Audit 392685

Finding 2025-001: Significant Deficiency in Internal Control Over Federal Awards – Inadequate Review of Payroll Reports Federal Programs 93.912 and 93.110 U.S Department of Health and Human Services Criteria: Under 2 CFR 200.303 and 2 CFR 200.508, the auditee is required to maintain adequate internal controls over federal awards, including sufficient review and approval procedures to ensure costs charged to the federal program are allowable, properly supported, and accurately coded. Condition: During the transition to a new payroll provider, timesheets were processed and payroll was run without official supervisor review and approval, as required by the Organization’s policy. In several instances, there was no evidence of supervisor approval on the timesheets prior to processing. Cause: The deficiency occurred due to a misunderstanding in the manual approval process during the transition to the new payroll provider. Specifically, supervisors were approving timesheets in the new system but not saving their work, resulting in the absence of official approvals. Effect: This deficiency increases the risk that unauthorized or inaccurate payroll transactions could occur and not be detected or corrected in a timely manner, which could result in noncompliance with applicable federal requirements related to payroll costs. However, we did not identify any questioned costs or evidence of material noncompliance as a result of this deficiency during audit procedures. Questioned Costs: None. Recommendation: The Organization should strengthen payroll approval controls by requiring formal, documented supervisor approval for all timesheets prior to payroll processing, with clear evidence of approval retained for audit purposes. These updates to controls should be included in internal control documents to ensure all users understand their responsibilities. Views of responsible officials: See attached corrective action plan.