Audit 380963

Criteria 2 C.F.R Part 200.430, Standards for Documentation of Personnel Expenses, requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed and be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated Condition The District’s system of internal control includes processes to assign employees to specific grants and to conduct a quarterly review and approval of time charged to the grant by individuals knowledgeable about the employees’ assigned duties. While the system includes a review of employees charged to the grant, it does not include a mechanism to maintain records that document the actual work performed by employees whose salaries and wages are allocated among multiple federal awards or other funding sources. In addition, the system does not include an after-the-fact review of actual time incurred compared to budgeted estimates, or procedures to make necessary adjustments based on that comparison. Cause The District management believed that the quarterly review and reconciliation of the wages was sufficient to meet the requirements of the Uniform Guidance. Effect or Potential Effect Without records that accurately reflect the actual work performed and an after-the-fact review of time charged to federal awards, there is an increased risk that salary and wage costs may be charged to federal programs based on budgeted or estimated amounts rather than actual time worked. This could result in a potential misallocation of costs among funding sources, and inaccurate reporting of personnel expenses charged to federal awards. Questioned Costs Unable to determine due to a lack of supporting documentation for the allocation of salaries and wages among multiple federal awards and other funding sources. The District was unable to provide records demonstrating the actual time worked on federal program activities for employees whose compensation was charged, in part, to federal awards. The District had employees with wages charged to the grant under various assignments, including individuals who performed duties benefiting multiple programs or activities. Because adequate documentation was not available to support the distribution of time and effort, the amount of potential questioned costs could not be determined. Context Special Education Cluster (IDEA) Total salaries, wages and benefits charged to the Special Education Grants to States grant were approximately $2.8 million. Approximately 30% of the amounts charged to the grant were for employees performing duties benefiting multiple funding sources. While supporting documentation was not provided, employee assignments were consistent throughout the year based on daily schedules, staffing levels were stable, and budget allocations appeared reasonable in relation to program activities. These factors reduce the likelihood that a significant portion of the wages charged to the grants were unallowable. Supporting Effective Instruction State Grants Total salaries, wages and benefits charged to the Supporting Effective Instruction State Grants grant were approximately $1.8 million. Approximately 72% of the amounts charged to the grant were for employees performing duties benefiting multiple funding sources. While supporting documentation was not provided, employee assignments remained consistent throughout the year based on daily schedules, staffing levels were stable, and budget allocations appeared reasonable in relation to program activities. These factors reduce the likelihood that a significant portion of the wages charged to the grants were unallowable. Identification as a Repeat Finding Not a repeat finding. Recommendation The District should enhance its internal control procedures over payroll costs charged to federal awards to ensure compliance. The District should implement a process to document the actual work performed by employees whose salaries are allocated to multiple federal or nonfederal programs. This may include requiring periodic certifications, personnel activity reports, or equivalent documentation that reflects actual time worked. In addition, the District should establish an after-the-fact review process to compare actual time incurred to budgeted estimates and make necessary adjustments to ensure that payroll charges are based on actual effort rather than budgeted amounts. Views of Responsible Officials The District agrees with the finding. The District believed that employee approval of their timecard, its quarterly wage reconciliation process, combined with stable staffing patterns and consistent program assignments, met the requirements of 2 C.F.R. §200.430. Upon review of the auditor’s finding, the District recognizes that additional documentation and processes are required to demonstrate compliance with federal standards for personnel expense documentation. The District is committed to implementing improved controls, strengthening documentation processes, and ensuring full compliance going forward.