Audit 397085

Condition: During our testing of controls over payroll, we identified three instances of payroll summary reports lacking an indication of review and approval. Criteria: The Uniform Guidance 2 CFR 200.303 requires auditees to establish and maintain effective internal control over federal awards that provides reasonable assurance that the awards are being managed in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Organization should have a system of internal control in place to provide reasonable assurance that payroll summary reports are accurate and are being reviewed. Cause: The Organization has experienced significant turnover in HR positions and has had the Executive Director and Finance Manager take on these duties, along with their normal duties, until a replacement can be found. Effect: In the absence of review, payroll errors may go undetected, potentially resulting in inaccurate payroll records and payments. The possibility of fraud or noncompliance occurring and not being prevented or detected and corrected is present. Context: During our testing of a sample of six payroll summary reports, we noted an instance of a lack of review and approval. We then expanded the sample to 12 payroll summary reports, identifying one further instance of lack of review and approval, at which point the sample was again expanded to 24. A third instance was identified during the testing over the expanded sample, at which point testing ceased, and we determined that we could not rely on controls. The control deficiency did not result in a material impact on the program and did not reach the threshold for reporting questioned costs. Repeat of Prior Year Finding: No Auditor’s Recommendation: We recommend that payroll summary reports be reviewed and approved prior to completing the payroll process. If the Executive Director is unavailable, another staff member should review and approve the reports so the payroll process can be completed. View of Management: Management agrees with the finding. A response can be found in the Corrective Action Plan.