Audit 413336

Criteria: Uniform Guidance (2 CFR §200.430 – Compensation for Personal Services) requires that charges to federal awards for salaries and wages be supported by a system of internal controls that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Personnel expenses must be supported by records that accurately reflect the work performed and must reasonably reflect the total activity for which the employee is compensated. These records must also be incorporated into the official records of the organization. Condition/context: During our testing of payroll expenditures charged to federal awards, we identified a discrepancy between approved time and effort documentation and payroll allocations charged to the grant. Specifically, supporting documentation reflected that 20 percent of the employee’s time was allocated to the federal award; however, 25 percent of employee’s compensation was charged to the federal grant for one employee. Questioned costs: None Effect: The control designed to ensure payroll expenditures were charged to federal awards in accordance with approved time and effort documentation did not operate effectively. This increases the risk that payroll costs charged to federal awards may not be accurately allocated or properly supported. Cause: The discrepancy occurred because controls over the review and processing of payroll allocations were not operating effectively to ensure payroll charges agreed to the approved time and effort documentation prior to being charged to the federal award. Repeat finding: No. Recommendation: The Entity should establish and implement documented procedures for reviewing and approving payroll allocations charged to federal grants to ensure charges are accurate and supported by approved time and effort documentation. Views of responsible officials and planned corrective actions: Management agrees with the recommendation. NDN Collective has strengthened its review procedures over payroll allocations charged to federal awards. When a Program Manager identifies a change to an employee's payroll allocation, the change will be communicated directly to the Finance team for timely review and processing. The Finance team will review payroll allocations to ensure they are consistent with approved time-andeffort documentation prior to processing. In addition, there will be a secondary review of payroll allocations and supporting documentation to verify that charges to federal awards are accurate, properly supported, and consistently applied in accordance with Uniform Guidance requirements. These review procedures have been documented and incorporated into the Organization's payroll allocation process for all federal awards. Management believes these enhanced controls will strengthen compliance over allowable costs and reduce the risk of payroll allocation discrepancies in future reporting periods.