Audit 413648

2025-001 Internal Controls over Compliance - Allowable Activities and Costs - Payroll (Significant Deficiency) Legal Services Corporation 09.744060 Basic Field Grant Grant Period: 1/1/2025 – 12/31/2025 Contract Number: 744060 U.S Department of Justice 16.575 Victims of Crime Act Grant Periods: 10/1/24 – 9/30/25 and 10/1/25 – 9/30/26 Contract Number: 4055105; 4055106 Supreme Court of Texas Basic Civil Legal Services Program Grant Period: 9/1/2023 – 8/31/2026 Contract Number: 26030 Criteria: Under 2 CFR Section 200.303(a) a non-Federal entity is required to establish and maintain internal controls over compliance with Federal statutes, regulations, and the terms and conditions of the Federal grant. In addition, under 2 CFR Section 200.430 – Compensation – personal services, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Budget estimates may be used for interim accounting purposes, but budget estimates alone do not qualify as support for charges to Federal awards. The entity’s system of internal controls must include a process to review after-the-fact interim charges made to a Federal award to budget estimates and make any necessary adjustments such that the final amount charged to the Federal award is accurate, allowable and properly allocated. Texas Grant Management Standards also contains provisions for selected items of cost for Compensation – personal services which mirrors the requirements of 2 CFR Section 200.430. Condition: The Organization’s internal control process to compare actual time charged on the employee’s time sheet to the budget allocation charged to the grant to determine if budget estimates reflect reasonable approximations of the activities performed did not consistently occur. For 8 of 74 payroll transactions selected for testing for the two major federal programs, the underlying time sheet provided was not signed by either the employee or the supervisor and/or was completed or approved several months after the pay period. The same condition was noted for the Organization’s BCLS Program. For 4 of the 40 payroll transactions selected for testing the underlying time sheet provided was not signed by either the employee or the supervisor and/or was completed or approved several months after the pay period. In addition, for 3 of 40 payroll transactions selected for testing, the Organization was unable to provide a time sheet to substantiate the employee’s time for that period. The finding appears to be a systemic issue. The samples were not statistically valid. Cause: While the Organization's internal control processes require that time sheets be completed and reviewed and approved by appropriate personnel on a timely basis, these policies are not consistently followed. In some cases, time sheets are completed, reviewed, or approved only when required for grantor or auditor review. Time sheets supporting personnel costs for employees that have subsequently left the Organization may not be available or reproducible. Effect: Failure to review time sheets or maintain time sheets to support compensation allocations could result in an over/under statement of compensation charged to the grants. Questioned Costs: There were no questioned costs for Legal Services Corporation Basic Field Grant ALN 09.77460 or Victims of Crime Act ALN 16.575. For the Basic Civil Legal Services Grant Contract No. 26030, known questioned costs for the three missing time sheets totaled $2,291. Likely questioned costs which were extrapolated from known questioned costs to the remaining payroll population for the grant were calculated to be $16,322. Perspective: There is not consistent evidence of the Organization’s review and reconciliation of time sheets to budget estimates which affects both the allowable activities and allowable costs requirements. Repeat Finding: Yes Auditor’s Recommendation: We recommend the Organization review its timekeeping policies and procedures to ensure time sheets are retained for all payroll transactions to support the allocation of compensation between cost objectives and that these are provided timely to the Director of Finance to reconcile the allocation of personnel costs charged on the time sheets to the budget estimates used to bill grantors. This should be done in conjunction with monthly or quarterly billings (or other determined regular interval), at fiscal year-end, and at the end of the grant year (if different from the Organization’s fiscal year). Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.