Audit 411097

Federal Award Program: U.S. Department of Commerce Pacific Coast Salmon Recovery - Pacific Salmon Treaty Program (Assistance Listing #11.438) Type of Finding: Significant deficiency in internal control over compliance Compliance Requirement: Allowable costs Criteria: Federal award terms and Uniform Guidance cost principles require costs charged to federal awards to be adequately supported and authorized. In addition, effective internal control over compliance should include documented approval of employee salary/wage rates and subsequent rate changes, such as through a pay rate authorization form or equivalent documentation, and independent review or approval of changes to pay rates before those rates are used to charge payroll costs to federal awards. Condition: Audit procedures identified that the Organization maintains employee salary and wage rates in a master rate spreadsheet; however, it does not maintain documentation to support approved pay rates. Evidence of approval for initial pay rates and subsequent rate changes was not retained. In addition, the master spreadsheet serves as the sole source of pay rate information and may be modified without documented oversight. Cause: The Organization has not designed and implemented a formal personnel action or pay rate approval process that requires documented authorization of initial pay rates and subsequent rate changes. The Organization relies on an internally maintained, editable spreadsheet as the primary support for pay rate information, without sufficient documented independent review, approval, or restriction over changes. Effect and Context: Unauthorized, unsupported, or incorrect pay rates could be entered into the payroll system and charged to federal awards without timely prevention or detection. If payroll or personnel compensation costs are charged to a major federal program, this deficiency could result in unallowable or unsupported payroll costs being charged to the program. Our sample size was 40 payroll trans ctions, and all selections in our sample used personnel pay rates for which evidence of approval could not be provided. Our sample was not statistically valid. Repeat finding: No. Auditor’s recommendation: We recommend that the Organization establish and implement formal payroll rate documentation and approval controls. At a minimum, management should maintain documentation to support all initial salary/wage rates and subsequent rate changes; require documented approval by an appropriate supervisor, executive, or governing body designee before pay rate changes are entered into the payroll system; restrict access to the master rate spreadsheet and maintain version history or change logs, and require independent review of all pay rate changes before payroll is processed. Management’s response: Management is in agreement with the finding. See corrective action plan.

Federal Award Program: U.S. Department of Commerce Pacific Coast Salmon Recovery - Pacific Salmon Treaty Program (Assistance Listing #11.438) Type of Finding: Significant deficiency in internal control over compliance Compliance Requirement: Procurement Criteria: The Uniform Guidance (2 CFR § 200.318 through 327) requires recipients and subrecipients to maintain and use documented procurement procedures that are consistent with applicable federal statutes, regulations, and the procurement standards in 2 CFR part 200. It also requires written standards of conduct covering conflicts of interest for employees engaged in the selection, award, and administration of contracts. Condition: The written procurement policy was not sufficient to demonstrate compliance with the Uniform Guidance procurement requirements applicable to the major program. Although the policy included certain procurement-related provisions, it did not fully incorporate the procurement standards and required procedures under 2 CFR § 200.318 through 200.327, including requirements related to allowable procurement methods, competition, procurement-specific conflicts of interest, and contractor eligibility considerations. As a result, the written policy did not provide an adequate framework to support compliance with federal procurement requirements for procurements charged to the major program. Cause: The written procurement policy was not designed or updated to incorporate the Uniform Guidance procurement standards applicable to federal awards. Management appears to have relied on its general contractor procurement practices and separate conflict-of-interest policy rather than developing a comprehensive federal procurement policy that conforms to 2 CFR part 200. In addition, there did not appear to be an effective review process to ensure that written procurement procedures for the major program included all required federal procurement elements. Effect and Context: Because the written procurement policy does not conform to the Uniform Guidance, the subrecipient may procure goods or services using procedures that do not provide full and open competition, do not obtain required quotations, or do not meet the limited conditions for noncompetitive procurement. This increases the risk that federal funds may be used for procurements that are not allowable under the award terms and 2 CFR part 200. It also increases the risk of unsupported procurement decisions, conflicts of interest, awards to suspended or debarred parties, and contracts that omit required federal provisions. Repeat finding: No. Auditor’s recommendation: Management should revise its written procurement policy to conform to the Uniform Guidance procurement standards applicable to federal awards. Management’s response: Management is in agreement with the finding. See corrective action plan.