Audit 411544

Criteria Pursuant to 2 CFR § 200.430, Compensation—Personal Services, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed and support the distribution of employees' compensation among specific activities or cost objectives. Standards regarding time distribution are in addition to the standards for payroll documentation. Additionally, the California School Accounting Manual (CSAM), Procedure 905, Documenting Salaries and Wages, reiterates the requirements and provides guidance to local educational agencies for maintaining Personnel Activity Reports (PARs), or equivalent documentation, to support payroll costs charged to federal and other restricted programs. Condition During the initial testing of payroll expenditures charged to Elementary and Secondary School Emergency Relief (ESSER) Funds and other restricted funding sources, errors were noted related to the documentation to support payroll costs: • Four employees charged to the ESSER program all had signed PARS forms that were dated August 21, 2023, and covered the entire fiscal year ending June 30, 2024. Therefore, the PARs did not represent an after-the-fact distribution of the employees' actual activities and were not prepared regularly to coincide with one or more pay periods. • Additionally, one of the four PARS forms received for the initial sample of ESSER employees was not signed. Testing was expanded to another four employees and three additional payroll periods. For the extended sample, all PARs forms met the requirements of representing an after-the-fact distribution of the employees' actual activities, were prepared at least monthly and coincided with one or more pay periods, and contained the employee’s signatures. Through further interview with management it was determined that the incorrectly dated PARs forms were an isolated administrative error supported by the expanded testing results. Effect Support for payroll costs charged to federal and restricted programs did not consistently comply with 2 CFR § 200.430(g) – Standards for Documentation of Personnel Expenses. As a result, expenditures could be questioned or disallowed by the granting agency, and the District may be unable to demonstrate compliance with federal documentation requirements. Cause The District initially planned to spend ESSER funding on a capital project understood to be allowable under program requirements. Subsequently, the District concluded the project did not clearly align with the allowable ESSER uses and decided to transfer allowable payroll costs to maximize the use of the remaining ESSER Funds. The District’s documentation of the retro-active transfer of personnel expenses inadvertently included an earlier date rather than the date the form was completed to reflect the after-the-fact distribution of each employee’s actual activity. Questioned Cost There are no related questioned costs. Repeat Finding This is not a repeat finding. Recommendation Establish procedures when personnel expenses are retro-actively transferred to any federal or other restricted programs to ensure support documentation is consistent with the requirements of 2 CFR § 200.430(g) and California School Accounting Manual (CSAM), Procedure 905 Documenting Salaries and Wages. Ensure PARs forms or equivalent documentation are completed correctly with adequate explanation to support federal and other restricted program payroll expenditures. Additionally, continue to monitor current procedures to ensure all personnel expenses charged to federal program are supported by PARs or other documentation that reflect an after-the-fact distribution of the employees' actual activities, is prepared regularly and coincides with one or more pay periods, and is signed by the employee. District Response and Action Plan The District agrees that our PARS forms needed improvement and have since implemented a better system to document the after-the-fact distribution of the employees' actual activities.