Finding #2024-002 – Material Weakness – Activities Allowed or Unallowed, Allowable Cost Principles 93.667 Social Services Block Grant - HAP - Bridge Housing and Case Management Payroll Approval Condition During our audit of the Organization for compliance with Uniform Guidance requirements, we noted...
Finding #2024-002 – Material Weakness – Activities Allowed or Unallowed, Allowable Cost Principles 93.667 Social Services Block Grant - HAP - Bridge Housing and Case Management Payroll Approval Condition During our audit of the Organization for compliance with Uniform Guidance requirements, we noted that the client was unable to provide sufficient evidence that the amount being requested for reimbursement was based on actual effort of employees during reimbursement period. In total 40 payroll samples were selected for testing and the lack of support for time spent by employees occurred for all items tested. Recommendation We recommend that Organization establish and enforce formal procedures requiring documented management review and approval of all payroll transactions including review of employees level of effort before they are processed. The review process should be supported by evidence, such as approval signatures, electronic audit trails, or other verifiable records. In addition, management should perform regular reconciliations of payroll to ensure compliance with federal and organizational policies. Management’s Corrective Action Plan Management concurs with this finding. During the fiscal year, the Organization experienced significant turnover within the Accounting and Finance Department, which impacted the consistent execution nd documentation of established payroll review and approval procedures. Although payroll was reviewed prior to processing, management acknowledges that documentation evidencing the review and approval was not consistently maintained to demonstrate compliance with internal control requirements. The Organization recognizes the importance of documented management review as a key internal control over payroll expenditures, particularly for ensuring the appropriate stewardship of federal funds. To address this finding, management has implemented the following corrective actions: Formalized written payroll processing procedures that require documented review and approval of each payroll register prior to transmission for processing. Established a standardized payroll approval checklist to document management’s review of payroll changes, employee additions and terminations, pay rate changes, deductions, and payroll totals before each payroll is processed. Clearly defined segregation of duties between Human Resources, Payroll, and Finance to ensure appropriate authorization and oversight throughout the payroll process. Implemented a centralized electronic retention process for payroll registers, approval documentation, and supporting reports to ensure records are complete and readily available for audit. Conducted training with Human Resources and Finance personnel on payroll approval requirements and documentation standards. Included periodic supervisory reviews of payroll documentation as part of the Finance Department’s internal monitoring process to ensure ongoing compliance. Management believes these corrective actions have strengthened internal controls over payroll processing and approval and will ensure that payroll transactions are consistently reviewed, approved, and appropriately documented prior to payment. Contact Person: Kathy Desmond, President and CEO Anticipated Completion Date: June 30, 2025