Audit 404984

PAYROLL CONTROLS Federal Agency: NIH, Department of Defense and Department of Health and Human Services. Award Name: Research and Development Cluster. Program Year: 2025. Assistance Listing Number: 12.420, 93.113, 93.350, 93.837, 93.838, 93.840, 93.846, 93.855, 93.859, 93.865, 93.866, 93.103, 93.084, 93.117, 93.145, 93.243. Criteria: In accordance with the documentation standards of 2 CFR section 200.430(a), costs of compensation for personal services are allowable to the extent the total compensation for individual employees is reasonable for the services rendered, conforms to the established written policy of the recipient or subrecipient and is determined and supported as provided in 2 CFR section 200.430(g), which states that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Condition: Payroll testing was completed for a sample of 40 individuals for which time and expenses were charged to R&D grants. Within that selection, we noted instances where payroll controls did not function properly in regard to percentage of time allocated to a grant, proper pay code inclusion, fringe benefit calculation and timely and supervisor level review of time sheets. Context: Management was able to isolate the time allocation error to 20 employees for which the time and costs charges to the grants were in excess of actual time allocation. This resulted in $87,831.53 in excess charged to the grants. Additional control deficiencies did not result in significant improper grant expenditures. Cause: A new payroll system was implemented in fiscal 2025. Grant allocation percentages were not accurately established in the payroll system upon conversion. Effect: Time charged to grant efforts by certain individuals exceeded actual time worked. Questioned Costs: $87,831.53. Recommendation: Review controls should be enhanced to ensure grant expenditures accurately reflect payroll costs. Views of Responsible Parties: Management acknowledges the control deficiencies identified related to payroll allocations within the newly implemented payroll system. These issues were identified early following implementation and were promptly investigated. Management isolated the issue to a population of 20 employees with unique circumstances and quantified the associated impact. Corrective actions have since been implemented to strengthen controls and ensure payroll charges to grant awards accurately reflect actual time worked. These actions include updates to grant allocation setup procedures within the payroll system, enhanced review and approval processes for time reporting, and additional oversight of payroll and grant charging activities. Management believes these enhancements mitigate the risk of similar errors occurring in the future.