Audit 404177

2025-004: Federal Awards – Allowable Costs Federal Agency: U.S. Department of Transportation CFDA No.: 20.509 Federal Program: Formula Grants for Rural Areas and Tribal Transit Program Control Category: Allowable Costs Questioned Costs: Does not exceed threshold for reporting Condition During our testing of payroll expenditures, we noted that administrative and maintenance 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 Authority'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 Authority 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. Recommendation We recommend that the Authority charge time to the program based on actual hours worked per the employees’ timesheets. Management’s Response Regarding Corrective Action Taken or Planned These rules apply to costs charged directly to federal programs, such as the 5311 grants that require a 44.67% match when used for operating expenses. All maintenance and administrative staff time is eligible as direct costs for these grants as their time is only spent on transit activities and not administrating non-transit programs. Staff apply payroll costs and on either actual vehicle miles or hours based their type of work, as recommended by the National Rural Transit Assistance Program, for time by staff that cannot be directly tied to a specific grant source.