Audit 412896

Significant Deficiency in Internal Control over Compliance Finding number: 2025-001 AL number: 17.259 AL title: Workforce Innovation and Opportunity Act (WIOA) Name of federal agency: U.S. Department of Labor Repeat finding: Yes - 2024-002 Criteria: Uniform Guidance (2 CFR 200.303 and 2 CFR 200.430) requires that charges to federal awards be accurate, allowable, and supported by sufficient documentation. Internal controls should be designed and implemented to provide reasonable assurance that payroll costs are accurately billed to federal programs. Condition: During testing of payroll disbursements for allowable costs and activities under the Workforce Innovation and Opportunity Act ("WIOA"), two payroll billing errors were identified totaling $151. The errors related to payroll costs charged to the grant for two individuals in July 2025. Specifically, the reimbursement calculation utilized total compensation amounts that included incentive pay rather than the eligible salary amounts required for grant reimbursement purposes. Payroll charges are entered by accounting staff and subject to monthly review by the CFO. While this review process represents a key control, the errors identified indicate that the review was not sufficiently detailed to detect all inaccuracies in the reimbursement calculations. Cause: The errors resulted from insufficient internal control over the review of grant reimbursement calculations and supporting documentation prior to submission. Specifically, controls were not operating effectively to verify that salary amounts used in reimbursement requests agreed to approved payroll records and allocation schedules. Effect or potential effect: The absence of a robust review process increases the risk of noncompliance with grant requirements and the potential for inaccurate billing to federal programs, even if the financial impact is not material. Recommendation: We recommend enhancing the existing review process to ensure payroll charges billed to federal programs are supported by underlying documentation such as payroll registers, time records, and allocation spreadsheets. This could include developing a standardized reconciliation checklist or requiring secondary review for accuracy. Strengthening the existing control will help minimize the risk of billing errors due to human oversight. Views of responsible officials: Management acknowledges that errors occurred in the July 2025 WIOA reimbursement calculations due to the use of compensation amounts that included incentive pay rather than the appropriate base salary amounts. While management had revised reimbursement calculations in other periods to exclude incentive compensation, the July calculations were not fully updated resulting in these exceptions. Management believes the errors were isolated and immaterial in nature but recognizes the opportunity to strengthen review procedures surrounding grant reimbursement calculations. Additional review procedures and reconciliation steps will be implemented to enhance the accuracy of future grant billings. Management also notes that participation in the WIOA program concluded in October 2025, reducing the likelihood of similar issues occurring within this specific program in future periods. Responsible party: Nora Davis, Chief Financial Officer