Audit 395860

2025-007: Federal Awards – Allowable Costs Federal Agency: U.S. Department of Housing and Urban Development CFDA No.: 14.218 Federal Program: Community Development Block Grants/Entitlement Grants Federal Award Year: 2025 Control Category: Allowable Costs Known Questioned Costs: $17,375 (sample) Projected Questioned Costs: $217,355 (projected) Condition During our testing of payroll expenditures, we noted that employee salaries and wages were charged to the federal program using predetermined allocation percentages rather than actual time recorded on employee timesheets or activity reports. Employees working on multiple programs did not maintain documentation identifying the actual hours worked on each program during the pay period. Instead, payroll costs were distributed across funding sources using fixed percentages established by management. Criteria 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, states, in part: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed…” Charges must “support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award;…” And “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Cause The City's payroll system charges time for employees each pay period based on an allocation rather than actual hours documented on the employee’s timesheet. Effect Because payroll costs were not supported by records reflecting the actual work performed, the City cannot demonstrate that salary and wage costs charged to the federal program were accurate and properly allocable. As a result, payroll expenditures charged to the program may be unallowable under federal cost principles, and there is an increased risk that federal funds could be misallocated among programs.Questioned Costs There were known questioned costs in the amount of $17,375 from the sample tested and $217,355 of projected questioned costs from projections. These costs are unsupported due to inadequate time documentation, not necessarily unallowable. Recommendation We recommend that the City charge time to the program based on actual hours worked per the employees' timesheets

2025-008: Federal Awards – Allowable Costs Federal Agency: U.S. Department of Housing and Urban Development CFDA No.: 14.871 Federal Program: Housing Choice Voucher Program Federal Award Year: 2025 Control Category: Allowable Costs Known Questioned Costs: $29,924 (sample) Projected Questioned Costs: $214,045 (projected) Condition During our testing of payroll expenditures, we noted that employee salaries and wages were charged to the federal program using predetermined allocation percentages rather than actual time recorded on employee timesheets or activity reports. Employees working on multiple programs did not maintain documentation identifying the actual hours worked on each program during the pay period. Instead, payroll costs were distributed across funding sources using fixed percentages established by management. Criteria 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, states, in part: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed…” Charges must “support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award;…” And “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Cause The City's payroll system charges time for employees each pay period based on an allocation rather than actual hours documented on the employee’s timesheet. Effect Because payroll costs were not supported by records reflecting the actual work performed, the City cannot demonstrate that salary and wage costs charged to the federal program were accurate and properly allocable. As a result, payroll expenditures charged to theprogram may be unallowable under federal cost principles, and there is an increased risk that federal funds could be misallocated among programs. Questioned Costs There were known questioned costs in the amount of $29,924 from the sample tested and $214,045 of projected questioned costs from projections. These costs are unsupported due to inadequate time documentation, not necessarily unallowable. Recommendation We recommend that the City charge time to the program based on actual hours worked per the employees' timesheets.