Audit 402659

Finding 2025-001– Allowable Costs – Significant Deficiency in Internal Control Over Compliance and Instance of Noncompliance Federal Program: COVID-19 – Disaster Grants – Public Assistance (Presidentially Declared Disasters) (Assistance Listing #97.036) Federal Agency: U.S. Department of Homeland Security Award Year: 2025 Criteria – Pursuant to 2 CFR §200.403 and 2 CFR §200.430, costs charged to federal awards must be accurate, allowable, properly supported, and based on records that accurately reflect the work performed. Payroll costs charged to a federal award must be based on the actual compensation rates applicable during the period in which the services were performed. Condition – During our testing of the allowable costs compliance requirements of the COVID-19 – Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program, we noted LAJH used subsequent employee pay rates when calculating payroll reimbursement requests submitted under the grant rather than the contemporaneous pay rates in effect during the applicable period of performance. In addition, there were duplicate entries included in this population, leading to an overstatement of allowable costs. Cause – LAJH did not have adequate internal controls in place to ensure payroll reimbursement calculations were based on accurate payroll records and pay rates applicable to the period during which grant-related services were performed. Effect – As a result, payroll expenditures charged to the federal program were overstated, resulting in questioned costs totaling $79,825. In addition, LAJH was not in compliance with federal allowable cost requirements. Questioned costs – $79,825 Context – The exception was identified through testing of payroll expenditures charged to the federal program. The error related to the methodology used to calculate reimbursable payroll costs for employees whose compensation rates changed after the grant performance period as well as a lack of overall review of the expenditures included in this grant. Identification as a repeat finding, if applicable – This is not a repeat finding. Recommendation – We recommend that LAJH strengthen its internal controls over payroll reimbursement calculations to ensure that amounts charged to federal awards are supported by contemporaneous payroll records and the actual pay rates in effect during the applicable service period. In addition, LAJH should implement a comprehensive review process to verify that all expenditures included in reimbursement requests are appropriate, complete, and free of duplicate entries. Management should also review all payroll-related reimbursement requests submitted under the program and adjust previously claimed amounts, as necessary. Views of responsible officials – Management agrees with the finding. During the preparation of payroll reimbursement calculations for the FEMA Public Assistance Program, subsequent employee pay rates were inadvertently used rather than the contemporaneous pay rates applicable during the grant performance period. Management has reviewed the calculation methodology and acknowledges that this resulted in questioned costs of $79,825.