93.224/93.527) Federal Awards Project Title: Health Center Program Award Period: June 1, 2024 – May 31, 2025 and June 1, 2025 – May 31, 2026 Award Number: H80CS00508 Agency: U.S. Department of Health and Human Services (HHS), Health Resources and Services Administration (HRSA) Criteria: Under 2 CFR §200.430(c)(2), compensation charged to federal awards must comply with the Executive Level II salary limitation established by the Office of Personnel Management (OPM). Salary costs allocated to the Health Center Program may not exceed this cap, and only the allowable portion up to the Executive Level II rate may be charged to the federal award. Condition: During testing of payroll charges, 3 of the 25 employees tested had salary charges which exceeded the Executive Level II cap. Upon further review of the full population, a total of 4 employees were identified whose salary charges to the grant exceeded the cap. Although the Organization calculated the capped allowable salaries for each employee, the allocations entered into the payroll system reflected full gross wages rather than the capped amounts, resulting in the excess salaries. Cause: The Organization did not have a system of internal controls that included verification of accurate entry of salary allocations into the payroll system. Effect: Unallowable salary amounts were initially charged to the grant. However, the Organization was able to identify other allowable expenditures sufficient to support the total amount of grant funds drawn. Questioned Costs: None Repeat Finding: No Recommendation: We recommend the Organization update its policies and procedures to include an independent review of payroll allocations entered into the payroll system to ensure they agree to the calculated capped amounts. Additionally, periodic reconciliation of salary charges to the Executive Level II limitation should be performed to prevent similar errors in the future. Views of a Responsible Official and Corrective Action Plan: Management agrees with the finding and will update payroll policies and procedures to include verification of salary allocations charged to federal awards. An independent review process and periodic reconciliations to the Executive Level II limitation will be implemented to prevent recurrence.