Audit 377964

Criteria – Organizations must establish internal control procedures over compliance with provisions of Title 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. §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 and Context – We selected a sample of 25 payroll transactions to test controls of payroll disbursements charged to the major program. The items selected in this sample were also used as a dual purpose test for purposes of testing compliance. In our sample, we noted that timesheets and personnel action forms did not adequately support the charges to the grant for six (6) of the twenty-five (25) payroll transactions tested. The errors noted resulted in overcharges to the program of $855. Given the internal control exceptions, the sample was not expanded to test a sufficient sample size to address the high remaining risk of noncompliance, and we were unable to obtain sufficient assurance over compliance and the major program received a qualified opinion. Questioned Costs – We tested $46,829 of $656,428 total payroll disbursements for the program. Known questioned costs were $855 of overcharges. Cause – The primary factor that contributed to the deficiencies was the lack of sufficient controls implemented to appropriately review and monitor payroll activity and ensure amounts were properly recorded in the general ledger. Repeat Finding – This is not a repeat finding from the prior year. Effect – Payroll transactions were being processed incorrectly. Recommendation – In order to ensure payroll transactions are properly reviewed and approved, and supporting documentation maintained, we recommend the Organization ensure controls over payroll are operating effectively – this includes retaining all supporting documentation, ensuring supervisor signoff on timecards, implementing a review process over employee time allocation from timecards to the general ledger, and maintaining documentation of approval for salaries that are charged to grants at a different rate than the employee’s normal salary. Management’s Response – Management agrees with the finding and has prepared corrective action as detailed in its Corrective Action Plan.