Audit 407020

Criteria: Uniform Guidance requires that charges to Federal awards be based on records that accurately reflect the work performed and be supported by adequate documentation. Condition: In testing payroll transactions, we noted payroll charges for which the District could not provide supporting documentation sufficient to substantiate allowability. Supporting timecard documentation was not provided because the underlying timecards were not retained by the School and were therefore not available for audit. Cause: The District did not have adequately designed and/or operating controls to ensure required payroll support documentation for Federal award charges was retained and available for audit. Management did not ensure that timecard records (or equivalent time-and-effort documentation) were preserved in accordance with applicable record retention requirements, and monitoring controls were not sufficient to prevent or detect the destruction of documentation needed to support payroll charges to Federal awards. Questioned costs: Unknown. Effect or potential effect: Because the supporting timecard documentation was not retained, the District cannot demonstrate that payroll charges to Federal awards are allowable and properly supported. This condition increases the risk of noncompliance with Federal award requirements, including record retention and documentation requirements. Additionally, because payroll is often a significant cost component of Federal awards, the condition represents a significant deficiency in internal control over financial reporting and compliance. Recommendation: Policies and procedures surrounding payroll should be reviewed with all relevant personnel. A formal process should be implemented that requires the completion, approval, and retention of time-and-effort documentation (timecards or other time-and-effort documentation) for all employees whose compensation is charged in whole or in part to Federal awards. Additionally, monitoring procedures should be implemented at the management level to perform periodic checks of compliance with such documentation policies. Views of Responsible Officials: We created a procedure and ensured that the appropriate staff members know their responsibilities in filing time and effort documentation.