2023-002 - Allowable Costs/Cost Principles – Internal Control and Compliance over Payroll Expenditures (Significant Deficiency)
Condition:
Community Development Block Grants-Entitlement Grants Cluster
We determined the City did not comply with federal requirements for direct payroll charges. Payrol...
2023-002 - Allowable Costs/Cost Principles – Internal Control and Compliance over Payroll Expenditures (Significant Deficiency)
Condition:
Community Development Block Grants-Entitlement Grants Cluster
We determined the City did not comply with federal requirements for direct payroll charges. Payroll costs for all eight employees tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation methods/plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on these grants. In April 2023, the City has required all Housing Department staff to retrospectively fill out timesheets pertaining to actual hours worked on the program during fiscal year 2023, The City performed reconciliation on Housing Department staff payroll charges to reflect actual hours worked. However, the admin supporting staff did not use the same method due to the low percentage of the payroll charges to the grant.
Housing Voucher Cluster
We determined the City did not comply with federal requirements for direct payroll charges. Payroll costs for all five employees tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation methods/plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on these grants. In April 2023, the City has required all Housing Department staff to retrospectively fill out timesheets pertaining to actual hours worked on the program during fiscal year 2023, The City performed reconciliation on Housing Department staff payroll charges to reflect actual hours worked. However, the admin supporting staff did not use the same method due to the low percentage of the payroll charges to the grant.
Management Comment.
City Response and Corrective Action:
Management has enforced the existing policy, which mandates that employees funded by federal grants document the actual time they spend working on those grants. The staff responsible for reporting the actual time spent on federally funded programs dedicate a significant portion of their time to these programs. However, there are administrative staffs that provide support towards these programs, and tracking their time spent towards the time spent on the program would require more time and effort than the minimal allocation the City allocated for each administrative staff as appropriated in the Adopted Budget. The minimal cost allocated towards the program is significantly less than the actual time spent as well as being below the 10 percent de-minimis indirect rate as mentioned in Note 4 on the FY 2022-23 Single Audit. Management will have supporting administrative staff to keep track of their actual work hours moving forward and/or establish an indirect cost allocation plan moving forward.
Name of Responsible Person:
Ron Garcia, Director of Community Development
Imelda Delgado, Housing Manager
Rose Tam, Director of Finance
Albert Trinh, Accounting Manager