Audit 414792

Information on the Major Federal Program: Program Name: Technical and non-financial assistance to health centers Assistance Listing Number: 93.129 Criteria: As it relates to the allowability of costs, part 2 CFR §200.403 of the Uniform Guidance states, in part, that “costs must meet the following criteria to be allowable under Federal awards: (b) conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, and (g) be adequately documented.” Specifically related to compensation costs, 2 CFR §200.430(g) states that “charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (vi) support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award.” Condition: During our testing of payroll costs charged to the grant, we noted that the Organization did not maintain effective controls to ensure payroll costs were consistently and accurately allocated to the grant throughout the year. Specifically, significant turnover within the accounting department resulted in inconsistencies in the methodology used to calculate and assign payroll costs to the grant. As a result, we identified certain instances in which payroll costs charged to the grant for specific employees exceeded the amounts supported by their actual time incurred. While the allocation methodology applied to individual employees resulted in certain overallocations, total payroll costs charged to the grant were less than the total payroll costs that would have been supportable based on actual personnel activity for the grant as a whole. Cause: The Organization experienced significant turnover within its accounting department during the year. Responsibilities related to grant accounting and payroll allocations were transitioned among multiple individuals, and management did not maintain sufficient review controls to ensure payroll allocation methodologies were consistently applied and adequately supported. Effect or Potential Effect: Failure to comply with the allowable cost requirements of the Uniform Guidance related to charging payroll costs to grants could result in expenses from Federal awards being inaccurately reimbursed and reported. Questioned Costs: None. Repeat finding: This is not a repeat finding. Recommendation: We recommend that management review and update its procedures for calculating and reviewing payroll allocations charged to federal awards. Such procedures should include documented methodologies, retention of supporting records, and an independent review of grant allocations to verify costs are based on actual personnel activity and are consistent with grant requirements. Views of Responsible Officials: Management agrees with the finding and has implemented updated procedures designed to improve oversight and review of payroll allocations charged to federal awards.