Audit 401782

Payroll Federal Agency: Department of Housing and Urban Development Federal Program Name: Community Development Block Grants Cluster Entitlements/Special Purpose Assistance Listing Number: 14.218 Federal Award Identification Number and Year: B-23-UN-12-0002 and B-25-UU-12-0003 Award Period: November 11, 2023 – November 20, 2029 and January 16, 2025 – June 6, 2031 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria: 2 CFR 200.302(b)(3) states that the recipient must maintain records that sufficiently identify the amount, source, and expenditure of funds for federally-funded activities. These records must contain information pertaining to federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. 2CFR 200.403 states that costs must be adequately documented. 2 CFR section 200.303(a) states a non-Federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-Federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with guidance in Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States or the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: There were two conditions present: • One employee had duplicate hours for three pay periods. • Two employees had incorrect pay rates used for the calculation of allowable payroll costs for seven pay periods. Questioned costs: • $3,974 - B-23-UN-12-0002 • $81 - B-25-UU-12-0003 Context: Forty employee pay periods were selected for testing. • One employee had a total of twenty-four hours duplicated over four pay periods. • Two employees had incorrect pay rates across seven pay periods. Cause: Allowable payroll costs are performed using a manual process. While the calculation was reviewed and approved, a cross check between the KRONOS report and the allowable cost calculation was not performed. Allowable payroll costs are calculated using pay rates at end of the quarter. When there are no changes during the quarter, this methodology results in an accurate calculation. However, if a pay rate changes during the quarter, this methodology results in a misstatement for the calculation of allowable payroll costs. Effect: Using incorrect hours or pay rates to calculate wages recorded quarterly can result in overcharging grant and submitting inaccurate expenditures to the grant which may lead to non-compliance with grant requirements. Repeat Finding: No Recommendation: It is recommended the County modify its procedure to include: • Improve reconciliation procedures to verify hours per pay period recorded in quarterly spreadsheet agrees to hours recorded in the KRONOS system. • Record grant wages using the pay rate at the beginning of the quarter if recorded on a quarterly basis or use pay rates for each pay period if recorded on a pay period basis. Views of responsible official and planned corrective actions: Management concurs with the auditor’s recommendations. Action taken in response to finding: • Document the audit process in a formalized SOP and cross train all reviewers from SRGA Admin, Budget, and Fiscal. • Create a checklist to accompany each personnel draw to ensure that after rates are verified that SRGA Admin certifies that no RPAs or pay adjustments were approved during the pay periods reported and if there were, a second pay rate is entered for that draw and hours are split according to accurate rates/dates. • Document the cure process in the SOP to ensure that any errors found after the fact will be corrected with HUD to remain compliant and to ensure that no funds drawn in error are retained. • Include a date verification process prior to submission of the draw to ensure that staff did not duplicate any dates. This verification will be an audit of the Time Tracking Review completed by Admin staff. Ongoing training and coaching will be administered should duplicate entries be found on final draw reports. • Audit of all personnel draws for both allocations of CDBG-DR grants will be completed using the new SOP and verification tools before the end of fiscal year 2026.