Audit 413457

Finding 2025-003 – Allowable Costs/Cost Principles U.S. Department of Health and Human Services – Passed through PA DHS - Foster Care – Title IV-E (ALN 93.658 and Pennsylvania Department of Human Services Children, Youth, and Families (CYF) Program (Major DHS Program) Condition: The County did not have a documented process to ensure that payroll costs charged to the Foster Care—Title IV-E program and other state and federal programs were allocated based on records that accurately reflected the work performed. During the audit, the County allocated payroll costs using a semiannual two-week time study. The County did not document an evaluation of whether the two-week periods were representative of employees’ activities for the remainder of the year. The County also did not document periodic after-the-fact reviews or adjustments to verify that the final payroll allocations were accurate, allowable, and properly allocated among the applicable programs and cost objectives. Criteria: Under 2 CFR 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Those records must be supported by internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. When interim estimates are used, the system must produce reasonable approximations of actual activity, significant changes must be identified timely, and periodic after-the-fact reviews and necessary adjustments must be performed. Cause: The County had not established and implemented written procedures requiring management to evaluate the representativeness of the time-study periods, document changes in employee activities, perform periodic after-the-fact reviews, and make adjustments when payroll allocations did not reasonably reflect actual activity. Effect: Because the County did not document that the time-study periods were representative or perform documented after-the-fact reviews, payroll costs charged to the program may not have been accurately or equitably allocated. This condition could result in unsupported or unallowable Federal charges and inaccurate program expenditures. Questioned Costs: All but one Children and Youth employee has their time included in the cost pool that is spread out between each of the Children and Youth programs based on the two-week time study. As there is no true up, the amount of questioned costs, if any, is not able to be determined. Recommendation: We recommend that the County establish procedures that provide a system and related documentation to support an equitable allocation of payroll costs. Views of Responsible Officials: See separate Corrective Action Plan.