Audit 413808

Criteria or specific requirement: 2 CFR §200.303, Internal Controls, requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance the entity is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effective internal controls include procedures to ensure financial reports submitted to federal agencies are accurate, complete, and reviewed prior to submission. Condition: The Organization did not have a documented review and approval process for Federal Financial Reports (FFRs) prior to submission to the granting agency. Questioned costs: None. Context: During testing of Federal Financial Reporting, CLA noted that the one Federal Financial Report submitted during the audit period was prepared and submitted without evidence of review or approval by an individual independent of the preparer. Cause: Management had not established a formal review and approval control over the preparation and submission of Federal Financial Reports. Effect: Federal Financial Reports may be submitted with inaccurate, incomplete, or unsupported information, resulting in noncompliance with federal reporting requirements and potentially affecting grant funding and monitoring decisions. Repeat finding: No. Recommendation: The Organization should implement a documented review and approval process for all Federal Financial Reports prior to submission. Evidence of review and approval should be retained to demonstrate compliance with federal reporting requirements and to help ensure reports are accurate and complete. Views of responsible officials: There is no disagreement with the audit finding.

Criteria or specific requirement: 2 CFR §200.430(g), Compensation - Personal Services, requires charges to federal awards for salaries and wages to be based on records that accurately reflect the work performed. Such records must reasonably support the distribution of employee activities and be supported by a system of internal controls that provides reasonable assurance that charges are accurate, allowable, and properly allocated. Condition: The Organization did not maintain adequate documentation to support the distribution of payroll costs charged to federal awards. During testing of payroll disbursements, CLA noted instances in which employee timesheets were not maintained to adequately document time and effort. Further inquiry revealed that certain employees were allocated to funding sources using predetermined labor distribution percentages established during the budgeting process rather than tracking and documenting actual time worked by program or funding source. Questioned costs: $151,627 Identification of how questioned costs were computed: For 6 employees, the Organization charged payroll costs to the contract using predetermined labor percentages rather than documented time and effort records. While certain services performed by these employees are known to benefit the grant program, the amount of payroll costs that were allowable and properly chargeable to the grants could not be determined because adequate time and effort documentation was not maintained to support the allocations. Therefore, the amount reported as questioned costs are the amount of salaries charged to the grant for which there was no time and effort documentation. Context: During testing of payroll expenditures charged to federal programs, CLA compared employee timesheets to payroll costs allocated to grant awards. For two employees selected for testing, the hours documented on timesheets did not reconcile to the payroll costs charged to the grants. Management explained that labor distribution percentages for certain positions were established through the annual budgeting process and used to allocate payroll costs throughout the year. However, employees charged using these allocation percentages did not maintain documentation of actual time and effort supporting the distribution of salary costs among funding sources. In addition to the two employees tested, management identified a total of four additional employees that did not maintain proper time and effort documentation, resulting in six total employees. Cause: Management had not established procedures requiring affected employees to document actual time and effort by program or funding source and relied on budgeted allocation percentages to distribute payroll costs to federal awards. Effect: Payroll costs charged to federal awards may not accurately reflect the actual work performed and may result in unsupported or improperly allocated expenditures. As a result, the organization is at increased risk of noncompliance with federal requirements governing compensation charged to federal awards. Repeat finding: No. Recommendation: The Organization should implement procedures to ensure payroll costs charged to federal awards are supported by records that accurately reflect the work performed. Employees whose salaries are charged to multiple programs or funding sources should maintain contemporaneous time and effort documentation sufficient to support the distribution of payroll costs. Management should periodically review this documentation to ensure payroll allocations to federal awards are accurate, supported, and compliant with federal requirements. Views of responsible officials: There is no disagreement with the audit finding.