Audit 398403

Material Weakness in Internal Controls over Compliance and Noncompliance Condition: The Organization could not provide documentation to support that personnel costs were charged to the federal awards based on actual costs and time spent on the federal program. Criteria: Per §200.430(g)(1) of the Code of Federal Regulations, charges to Federal awards for personnel costs must be based on records that accurately reflect the work performed. These records must support the distribution of employees’ salary among specific activities or cost objectives and must not exceed the actual time worked. Per § 200.303 of the Code of Federal Regulations, recipients must establish, document, and maintain internal controls over Federal awards that provides reasonable assurance that the recipient is managing the Federal Award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: Due to staff transitions during the year, the Organization could not provide documentation to support the amount of personnel costs charged to federal awards. While staff reported time spent on work performed under the federal awards, no review of the reported time was documented and no allocation documentation could be provided to trace the amount of personnel costs charged to federal awards to the time reported by staff. Effect: Federal expenditures on the Schedule of Federal Awards (SEFA) could be overstated resulting in noncompliance with federal cost principles and unallowable cost. Context: During our testing of payroll transactions charged to the federal program, we selected a sample of four out of 26 payroll periods to test. In all four payroll periods tested, the amount charged to the federal program could not be supported by documentation of actual personnel costs incurred for time spent on program activities. Documentation of the review of time spent on program activities reported by staff also could not be provided. Questioned costs total $436,615, which is the total amount of personnel costs reported under the major program grants for the year. Recommendation: We recommend the Organization implement written policies and procedures to ensure that payroll charges to federal awards are based on actual costs incurred. Employees should prepare time and effort documentation reflecting actual hours worked on the federal program activities for each payroll period. This documentation should be reviewed, and evidence of this review should be maintained. This documentation should be used to determine the amount of personnel costs to charge to the federal award, and documentation of this allocation should be maintained. Views of Responsible Officials: Management agrees with the finding.

Material Weakness in Internal Controls over Compliance Condition: During our testing of matching, level of effort, and earmarking, it was noted the Organization did not perform or document required controls over matching, level of effort, and earmarking requirements. Criteria: Per § 200.303 of the Code of Federal Regulations, recipients must establish, document, and maintain internal controls over Federal awards that provides reasonable assurance that the recipient is managing the Federal Award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: Controls to document proper tracking of matching, level of effort, and earmarking were not implemented by the Organization. The responsibility for oversight along with monitoring activities was not documented. Effect: Failure to establish, document, and maintain internal controls increases the risk that federal funds may not be used in accordance with applicable laws and regulations, potentially resulting in noncompliance with program requirements. Context: During our testing of matching, level of effort, and earmarking requirements, no evidence of controls over the compliance requirement could be provided. Recommendation: We recommend the Organization develop and implement formal documented monitoring procedures to ensure accuracy and track compliance with matching, level of effort, and earmarking requirements. Views of Responsible Officials: Management agrees with the finding.