Audit 408838

Payroll Allocation Documentation for Federal Awards Criteria Under 2 CFR 200.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Internal controls should provide reasonable assurance that payroll costs charged or allocated to federal awards are properly supported and consistently applied. Condition SELF maintained employee timesheets documenting hours worked, however, the timesheets did not identify the specific programs or cost objectives on which employees worked. Employees assigned to a single program were generally charged directly to their home department through the payroll system. For employees performing administrative, management, and other shared functions, payroll costs were not allocated to individual federal programs during the fiscal year. Following audit procedures and confirmation from the City of Philadelphia that certain City contracts included federal pass-through funding, management performed after-the-fact allocations of shared payroll costs to the applicable federal awards. SELF did not maintain contemporaneous documentation supporting the basis for these allocations during the audit period. Cause Management was not aware during the fiscal year that certain City of Philadelphia contracts contained federal passthrough funding subject to the Uniform Guidance requirements. As a result, procedures had not been established to identify federal awards or to contemporaneously document and allocate shared personnel costs benefiting those awards. Effect Without documentation supporting payroll allocations, the Organization cannot demonstrate that salaries charged to federal awards accurately reflect the work performed or that shared personnel costs were allocated using a consistently applied, reasonable methodology. This increases the risk that payroll expenditures charged to federal awards may not comply with Uniform Guidance requirements. Questioned Costs We were unable to determine the amount, if any, of questioned costs. Auditors’ Recommendation Management should establish procedures to identify all federal funding, including pass-through funding received through nonfederal entities, at the time awards are executed. The Organization should implement written policies requiring that payroll costs charged or allocated to federal awards be supported by contemporaneous documentation reflecting the work performed and that shared personnel costs be allocated using a documented, reasonable, and consistently applied methodology that complies with 2 CFR 200.430. Management’s Response and Corrective Action Plan Management was unaware that certain City of Philadelphia contracts contained federal pass-through funding until confirmation was received from the City during the audit. Upon becoming aware of the federal funding, management developed an allocation methodology for shared personnel costs and has begun implementing procedures to identify federal funding at award inception and to document payroll allocations contemporaneously for future reporting periods.