For the year ended June 30, 2022 audit, the audit team noted that payroll, personnel costs, and other than personnel service expenses were not being allocated by cost center on a monthly basis. This issue resulted in errors in the amount charged to various programs resulting in the need for a materi...
For the year ended June 30, 2022 audit, the audit team noted that payroll, personnel costs, and other than personnel service expenses were not being allocated by cost center on a monthly basis. This issue resulted in errors in the amount charged to various programs resulting in the need for a material allocation adjustment. In accordance with Uniform Guidance 200.405, costs that benefit multiple programs should be allocated to the programs based on the proportional benefit. Lincoln Hall did not have the adequate cost allocation mechanisms in place to properly allocate expenses throughout the year.
We have been taking several steps to address the issue with allocating costs. The Federal Award Finding and Questioned Costs Finding Number 2022-002 is a result of the initial way in which the general ledger and payroll systems were set up, requiring the majority of allocation work to be done manually in Excel. These manual allocations were done in detail after fiscal year-end to ensure our financial statements at year-end were not misstated. However, this detailed allocation work was not being done on a monthly basis.
We have upgraded the Serenic Navigator accounting system two times to improve its accounting capabilities and have also implemented additional allocation processes including allocation of payroll expenses of federal awards. We currently use line-item allocations in The Serenic Navigator for direct costs that are allocated when invoices are paid. During FY 2022 we are continuing to review and revise our process in order to allocate expenses (particularly payroll costs) in the general ledger on a monthly basis for allocations in the past that were performed at the end of the fiscal year.
The goal of our corrective actions is to significantly limit the material reallocation of costs by function at year-end and provide us with accurate cost allocations on a monthly basis. This will allow for more accurate reporting on a month-to-month basis and, therefore, will generate more timely and accurate financial information, thereby improving our compliance with cash management during the grant period.