Audit 412747

Federal Agency: U.S Department of Health and Human Services Assistance Listing Numbers: 93.224 and 93.527 Health Center Program Cluster Award Numbers: H80CS24177, H8N54116, H8HCS44965, Q8J54475, H2E50157, and Q8M49126 Criteria: In accordance with the Uniform Guidance’s compensation requirements (2 CFR 200.430 Compensation – personal services), payroll expenses must be based on records that accurately reflect the work performed and supported by a system of internal controls that provides reasonable assurances that charges are accurate; allowable and reasonable; and properly allocated. The Uniform Guidance allows for use of budget estimates on an interim basis. When using budget estimates on an interim basis, grantees must reconcile estimates against actual time or effort on a regular basis to ensure that estimates conform to actual staff activity. Grantees must make adjustments in the payroll distribution to align with actual time. [X] Compliance Finding [X ] Significant Deficiency [ ] Material Weakness Condition: During fiscal year 2025, the Organization charged payroll costs to federal programs based on predetermined budgeted percentages rather than actual time and effort of employees. Cause: The Organization did not have a process or controls in place to track and document the time and effort employees spent toward each federal award. Effect: Noncompliance with documentation of personnel expense standards; improper allocation of salary and fringe benefits. Questioned Costs: Indeterminable. The Organization’s payroll expenditures for personnel providing in-scope services appear to be sufficient to cover the amounts of grant funding drawn. However, we were not able to verify employee time and effort toward providing program services. Recommendation We recommend the Organization enhance its timekeeping processes to ensure payroll charges accurately reflect actual work performed on federal awards. If budget estimates continue to be used, they should be reconciled regularly against actual effort. Alternatively, the Organization could implement an after-the-fact certification system to document that salaries charged to federal programs are reasonable and consistent with actual work performed. Views of responsible officials and planned corrective action Management agrees with the finding. During fiscal year 2025, payroll costs charged to federal awards were allocated based on budgeted percentages rather than documented actual time and effort. Management acknowledges that controls were not sufficient to ensure compliance with Uniform Guidance requirements for documenting and allocating personnel costs charged to federal programs. Management is committed to strengthening internal controls over payroll allocations to ensure personnel costs charged to federal awards are supported by appropriate documentation and accurately reflect work performed.