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.
2026-102: Allowability of Costs / Internal Controls over Payroll Federal program:Health Center Program Cluster / FAL 93.224 Health Center Program U.S. Department of Health and Human Services Federal grant number H80CS00416 Questioned costs: Unknown Criteria: In accordance with 2 CFR, §200.430(g)(1)(i), 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 which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: For 3 out of 40 payroll transactions tested, we noted that the employees were compensated at rates that did not agree to their approved payroll contract or other management-approved documentation. Cause: Unknown Effect: Employees' compensation costs charged to the Federal program may not have represented an accurate allocation of grant funds, which could result in unallowed costs being charged to the program. It was not practical to extend our auditing procedures sufficiently to determine questioned costs, if any, that may have resulted from this finding. Recommendation: The Center should develop policies and procedures to help ensure pay rates are consistent with supporting employee agreements or other management-approved documentation.
Finding Number: 2025-002 Federal Program: Ending the HIV Epidemic: A Plan for America Federal Award Identification Number: UT833926 Assistance Listing Number (ALN): 93.686 Federal Awarding Agency: Department of Health & Human Services Compliance Requirement: Activities Allowed or Unallowed & Allowable Costs/Cost Principles Pass-through Entity: Direct Award Repeat Finding: No Prior Audit Finding Number: N/A Material Weakness – Payroll Approvals Criteria 2 CFR § 300.106 gives regulatory effect to U.S. Department of Health & Human Services for 2 CFR § 200.303(a), which requires non-Federal entities to establish and maintain effective internal control over Federal awards. These controls must provide reasonable assurance that awards are managed in compliance with applicable statutes, regulations, and award terms, and should align with standards issued by the Government Accountability Office or the Committee of Sponsoring Organizations of the Treadway Commission. Additionally, 2 CFR § 200.430(g)(1)(i) requires that charges to Federal awards for salaries and wages be supported by records that accurately reflect the work performed and are backed by a system of internal controls ensuring the charges are accurate, allowable, and properly allocated. The City of Columbus’ Department of Public Health policy titled, “Staff Timekeeping for Grant Funded Positions,” Part I, requires all grant funded staff to complete timesheets reflecting total hours worked and grant-related hours. Section D, specifically, requires that timesheets must be signed by and submitted for approval on the Tuesday following the end of a pay period. Timesheets submitted for approval must be approved by either the employees’ supervisor or the director of the program by the Thursday following the end of a pay period. Condition Although the City has established policies consistent with Federal requirements, supervisory review of timesheets was not performed timely in all instances. During testing of the payroll records under AL #93.686 (Ending the HIV Epidemic: A Plan for America), none of the 40 timesheets tested were reviewed within the required timeframe referenced in the Criteria section. Cause Supervisory personnel did not consistently follow established procedures for timely review and approval of timesheets. Effect Failure to follow the established internal control policy and ensuring all timesheets are appropriately reviewed and approved by a knowledgeable supervisor, within the required timeframe referenced in the Criteria section, could result in unallowable costs being allocated to a federal program and could ultimately result in noncompliance and/or a questioned cost. Recommendation The City should reinforce its existing policies with supervisory staff and implement additional procedures, if necessary, to ensure timesheets are reviewed and approved within the required timeframe prior to charging costs to Federal programs. Officials’ Response: Refer to the Corrective Action Plan.
Federal Agency: Legal Services Corporation (LSC) U.S. Department of Health and Human Services Federal Program Name: LSC Grants Aging Cluster - Special Programs for the Aging, Title III, Part B Assistance Listing Number: 09.706060 93.044 Federal Award Identification Number and Year: 09-706060 - 2025 Various – Aging Cluster Pass-Through Agency: Various – Aging Cluster, see SEFA Pass-Through Numbers: Various – Aging Cluster, see SEFA Award Period: Various – see SEFA Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), indicate that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) indicate that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. It also states that costs must be adequately documented. The LSC financial guide also articulates that a cost allocation base must be cost-driven and that budgeted numbers or percentage of revenue are not allowable allocation bases. Condition: During our testing we noted: • LSC Payroll Transactions: Fourteen instances of errors totaling a net under allocation amount of $2,657. The under allocation was due to various over allocations of costs to other grants that were not based on employees’ time charged to the respective other grants in their timesheets. We also noted that the Organization allocated costs from the general fund (which consists of two unrestricted grants and the LSC grants) to LSC grants using allocation bases of percentage of revenue and projected revenue of the grants that make up the general fund. However, as revenue was recognized as expenses were incurred for the general fund, the allocations based on revenue approximated an allocation method based on a cost driver. • LSC Native American Grant Payroll Transactions: Three instances where a total of $4,383 was charged to payroll costs via an estimated fixed percentage allocation of employee time spent on the LSC Native American grant. The Organization was not able to provide supporting documentation for the fixed percentage. • Aging Cluster Payroll Transactions: Seven instances of errors totaling a net overallocation of payroll costs of $144 where an unsupported allocation percentage was used to allocate the employee's pay to the grant. The Organization used an allocation base of monthly hours coded to the grant per timesheets divided by 150 hours for the monthly pay period instead of total monthly hours listed in the employees’ timesheets. • Aging Cluster Fringe-benefit Transactions: Five instances where $2,797 of additional medical insurance costs were allocated to grants based on reconciliations of budgeted grant revenue to period-to-date actual grant expenses that showed revenue exceeding expenses. Based on discussions with management and subsequent recalculations, it appears that the allocated costs (and more) could have been allocated via an allowable cost driver method (grant salaries compared to total organization salaries for the year). Questioned Costs: None. Context: These 29 instances were noting during testing of 120 transactions. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC allocation base (based on revenue or projected revenue) for the period divided by the total allocation base (based on revenue or projected revenue) coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2024-002 and 2024-004. Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Lastly, the Organization could consider removing LSC from the general fund into its own fund, and using fringe benefit rate and indirect cost rate allocation methods to simplify its cost allocation process. Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Manual adjustments primarily result from planned internal reconciliations and reviews designed to ensure the accuracy of CLS allocations. These reconciliations are conducted on a monthly basis and form an integral part of the Organization’s internal control framework. Additionally, with respect to the Native American grant transactions, CLS implemented the necessary correction to the referenced percentage effective beginning in 2026. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations specify that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Blood Diseases and Resources Research Assistance Listing Number: 93.839 Award Period: 3/1/2022 – 12/31/2028 Type of Finding: - Significant Deficiency in Internal Control over Compliance and Other Matters Criteria or specific requirement: 2 CFR Section 200.430(g) states that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Condition: During our testing of allowable costs for payroll related expenses, we noted one instance where payroll was overcharged by $125.32. Questioned costs: $125.32 Context: We noted 1 of the 40 tested payroll costs was overcharged to the grant by $125.32. Cause: The overdrawn of the funds was due to a formula error in the Organization's spreadsheet. Management's internal controls missed this miscalculation in their review of the allowable expenditures spreadsheet before costs were charged to the grant. Effect: $125.32 overcharged to grant in payroll expense. Repeat finding: No Recommendation: We recommend that the Organization reviews their calculations around payroll costs before drawdowns and that evidence of this review is retained. Views of responsible officials: There is no disagreement with the audit finding.
Criteria Management is responsible for establishing and maintaining effective internal control over financial reporting, including controls to ensure payroll transactions are properly authorized and supported. Per 2 CFR, Part 200.430(g), payroll charges must be supported by records and systems of internal controls that ensure accuracy, allowability, and proper cost allocation. Condition AIChE did not consistently maintain documented evidence of management approval for employee pay rate changes. While pay rate changes were entered into the payroll system and reflected in payroll records, documentation demonstrating formal approval was not retained in certain instances. Cause Approved pay rate documentation was not consistently retained in payroll records. Effect or Potential Effect The lack of approved pay rate documentation increases the risk of unauthorized salary adjustments and improper payroll expenditures and could result in unallowable costs being charged and non-compliance with grant requirements. Questioned Costs None. Context For 6 of 25 payroll samples, pay rate forms with documented approval were not available. Identification as a Repeat Finding This finding is not a repeat finding. Recommendation Management should implement procedures to ensure that documented approval of pay rate changes is consistently retained. Views of Responsible Officials Management will formally document the CEO and CFO approval of all pay rate changes. Although reviews were performed in 2025, formal approval documentation was not maintained.
Finding 2025 – 001 Subject: Apprenticeship USA Grants – internal controls Federal Agency: U.S. Department of Labor Federal Programs: Apprenticeship USA Grants Assistance Listing Number (ALN): 17.285 Direct Agency: Department of Labor Compliance Requirements: Allowable Costs/Cost Principles Audit finding: Significant Deficiency Condition and Context An effective internal control system was not designed or implemented at the Organization related to payroll and incentives/subscriptions to ensure compliance with requirements related to the grant agreements and Allowable Costs/Cost Principles compliance requirements. Payroll The Organization did not design an effective system of internal controls to ensure that actual payroll costs were charged to the grant based on each employee’s time and effort for the time period January through June 2025. The Organization charged amounts that did not reflect the actual amounts paid which created costs charged to the grant over and above those allowable. The total payroll costs found to be unallowable totaled $23,228 and were computed as the difference between the amount charged to the grant and the time and effort allocations of actual payroll costs. Incentives/Subscriptions The Organization did not design an effective system of internal controls to ensure that incentive/subscription costs for the individuals shops were charged to the grant based on amounts agreed upon with the grantor. The total incentive/subscription costs found to be unallowable totaled $7,688 and were computed as the difference between the amount charged to the grant and a capped amount of $1,500 per shop for subscriptions and $8,500 per shop for incentives. Criteria ‘The auditee shall: . . . (b) Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs. . . ." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (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… (g) Be adequately documented… 2 CFR 200.430(i) states in part: “Standards for documentation of Personnel Expenses (1) 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 which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) 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, a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using difference allocation bases; or an unallowable activity and a direct or indirect cost activity…” Cause The Organization’s management had not developed or implemented a system of internal controls to ensure compliance with the grant agreement, internal policy and the compliance requirements listed above. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs that could result in the repayment of federal funds. Questioned Costs Known questioned costs of $30,916 were identified as detailed in Condition and Context. Recommendation We recommend that the Inter-Industry Organization’s management establish controls to ensure compliance with the grant agreement and the Allowable Costs/Cost Principles compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Assistance Listing: 66.957 Greenhouse Gas Reduction Fund: National Clean Investment Fund and 66.959 Greenhouse Gas Reduction Fund: Solar for All Finding No. 2025-004: Significant Deficiency in Controls over Documenting Time Sheet Reviews Condition: During testing of payroll transactions for the SFA and GGRF programs, controls related to timesheet reviews and payroll processing were not consistently performed or documented. Specifically, for the SFA program, all eleven (11) payroll transactions tested ($32,607) lacked documented evidence of timesheet review. For the GGRF program, two (2) out of nine (9) payroll transactions tested ($6,490) did not include documented evidence of timesheet review. In addition, payroll was processed without a formal secondary review after preparation by the Director of People and prior to submission through third-party service provider. While management indicated that reviews were performed, supporting documentation was not consistently retained, and a formalized process to evidence such review was not in place. Criteria: In accordance with Uniform Guidance (2 CFR 200.303 and 200.430), entities are required to maintain effective internal controls over payroll processes. This includes maintaining appropriate supporting documentation (such as timesheets), performing, and documenting supervisory review of payroll and time records, and ensuring that payroll costs charged to federal awards are accurate, allowable, and properly approved. Cause: These conditions appear to result from insufficiently formalized review control procedures and inconsistent documentation retention practices, particularly during and following system transitions. Additionally, payroll review and approval protocols were not clearly defined or consistently applied. Effect or Potential Effect: The absence of consistently documented review controls over timesheets and payroll processing limits the ability to verify the accuracy, completeness, and allowability of payroll costs. This increases the risk that errors or unsupported payroll charges could occur and not be identified in a timely manner, which may result in noncompliance with applicable federal requirements. Questioned Costs: None Perspective Information: While control deviations were noted in the areas of timesheet review and payroll processing, the exceptions identified were limited to the sample tested and were primarily related to documentation and consistency of control execution rather than evidence of pervasive or intentional noncompliance. Management indicated that reviews were performed; however, documentation to support these reviews was not consistently retained. Strengthening documentation practices and formalizing control procedures will enhance transparency, support compliance with Uniform Guidance requirements, and improve the organization’s ability to demonstrate effective internal control over payroll-related expenditures charged to federal programs. Identification of Repeat Finding: Not applicable since this is a new finding. Recommendation: We recommend that management enhance payroll controls by requiring documented supervisory review and approval of all timesheets prior to payroll processing, implementing a formal secondary review of payroll registers before submission, and formalizing payroll policies and procedures. These procedures should clearly define roles, responsibilities, and documentation requirements to support consistent application and evidence of control performance. Views of Responsible Officials: Management agrees with the finding. While timesheet and payroll reviews were performed, documentation of these reviews was not consistently retained, and a formal secondary review of payroll prior to processing was not in place. Management has implemented corrective actions, including establishing a formal, documented review process for timesheets and payroll prior to disbursement. Reviews will be performed within a centralized system or documented workflow to ensure audit evidence is retained. Additionally, a secondary review control has been implemented requiring independent approval of payroll before submission through Paylocity. Management will incorporate these procedures into standard operating practices and monitor compliance to ensure controls are consistently applied across programs.
Allowable Costs and Activities Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Health Center Program Cluster Assistance Listing Number: 93.224 Federal Award Identification Numbers and Year: 6 H80CS29010; 6 H80CS29011 Award Period: June 1, 2024 – May 31, 2025; June 1, 2025 – May 31, 2026 Criteria or Specific Requirement: Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; and 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 (2 CFR 200.430(i)(1)). Condition: Payroll costs for employees allocated to the grant at less than 100% were based on budgeted or estimated allocation percentages that varied by period; however, the Organization was unable to provide contemporaneous, after-the-fact documentation to support the actual distribution of effort for payroll transactions selected for testing (other than December 2025). Management maintains a dynamic allocation file that is updated monthly and does not retain historical, point-in-time versions of allocation support, resulting in a lack of auditable documentation to support payroll allocations to the program. Questioned Costs: $49,307 Context: Twenty-two (22) of forty (40) transactions selected for testing, related to payroll costs for employees allocated at less than 100% across multiple grants, based on budgeted percentages. Cause: The Organization has not implemented a formal process to retain contemporaneous time and effort documentation or point-in-time allocation records to support payroll costs charged to federal awards. Instead, management relies on a continuously updated allocation worksheet that is not version-controlled or archived, resulting in the inability to reconstruct actual effort allocations for prior periods. Effect: As a result, payroll costs charged to the grant may not be supported by records that accurately reflect the actual work performed, increasing the risk that allowable costs are misstated and not in compliance with 2 CFR 200.430. Repeat Finding: No Recommendation: Management should implement a formal time and effort reporting process that ensures payroll costs charged to federal awards are supported by contemporaneous documentation of actual work performed, requires retention of historical, point-in-time allocation records for each payroll period (e.g., version-controlled or archived reports), and includes a documented review and approval process that compares allocation percentages to employee attestations or activity reports to validate the reasonableness and accuracy of costs charged to the grant. Views of Responsible Officials: There is no disagreement with this finding.
Finding 2025-002 Insufficient Documentation of Personnel Expenses Type of Finding: Noncompliance and Material Weakness in Internal Control over Compliance Condition: The Organization charges a material amount of payroll-related costs to its major federal program. However, for 7 months of the year, it did not maintain sufficient documentation to support the level of effort charged to the award, as required by federal regulations. While staff members are required to complete timesheets, the format did not capture the level of detail needed to substantiate payroll allocations to federal programs. Additionally, there was no formal process for supervisory review and approval of these timesheets. Although no overcharges or double-dipping were identified, the lack of adequate documentation results in known and likely questioned costs due to noncompliance with documentation requirements. A new system was implemented in August 2025 which improved the deficiencies and compliance matters for the remainder of the year. Criteria: According to Uniform Guidance 2 CFR §200.430(g), the Organization's charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. The records also must reasonably reflect the total activity for which the employee is compensated. The records also must 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; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Cause: This issue appears to stem from two primary causes: (1) the timesheet system in use was not designed to capture the information needed to support federal payroll charges, and (2) there is a lack of formal internal controls around timekeeping, including supervisory review and approval of reported time. Possible of Known Effect: As a result, a material amount of salary and payroll taxes charged to the federal program is not adequately supported in accordance with 2 CFR 200.430. This leads to both known and likely questioned costs. The absence of proper documentation increases the risk of misallocated expenses and undermines the Organization’s ability to demonstrate compliance with federal cost principles. Questioned Costs: Known questioned costs of $15,361 were identified. Repeat Finding: This finding is a repeat from the prior year. The previous finding was 2024-002. Recommendation: We recommend that the Organization revise its timekeeping system to ensure that staff members record time in a manner that clearly supports the allocation of payroll costs to federal programs. Additionally, we recommend the development and documentation of internal controls to oversee the time reporting process and ensure compliance with federal requirements. The changes implemented in August 2025 appear to address the issues identified in this finding. Views of Responsible Officials: The Organization started using features within Gusto beginning in August 2025 that capture employee name, pay period, hours worked by funding source, detailed notes (if applicable) and supervisory approval. The Organization trained all staff whose salaries are charged in whole or in part to grants on documentation and time allocation requirements. Monthly timesheets charged to grants are reviewed before submission for reimbursement. All timesheets require approval by a supervisor before payroll is processed and the final payroll requires two approvals by the CEO. Accounting Manager and/or the Development Manager. The Organization will conduct quarterly internal reviews to ensure compliance and adjust as needed.
Program: COVID-19 Community Development Block Grant Cluster Entitlement/Special Purpose Grants Federal Financial Assistance Listing Number: 14.218 Federal Grantor: U.S. Department of Housing and Urban Development Award No. and Year: B23-MC-20-0004 and 2023, B24-MC-20-0004 and 2024, B-25-MC-20-0004 and 2025 Program: COVID-19 Housing Voucher Center Cluster Federal Financial Assistance Listing Number: 14.871, 14.879 Federal Grantor: U.S. Department of Housing and Urban Development Award No. and Year: KS004VO0127 and 2025, EHV KS004 and 2025, KS004DV0001 and 2025 Compliance Requirements: Activities Allowable or Unallowed and Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR Section 200.303(a), Internal Controls, state that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. 2 CFR Section 200.430, Compensation – Personal Services, states that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing, we identified the following instances where the timesheet was not reviewed and approved by the employee’s supervisor: • One (1) timesheet charged to the Community Development Block Grant (CDBG) program • Two (2) timesheets charged to the Housing Voucher Center Cluster (HVC) Cause: The City's internal control procedures permitted certain timesheets to be processed without documented supervisory approval. Effect: Because the City's internal control procedures permitted an exception to documented supervisory approval for the timesheets tested, evidence of review and approval was not available. As a result, the operation of the review control could not be verified for those timesheets.Questioned Costs: No questioned costs were identified as a result of our procedures. Context/Sampling: A nonstatistical sampling of forty (40) timesheets were selected for testing for the CDBG program. A nonstatistical sampling or forty (40) timesheets were selected for testing for the HVC program. The condition above was identified during our procedures related to activities allowed or unallowed and allowable costs/cost principles. Repeat Finding from Prior Years: No Recommendation: We recommend that management strengthen controls over payroll processing by ensuring that all timesheets charged to federal programs are reviewed and approved by an independent supervisor prior to payroll processing. Management should also periodically monitor compliance to confirm that approval controls are operating as designed. View of Responsible Officials: See separately issued Corrective Action Plan.
Finding 2025-001 – Allowable Cost Principles – Payroll Evidence of Review (Significant Deficiency in Internal Control over Compliance) Criteria – In accordance with the Uniform Guidance 2 CFR 200.303 regarding internal controls, the Agency must establish and maintain effective internal control over the federal award that provides reasonable assurance that the Agency is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Additionally, per 2 CFR 200.430(i) “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed… These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.” Condition/context – Out of the total population of payroll transactions charged to this program, we selected a sample of forty (40) transactions using a random sampling methodology and noted three (3) instances where employee timecards did not have evidence of review or approval by the appropriate director or supervisor of the program in the system. We understand that the payroll process is designed to move forward even if approval is not documented in the system. Effect – Without proper internal controls over timecards, there is an increased likelihood that payroll costs charged to the federal program are incorrect. While timecard review/approval was not documented for 3 samples, based on testing performed, the related payroll was allowable per the grant. Cause – There appears to be inadequate internal controls and/or documentation of controls over review and approval of timecards, to ensure time is accurately reported and ultimately payroll costs are properly charged to the program. Repeat finding – This is not a repeat finding. Recommendation – The Agency should reexamine its processes and controls over payroll. This may also include providing additional training on the importance and relevance of accurate timecards and their impact with compliance requirements. Views of responsible officials – The responsible officials acknowledge the finding, concur with the recommendation and are actively working with the Human Resource Department to implement the program identified within the associated corrective action plan.
Material Noncompliance - Allowable Costs/Cost Principles - Compensation Questioned Costs: $ 43,500 New or Repeat: New. Criteria: Uniform Guidance, 2 CFR § 200.430, requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed and that such records be supported by a system of internal control providing reasonable assurance that the charges are accurate, allowable, and properly allocated. Records must reasonably reflect the total activity for which the employee is compensated and support distribution of salary and wages among specific activities or cost objectives when the employee works on more than one federal award, non-federal award, or other activity. In addition, 2 CFR § 200.403 requires that costs charged to federal awards be necessary and reasonable for the performance of the federal award and be adequately documented, among other allowability factors. Condition: During our testing of payroll/personnel costs charged to the Community Development Financial Institutions Program award, Assistance Listing No. 21.020, we noted that the Organization approved employee wages and maintained payroll records (for example, payroll registers, pay rates, and evidence of payment); however, the Organization did not maintain timesheets, time-and-effort records, personnel activity reports, periodic certifications, or other equivalent records sufficient to accurately reflect the work performed and support the allocation of wages and related fringe benefits to the CDFI Program award. The Organization was unable to provide documentation evidencing the employees’ actual work performed that supported the allocation of compensation costs to the Community Development Financial Institutions Program award and, where applicable, between Community Development Financial Institutions Program-eligible activities and other activities/cost objectives. Cause: The condition appears to have occurred because the Organization did not have a sufficiently designed or consistently implemented process to ensure personnel activity documentation (or other equivalent recorded evidence) was prepared, reviewed, and retained to support allocations of payroll and related fringe benefits charged to the federal award. Context and Effect: We selected 10 employees and/or payroll transactions charged to the federal award, for the year ended December 31, 2025. The sample included compensation charges (wages and fringes) totaling $43,500 which was the total population allocated to this federal award. Of the items tested, 10 employees and/or payroll transactions totaling $43,500 did not include sufficient documentation (such as timesheets, periodic certifications, or other equivalent records) to support that the charges accurately reflected work performed and were properly allocated to the Community Development Financial Institutions Program -eligible activities/cost objectives. As a result of the condition, the Organization did not demonstrate that salary, wage, and related fringe benefit charges to the federal award were supported by records that accurately reflect the work performed and that the amounts charged were properly allocated among cost objectives. This increases the risk that compensation costs charged to the federal award may be unsupported, unallowable, or not properly allocated and could result in repayment, disallowances, or additional monitoring by the federal agency or pass-through entity. Questioned Costs: Questioned costs are $43,500 (wages and fringe benefits). This amount represents the portion of costs determined to be unsupported. Recommendation: We recommend that the Organization strengthen its policies, procedures, and internal controls over compensation costs charged to the federal award to ensure compliance with 2 CFR § 200.430 and 2 CFR § 200.403. Specifically, management should: 1. Establish written procedures requiring recorded evidence to support salary, wage, and fringe benefit charges to the federal award and to support allocation among cost objectives. 2. Implement a documented process for personnel activity reporting and/or periodic certifications (or other equivalent documentation) that reasonably reflects actual work performed and supports the allocation of compensation costs to eligible activities. 3. Require supervisory review and approval of personnel activity documentation/certifications on a periodic basis and retain documentation in the grant file and/or payroll file. 4. Perform periodic reconciliation and after-the-fact review of payroll and fringe benefit allocations, including timely adjustments when actual activity differs from budget estimates or planned allocations. 5. Provide training to program and finance personnel on the documentation standards in 2 CFR § 200.430 and allowability factors in 2 CFR § 200.403. 6. Enhance management review controls to ensure compensation costs are supported prior to posting to the general ledger and/or requesting reimbursement. Views of Responsible Officials: Management concurs with this finding. During the audit period, the Organization maintained payroll records, compensation documentation, and payroll allocation schedules; however, it did not maintain personnel activity reports, periodic certifications, or other after-the-fact documentation sufficient to support compensation costs charged to the Community Development Financial Institutions Program in accordance with 2 CFR § 200.430. The Organization's methodology relied on management-established allocation percentages based on employee responsibilities and anticipated level of effort supporting CDFI Fund activities. While management believes the costs charged to the award were incurred in support of eligible program activities, the Organization recognizes that documentation supporting the allocation methodology did not meet the standards required under Uniform Guidance. By December 31, 2026: 1. The CFO will establish a cost allocation plan which includes a methodology to support salary, wage, and fringe benefit charges, and other applicable costs, to the federal award and to support allocation among cost objectives. 2. The CFO will implement a documented process for personnel activity reporting and/or periodic certifications (or other equivalent documentation) that reasonably reflects actual work performed and supports the allocation of compensation costs to eligible activities. 3. The CFO will reconfigure the current workforce management system to ensure projects, departments, and contextual details are logged at the source. 4. The COO will review the existing timesheet submission and review policy to ensure compliance with federal requirements. The policy will require supervisory review and approval of personnel activity documentation/certifications consistent with the payroll cadence and retain documentation in the grant file and/or payroll file. The CFO will review and enforce compliance with timesheet submission requirements. 5. The CFO will implement a dynamic allocations module within Sage Intacct to facilitate automated allocation of time and fringe benefits to federal and other programs. 6. The CFO will ensure that the systems established perform periodic reconciliations and after-the-fact review of payroll and fringe benefit allocations. The CFO will make timely adjustments when actual activity differs from budget estimates or planned allocations. 7. The CFO, COO, and other personnel working on federal programs will receive training on the documentation standards in 2 CFR § 200.430 and allowability factors in 2 CFR § 200.403. 8. The CFO and COO will provide training to program and finance personnel on the documentation standards in 2 CFR § 200.430 and allowability factors in 2 CFR § 200.403. 9. The CFO will, as part of the monthly close process, review compensation charged to federal awards to ensure all costs are appropriate and supported prior to requesting reimbursement.
2025-003: Supporting Timecards not Maintained - Significant Deficiency Type of Finding: Significant Deficiency in Internal Control over Compliance and Compliance – Allowable Costs (Payroll) Federal Agency: Chicago Department of Public Health Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number: 1217907 Award Period: January 1, 2023 to December 31, 2025 Criteria: Under 2 CFR 200.430, charges to federal awards for salaries and wages must be supported by records that accurately reflect the work performed, are incorporated into the official records of the non-federal entity, and are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. In addition, 2 CFR 200.203 requires the Organization to establish and maintain effective internal control over federal awards. Consistent with these requirements, entity policy requires contemporaneous time and effort records for all employees whose salaries are charged to federal awards. Condition and Context: The auditor tested 27 payroll items for the audit period and identified 3 exceptions related to missing timecards for 3 employees for the June 30 pay period. As a result, the Organization was unable to provide complete contemporaneous support for certain payroll costs charged to the federal award. The exceptions identified in the sample indicate that the entity’s controls over payroll documentation were not fully effective for the period under audit. Cause: The Organization’s controls over the preparation, retention, and retrieval of payroll time and effort documentation did not operate effectively for the affected pay periods. Based on available information, required records were either not maintained in accordance with policy or were not retained and retrievable within the Organization’s official records. Effect: Because required supporting documentation was not available, certain payroll costs charged to the federal program could not be fully substantiated as accurate, allowable, and properly allocated to the award. Unsupported payroll costs may be subject to disallowance, and the control deficiency increases the risk that additional payroll charges to the program may not be adequately supported. Questioned Costs: Unknown Repeat Finding: No. Recommendation: We recommend the Organization should strengthen controls over payroll documentation for employees whose compensation is charged to federal awards and maintain payroll support in an organized and retrievable manner within the Organizations records. Views of Responsible Officials and Planned Corrective Action: See corrective action plan.
2025-004 - Lack of Written Federal Program Policies Type: Material Weakness Condition: The Organization does not have documented policies and procedures specific to the administration of the Community Resilience Hubs for Detroit Neighborhoods program. This includes the absence of written guidance on key compliance areas such as payments, procurement, allowability of costs charged to federal programs, compensation, and travel costs under Uniform Guidance. Criteria: Per 2 CFR 200.303 and 200.331 of the Uniform Guidance, non-federal entities are required to establish and maintain effective internal controls and written policies to ensure compliance with federal statutes, regulations, and the terms and conditions of federal awards. These policies should be tailored to the specific requirements of each federal program. Cause: The entity has not developed formal written policies and procedures for the Community Resilience Hubs for Detroit Neighborhoods program, possibly due to reliance on informal practices or general administrative policies that do not address federal-specific requirements. Effect: Without documented policies, there is an increased risk of noncompliance with federal requirements, inconsistent program administration, and lack of accountability. This may result in questioned costs, audit findings, or potential repayment of federal funds. Recommendation: We recommend that the Organization develop and implement written policies and procedures specific to the Community Resilience Hubs for Detroit Neighborhoods program. These should include: - Payments in accordance with §200.302 (6) - Procurement in accordance with §200.318 - Allowability of costs charged to federal programs in accordance with §200.302 (7) - Compensation in accordance with §200.430 and §200.431 - Travel costs in accordance with §200.474. Training should also be provided to staff responsible for administering the program to ensure consistent application of these policies. Views of Responsible Officials: Management acknowledges the auditor’s finding regarding the absence of formally documented federal program policies. We recognize the importance of maintaining written procedures to ensure consistent compliance with Uniform Guidance requirements and to strengthen internal controls over federal awards. While informal practices have historically guided our federal program administration, we agree that formalizing these policies will enhance transparency, accountability, and operational efficiency. Management is currently in the process of developing written policies covering key areas such as procurement, allowable costs, subrecipient monitoring, and cash management. We anticipate completing this documentation and implementing the policies by December 31, 2026. We are committed to continuous improvement and appreciate the auditor’s recommendations as part of our efforts to maintain strong compliance and stewardship of federal funds.
AL title: Supplemental Nutrition Assistance Program Employment & Training (SNAP E&T) Name of federal agency: Department of Agriculture Name of pass-through entity: Los Angeles County Department of Economic Opportunity (DEO) and Foundation for Community Colleges California Employment Development Department Repeat finding: No Criteria: Under the Uniform Guidance, specifically 2 CFR 200.430, charges to Federal awards for compensation must be supported by a system of internal control which provides reasonable assurance that costs are allocated appropriately and accurately. Per 2 CFR §200.403, allowable costs must be "necessary, reasonable, and adequately documented." Condition: During our testing of payments charged to the federal major program, we noted that employee timesheets lacked evidence of review and approval. Federal regulations require that expenditures charged to Federal awards be properly reviewed, approved, and documented to ensure allowability and compliance with grant terms. Cause: Due to the size of the Organization's programmatic operations, the implementation of controls over the program is still in progress, as the Federal program is relatively new to the Organization. As a result, controls were not consistently applied to all personnel charged to the program. Effect: Management provided documentation on personnel costs allocated to the program, but was unable to consistently provide evidence of review. Lack of review increases the risk of unauthorized or unallowable costs being charged to the Federal award, potentially leading to questioned costs and noncompliance with Federal grant requirements. Context: This issue applied to compensation costs for four salaried employees charged to the grant, with expenditures of approximately $138,000 out of the total award expenditures of $4,569,611. Questioned cost: None. Recommendation: Management should review the requirements of CFR 200.430 and ensure that current processes, whether digital or hard-copy driven, are consistent with the requirements of the Uniform Guidance. In addition, management should consider adding additional resources to its payroll approval process. Views of responsible officials: The Organization has made significant progress in strengthening its timekeeping processes over the past 18 months. In 2025, the agency transitioned approximately 800 weekly transitional workers from a paper-based timekeeping process to an electronic timekeeping system. In 2026, the agency implemented an upgraded workforce management system that provides enhanced scheduling, monitoring, and supervisory oversight capabilities. Management recognizes the importance of full compliance with timekeeping requirements. Given the size and complexity of the Organization's operations, including a large workforce distributed across multiple programs and locations, implementation of system and process changes requires substantial planning, training, and operational coordination. To support these efforts, the agency has dedicated additional resources and established clearly defined responsibilities to drive implementation and oversight. The agency continues to refine procedures, provide training, and leverage system capabilities to strengthen controls and ensure consistent compliance across the Organization.
AL title: Workforce Innovation and Opportunity Act (WIOA Cluster) Name of federal agency: Department of Labor Name of pass-through entity: California Employment Development Department Repeat finding: Yes Criteria: Under the Uniform Guidance, specifically 2 CFR 200.430, charges to Federal awards for compensation must be supported by a system of internal control which provides reasonable assurance that costs are allocated appropriately and accurately. Per 2 CFR §200.403, allowable costs must be "necessary, reasonable, and adequately documented." Additionally, 2 CFR §200.302(b)(3) requires non_x0002_Federal entities to maintain records that sufficiently detail financial transactions to support Federal expenditures. Condition: During our testing of payments charged to the federal major program, we noted that employee timesheets lacked evidence of review and approval. Certain employees charged to the grant did not prepare timesheets and a separate tracking system was used. Federal regulations require that expenditures charged to Federal awards be properly reviewed, approved, and documented to ensure allowability and compliance with grant terms. Cause: The Federal program was new to the organization and controls over the program had not been fully established. Turnover in the accounting department contributed to the lack of resources for tracking these costs. Effect: Management provided documentation on personnel costs allocated to the program, but was unable to provide evidence of review. Lack of review increases the risk of unauthorized or unallowable costs being charged to the Federal award, potentially leading to questioned costs and noncompliance with Federal grant requirements. Context: This issue applied to approximately 50% of the compensation costs charged to the grant expenditures. Management performed time studies on some of the employees whose costs were shared among programs, and the local granting organization did not cite this as a finding in their review of their subrecipient's activities. Questioned cost: Unable to be determined. Recommendation: Management should review the requirements of CFR 200.430 and ensure that current processes, whether digital or hard-copy driven, are consistent with the requirements of the Uniform Guidance. In addition, management should consider adding additional staff to its accounting and/or grants management team. Views of responsible officials: The Organization has made significant progress in strengthening its timekeeping processes, as described in finding number 2025-002. This program ended in March 2025, and therefore management was unable to complete full remediation of the processes before completion of the grant.
Finding No. 2025‐006: Allowable costs – Control deficiency in internal control over compliance. 93.940 HIV Prevention Activities Health Department Based Criteria: In accordance with 45 CFR 75 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, Subrecipient will develop, implement and maintain financial management and control systems, which include at a minimum accurate payroll, accounting and financial reporting records, cost source documentation, effective internal and budgetary controls, and determination of reasonableness, allowability and allocability of costs, and timely and appropriate audits and resolution findings. Condition: During our review, we noted that for 2 out of 8 sampled costs we were incorrectly coded and charged to the grant. Cause: The Organization failed to ensure that all costs charged to the grant were reasonable, allowable, and allocable to the grant. Effect: Improperly coded and charged costs could result in unallowable costs. Questioned costs: $2,932. Recommendation: Management should review the current procedures and the requirements of Section 200.430 and implement changes where necessary to ensure that costs are charged in accordance with Section 200.430. Management’s Response: See corrective action plan.
According to 2 CFR 200.430 Compensation - personal services, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. During the audit we observed documentation showing employees recording a full 8 hour work day on time sheets while leaving work early. Management was instructed to cease tracking and compensate employees for full time anyway. Employee(s) doing the following activities and still getting compensated for a full 8 hour work day; Employee(s) leaving their assigned worksite prior to the end of work day, employee(s) not calling off or leaving early for appointments without correctly calling off nor submitting the proper leave slips, employee(s) arriving late and leaving early daily. Management override and lack of monitoring/enforcement. Questioned costs, weakened internal controls increasing risk of ongoing misuse; potential repayment, sanctions, or loss of funding eligibility. Immediate reinstatement of accurate timekeeping; repayment of questioned costs; strengthened controls and training; possible referral for further investigation. Management agrees
Reportable Finding Considered a Significant Deficiency and Noncompliance Finding – Allowable Costs/Cost Principles – Payroll Documentation Agency: U.S. Department of State, Bureau of Population, Refugees, and Migration (PRM) Program: U.S. Refugee Admissions Program ALN# 19.510 Grant Number: SPRMCO25CA0026, SPRMCO25CA0028, and SPRMCO24CA0337 Program Year: 2025 Criteria: 2 CFR §200.430(i) requires charges to federal awards for salaries and wages to be supported by records that accurately reflect the work performed and be incorporated into the entity’s system of internal control, which provides reasonable assurance that charges are accurate, allowable, and properly allocated. Condition: During testing of payroll transactions charged to the PRM programs, we noted that although employees completed timesheets, the timesheets did not contain evidence of supervisory review or approval. Based on discussions with management, supervisor review was performed informally; however, no documented approval, such as a signature, electronic approval, or other evidence of review, was retained. Cause: The Organization did not have a formalized process requiring documented supervisory approval of timesheets during the audit period. As a result, review activities were not consistently evidenced and retained. Effect: Without documented supervisory review, the Organization cannot demonstrate that time charged to federal awards was reviewed for accuracy, allowability, and proper allocation. This increases the risk that payroll costs charged to federal awards may be inaccurate or unsupported. Questioned costs: None Perspective: Statistical sampling was not used; however, a nonstatistical sampling approach was applied in accordance with AICPA guidance. This condition was identified in payroll testing and appears to be systemic, as management indicated documented timesheet approvals were not required during the period under audit. Repeat finding: This is not a repeat finding. Recommendation: We recommend that management implement and maintain a formal timesheet approval process requiring supervisors to review and approve employee timesheets electronically or in writing before payroll is processed. Documentation of the approval should be retained to support payroll costs charged to federal awards. Management’s response (unaudited): See Corrective Action Plan
Finding # 2025-001 Type: Material weakness Type: Immaterial noncompliance Assistance Listing Number: Department of Health and Human Services 93.658 Foster Care Title IV-E Requirement: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Such records must meet the standards as specified in 2 CFR 200 Subpart E Cost Principles §200.430. Condition: Certain entries in the payroll system were entered, reviewed, and approved before the work had been performed. Context: Total payroll charged before the work was performed was approximately $18,200 of the $773,000 total federal expenditures for the year. Cause: The new time keeping system was not implemented correctly. Effect: Payroll costs charged to the grant may not be accurate. Questioned Costs: Approximately $18,200 (extrapolated $34,400) Recommendation: We recommend management use the time tracking system to track all and exact time worked on government grants and programs. In addition, management should ensure that the timecards submitted by staff are reviewed and approved timely after the work is performed. Management’s Response: Management will reconfigure the system to require after-the-fact entry of actual hours worked and to restrict advance entry and approval, reinforce supervisory review procedures to ensure timely and accurate approval of timecards, and provide training to employees and supervisors on federal timekeeping requirements under 2 CFR 200.430. These actions will strengthen internal controls and ensure payroll costs charged to federal awards accurately reflect work performed going forward.
Allowable Costs, Payroll Disbursements - AB Federal Agency: U.S. Department of Housing and Urban Development Federal Program: Housing Voucher Cluster FALN: 14.871/14.879 Federal Award Identification Number and Year: MD023, 2025 Award Period: 1/1/2025-12/31/2025 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Per 2 CFR 200.430, compensation charged to federal awards must be reasonable, adequately documented, and supported by records that accurately reflect the work performed. Payroll costs charged to the Housing Voucher Cluster must be properly allocated based on actual services provided and supported by appropriate documentation. Condition: The Commission did not have adequate procedures in place to ensure time records were reconciled to payroll registers and that payroll costs charged to the Housing Choice Voucher Program were supported by documentation accurately reflecting actual payroll activity. Questioned costs: $1,545.25, see calculation determination under context. Context: During testing of 40 payroll files, exceptions were noted in the following: - For 1 sample, gross wages recalculated based on approved timesheet hours and authorized pay rates totaled $3,830.05, while gross wages recorded on the payroll register totaled $4,836.10, resulting in an unsupported variance of $1,006.05. - As a result of our testing, 2 more individuals were identified who had been paid incorrectly. Cause: The Commission did not have adequate procedures in place to ensure time records were reconciled to payroll registers and that payroll costs charged to the Housing Choice Voucher Program were supported by documentation accurately reflecting actual payroll activity. Effect: The Commission is not in compliance with HUD requirements. Repeat finding: No. Recommendation: We recommend the Commission implement procedures to ensure payroll costs charged to the Housing Voucher Cluster are properly supported, accurately allocated, and reconciled to payroll records. Management should review and approve payroll allocations and investigate any variances to ensure compliance with 2 CFR 200.430. Views of responsible officials: There is no disagreement with the audit finding.
Finding No. 2025-004 Federal Agency: U.S. Department of Health Services (DHS) Federal Program Name: All DHS Assistance Listing Number: All DHS Pass Through Entity: Wisconsin Department of Health and Human Services Federal Award Notification Number and Year: All DHS Award Period: January 1, 2025 – December 31, 2025 Compliance Requirement Affected: Reporting Type of Finding: Material Weakness in Internal Control Over Compliance Criteria or Specific Requirement: Allowable Costs/Cost Principles - CFR 200.430 Compensation - Personal Services requires that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. This documentation must be incorporated into the official records of the recipient. The support must include documentation for the distribution of employee's salary or wages amount for specific activities or cost objectives when the employee works on more than one federal award and when employees work on indirect/direct cost activities and unallowable/direct/indirect cost activities. Condition: During our testing, we noted employee payroll costs are not uniformly allocated to programs, with some allocations not in balance, and other allocations not recorded on the general ledger at all. Also, some payroll costs are directly adjusted out of payroll accounts into programs that have one singular account, making reconciliation difficult. In addition, portions of fiscal and administrative employee payroll costs are not allocated at all. Questioned Costs: None Context: The Human Services Department (the Department) has sixteen cost centers where payroll costs are directly charged through the County's biweekly payroll process, along with payroll allocation accounts in six other cost centers, for a total of twenty-two cost centers. The Department administers more than 40 programs that professional program staff work in. There are also approximately a dozen programs that consist of external vendor payments; these typically have fiscal and administration staff completing clerical, billing, accounting, reporting and contract management tasks. Program counts fluctuate during the year based on funding and grant award periods. Cause: High levels of employee turnover in the Fiscal Division of the Department, coupled with constant changes in funding, programs and regulations have resulted in a piecemeal cost allocation process for payroll costs that varies from program to program. Also, the County as a whole has not updated its accounting system and overall account structure for an extended period of time. Effect: The auditor noted no instances of noncompliance; however, the lack of uniform allocation and uniform account structure could result in the Department over allocation of payroll costs to a grant program. Recommendation: The County should conduct a review of its overall account structure, and the Finance Department should coordinate and assist the Human Services Department in the implementation of a new, uniform account structure. The Human Services Department should develop a uniform payroll allocation process that will allocate all employee costs to each program based on actual hours worked, regardless of funding availability. Views of Responsible Officials: There is no disagreement with the finding.
U.S. Department of Veterans Affairs 2025-002 – VA Supportive Services for Veteran Families Program (SSVF) – Assistance Listing No. 64.033, Grant Period – October 2024 through September 30, 2026. Condition: During testing of 21 payroll transactions, we noted that 7 employees' approved timesheets allocated 100% of their time to programs other than SSVF. These timesheets were approved by both the employees and their supervisors and were used in payroll processing, resulting in payroll register charges being recorded to incorrect program codes. Based on review of employee personnel records and discussions with management, each employee was assigned 100% to the SSVF program during the period and did not perform work for the other programs identified on the timesheets. The auditors traced the related payroll expenditures to the general ledger and noted that the payroll costs were ultimately recorded in the correct amounts to SSVF. Criteria: 2 CFR 200.430(g)(1) indicates that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Cause: Management's controls over the preparation and supervisory review of employee timesheets were not operating effectively to ensure that time distributions accurately reflected employees' assigned program activities prior to payroll processing. Effect: Because inaccurate timesheets were approved and processed, the controls designed to ensure accurate payroll documentation did not operate effectively. Although the payroll expenditures were ultimately recorded to the correct federal program and no questioned costs were identified, inaccurate supporting documentation increases the risk that payroll costs could be charged to the wrong funding source and that errors or noncompliance may not be detected timely. Context: Seven out of twenty-one payroll transaction sampled. Our sample was not a statistically valid sample. This was not a repeat finding from a prior period. Questioned Costs: NoneRecommendations: We recommend that management strengthen controls over payroll time reporting by requiring employees to accurately complete timesheets, enhancing supervisory review procedures to verify program coding before approval, and implementing payroll review procedures to ensure approved timesheets agree with employee funding assignments prior to payroll processing. Management should also provide periodic training to employees and supervisors regarding payroll documentation requirements. Management Response: Management acknowledges the finding regarding the accuracy of supporting payroll documentation for employees charged to the Supportive Services for Veteran Families (SSVF) program. Management agrees that stronger review controls over payroll documentation are appropriate and has implemented additional procedures to ensure supporting documentation is accurate before payroll is finalized.
Finding # 2025-001 Type: Material weakness Type: Immaterial noncompliance Assistance Listing Number: Department of Health and Human Services 93.658 Foster Care Title IV-E Requirement: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Such records must meet the standards as specified in 2 CFR 200 Subpart E Cost Principles §200.430. Condition: Certain entries in the payroll system were entered, reviewed, and approved before the work had been performed. Context: Total payroll charged before the work was performed was approximately $18,200 of the $773,000 total federal expenditures for the year. Cause: The new time keeping system was not implemented correctly. Effect: Payroll costs charged to the grant may not be accurate. Questioned Costs: Approximately $18,200 (extrapolated $34,400) Recommendation: We recommend management use the time tracking system to track all and exact time worked on government grants and programs. In addition, management should ensure that the timecards submitted by staff are reviewed and approved timely after the work is performed. Management’s Response: Management will reconfigure the system to require after-the-fact entry of actual hours worked and to restrict advance entry and approval, reinforce supervisory review procedures to ensure timely and accurate approval of timecards, and provide training to employees and supervisors on federal timekeeping requirements under 2 CFR 200.430. These actions will strengthen internal controls and ensure payroll costs charged to federal awards accurately reflect work performed going forward.
2025-001. Allowable Costs/Cost Principles United States Department of Health and Human Services, Substance Abuse and Mental Health Services Administration Passed Through Vibrant Emotional Health: Substance Abuse and Mental Health Services Projects of Regional and National Significance – 988 National Suicide Prevention Lifeline ALN: 93.243 Substance Abuse and Mental Health Services Projects of Regional and National Significance – 988 National Suicide Prevention Lifeline ALN: 93.243 Substance Abuse and Mental Health Services Projects of Regional and National Significance – 988 National Suicide Prevention Lifeline ALN: 93.243 Substance Abuse and Mental Health Services Projects of Regional and National Significance – 988 National Suicide Prevention Lifeline ALN: 93.243 Passed Through New York State, Office of Mental Health: Substance Abuse and Mental Health Services Projects of Regional and National Significance – 988 S11MY1 ALN: 93.243 Substance Abuse and Mental Health Services Projects of Regional and National Significance – 988 SAMHSA 1.0 Y2 ALN: 93.243 Condition: Uniform Guidance Subpart E, 2 CFR §200.430, covers standards for documentation of compensation-personal services. Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and time spent. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Furthermore, these records should 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; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Time records prepared by employees reflect the total hours worked for the day, but for three administrative employees whose payroll was allocated among multiple federal awards, the records do not reflect the actual time spent on programs funded by a federal award, rather they are based on budgeted hours. Criteria: Salaries and wages charged to federal awards must be supported by documentation prescribed by the Uniform Guidance Subpart E, 2 CFR §200.430. Cause: The Organization allocates payroll to programs funded by awards based on the contract supported budget, which is based on an estimate of the time that work will be performed by individuals. At the time of the audit, the true-up of budgeted hours to actual hours worked had not been completed. Effect: Without time records, which are based on time worked to support the proper allocation of payroll, errors could occur and result in the Organization reporting and receiving reimbursement for the incorrect amount of payroll expenses chargeable to an award. Questioned Costs: We were unable to determine a dollar amount as Personnel Activity Report (PAR) details were not available. Identification of a Repeat Finding: This is a repeat finding from the prior year, 2024-001. Recommendation: The Organization’s use of PAR equivalent documentation, should allow each employee to accurately reflect the time work is performed for each federal award. Views of Responsible Officials and Planned Corrective Action Plan: The Organization agrees with the finding as indicated in the Organization’s corrective action plan, and has modified procedures to reflect actual time worked by employees on PAR equivalent documentation. The Organization’s new payroll and time keeping system should capture information, which will support personnel expenses funded by each federal award.
Finding 2025-007: Inadequate Controls Over Payroll Allocations and Allowable Costs – Significant Deficiency and Instance of Noncompliance Federal Program: Health Center Program (Assistance Listing 93.224) Criteria: Uniform Guidance requires non-Federal entities to maintain records that accurately reflect the work performed and support the distribution of salary and wages charged to federal awards. Internal controls should provide reasonable assurance that payroll costs charged to federal programs are based on records that accurately reflect the employee's actual work performed and that compensation costs are properly allocated among funding sources. Condition: Management represented that employee compensation costs are allocated to federal programs based on time worked and that employee time records are maintained and approved by employees and supervisors. However, the Organization does not have adequate controls to ensure payroll allocations charged to federal programs agree to approved time records or that overtime compensation is allocated in accordance with the employee's actual distribution of work performed. During testing of 40 payroll selections comprising 83 payroll allocation instances, we identified the following exceptions: • Ten payroll allocation instances were noted where the hours charged to the Health Center Program did not agree to the hours reflected on the employee's approved timecard. Management indicated that, for salaried employees, timecards are maintained for internal reporting purposes only and are not used as the basis for allocating payroll costs to grant programs. As a result, payroll costs allocated to the program were manually adjusted and did not consistently agree with the employees' approved time records. • Seven payroll allocation instances were noted where overtime compensation was allocated based on the distribution of regular hours charged to the program rather than the actual hours worked during the overtime period. As a result, overtime costs were not allocated in a manner consistent with the work performed. Cause: The Organization has not implemented effective controls to ensure payroll allocations are based on approved time records and that employees and supervisors are adequately trained regarding timekeeping and program coding requirements. In addition, management has not established procedures to review payroll allocations for consistency with approved time records or to verify that overtime compensation is allocated based on actual work performed. Effect: Because payroll allocations are not consistently supported by approved time records and overtime costs are not allocated based on actual work performed, there is an increased risk that compensation costs charged to federal programs may be inaccurate, unsupported, or improperly allocated. This may result in federal programs being charged for costs that do not reflect the actual services performed for the program. Questioned Costs: $3,447.45, consisting of $3,440.89 related to payroll allocations that did not agree to approved time records and $6.56 related to improper allocation of overtime compensation. Context: During testing of 40 payroll selections and 83 payroll allocation instances, we identified 17 instances where compensation costs were not allocated in accordance with approved time records or actual work performed. The exceptions resulted from manual adjustments to program allocations that differed from employee-approved time records and from the use of allocation methodologies for overtime compensation that did not reflect actual overtime hours worked on the program. The exceptions indicate a systemic deficiency in controls over payroll allocations and compensation cost documentation. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management strengthen controls over payroll allocations by requiring compensation costs charged to federal programs to be supported by employee and supervisor-approved time records that accurately reflect actual work performed. Employees and supervisors should receive training regarding program coding requirements, and management should implement a documented review process to verify that payroll allocations, including overtime compensation, are consistent with approved time records before costs are charged to federal programs. Management Response: Management concurs with the finding. The Organization acknowledges deficiencies in controls over payroll allocation processes and recognizes the importance of ensuring compensation costs charged to federal programs are supported by records reflecting actual work performed. Management is implementing revised payroll allocation procedures requiring allocations to be supported by approved time records and documented review processes. Specifically, compensation charged to each federal award will be based on timesheets or other time and effort records that reflect the actual hours worked on each program, are signed by the employee, and are approved by the employee’s direct supervisor, in accordance with the standards for documentation of personnel expenses under the Uniform Guidance (2 CFR 200.430(g)). Overtime will require advance supervisory approval and will be charged only to the program on which the overtime hours were worked. Additional training will be provided to employees and supervisors regarding timekeeping and grant coding requirements, and management will periodically review payroll allocations to verify compliance with federal requirements. Each pay period, the Accounting Department will reconcile payroll allocations recorded in the payroll system to approved time records before posting related costs to the general ledger and charging them to federal programs, and will investigate and correct any discrepancies before including the costs in a reimbursement request form. Where budgeted allocations are used for interim purposes, they will be compared to actual effort at least quarterly and adjusted as necessary so that final amounts charged to federal awards reflect actual work performed. The Chief Financial Officer (CFO) will review the results of these reconciliations, and all time records, approvals, and reconciliations will be retained in accordance with the record retention requirements of the Uniform Guidance (2 CFR 200.334).
Finding 2025-009: Activities Allowed/Unallowed and Allowable Costs – Significant Deficiency Federal Program: Health Center Program (Assistance Listing 93.224) and Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Assistance Listing 93.918) Criteria: Management should establish and maintain appropriate internal controls to ensure employee compensation is reviewed and approved by authorized personnel independent of payroll processing and accounting functions. Segregation of duties helps reduce the risk of unauthorized or inappropriate compensation changes. Condition: The organization's control documentation indicates that the Chief Executive Officer (CEO) is responsible for reviewing and approving employee pay rates. During testing, we noted that employee pay rate approvals were instead being performed by the CFO, who is also responsible for various accounting and payroll-related functions. Cause: The control was not operating as designed, as responsibility for pay rate approvals had been delegated to the accountant rather than the CEO. Effect: The lack of independent approval over employee pay rates increases the risk that unauthorized or inaccurate compensation changes could occur and remain undetected. No instances of unallowable payroll costs or noncompliance were identified during our testing. Questioned Costs: None. Context: This is a systemic problem. The deficiency relates to the organization's control over the review and approval of employee compensation rates charged to federal programs. Although management's documented control assigns responsibility for pay rate approval to the CEO, the control was not operating as designed because approvals were being performed by the CFO, who also has payroll and accounting responsibilities. Repeat Finding: This is not a repeat finding. Recommendation: Management should ensure that employee pay rates and subsequent compensation changes are reviewed and approved by an appropriate member of management, such as the CEO or another designated individual independent of payroll processing and accounting functions. Documentation of such approvals should be maintained. Management Response: Management concurs with the finding. The Organization acknowledges that employee compensation approvals were not consistently performed in accordance with documented procedures. To strengthen segregation of duties and oversight, responsibility for review and approval of employee compensation changes will be reassigned to appropriate executive leadership personnel independent of payroll processing responsibilities, consistent with the requirement under the Uniform Guidance (2 CFR 200.303) that the Organization establish and maintain effective internal control over federal awards. All pay raises will be initiated upon the recommendation of the respective department directors and must be approved by the Chief Executive Officer (CEO) or Chief Financial Officer (CFO) prior to processing. All compensation changes will be made in accordance with the Organization's Board-approved written compensation policies and will be reasonable and consistent with compensation paid for similar work, as required by the compensation standards for personal services under the Uniform Guidance (2 CFR 200.430). Human Resources will be responsible for ensuring that all pay raise documentation, including department director recommendations and CEO/CFO approvals, is properly completed and filed in the employee’s personnel record. Documentation of all compensation approvals will be maintained in accordance with the record retention requirements of the Uniform Guidance (2 CFR 200.334) and periodically reviewed to ensure compliance with established policies and procedures.
Federal Agency: U.S Department of Health and Human Services Assistance Listing Numbers: 93.224 and 93.527 Health Center Program Cluster Award Numbers: H80CS24177, H8N54116, H8HCS44965, Q8J54475, H2E50157, and Q8M49126 Criteria: In accordance with the Uniform Guidance’s compensation requirements (2 CFR 200.430 Compensation – personal services), payroll expenses must be based on records that accurately reflect the work performed and supported by a system of internal controls that provides reasonable assurances that charges are accurate; allowable and reasonable; and properly allocated. The Uniform Guidance allows for use of budget estimates on an interim basis. When using budget estimates on an interim basis, grantees must reconcile estimates against actual time or effort on a regular basis to ensure that estimates conform to actual staff activity. Grantees must make adjustments in the payroll distribution to align with actual time. [X] Compliance Finding [X ] Significant Deficiency [ ] Material Weakness Condition: During fiscal year 2025, the Organization charged payroll costs to federal programs based on predetermined budgeted percentages rather than actual time and effort of employees. Cause: The Organization did not have a process or controls in place to track and document the time and effort employees spent toward each federal award. Effect: Noncompliance with documentation of personnel expense standards; improper allocation of salary and fringe benefits. Questioned Costs: Indeterminable. The Organization’s payroll expenditures for personnel providing in-scope services appear to be sufficient to cover the amounts of grant funding drawn. However, we were not able to verify employee time and effort toward providing program services. Recommendation We recommend the Organization enhance its timekeeping processes to ensure payroll charges accurately reflect actual work performed on federal awards. If budget estimates continue to be used, they should be reconciled regularly against actual effort. Alternatively, the Organization could implement an after-the-fact certification system to document that salaries charged to federal programs are reasonable and consistent with actual work performed. Views of responsible officials and planned corrective action Management agrees with the finding. During fiscal year 2025, payroll costs charged to federal awards were allocated based on budgeted percentages rather than documented actual time and effort. Management acknowledges that controls were not sufficient to ensure compliance with Uniform Guidance requirements for documenting and allocating personnel costs charged to federal programs. Management is committed to strengthening internal controls over payroll allocations to ensure personnel costs charged to federal awards are supported by appropriate documentation and accurately reflect work performed.
SIGNIFICANT DEFICIENCY U.S. Department of Health And Human Services, ALN 93.493 Congressional Directives, Grant# 1H79FG001321-01; Grant period - September 30, 2024 to September 29, 2025; Pass-through: Substance Abuse and Mental Health Services Administration; Applicable compliance component: Allowable Costs/Cost Principles Finding 2025-001 – HopeSparks did not have adequate internal controls to ensure personnel costs charged to the federal program are supported with records that reflect personnel activity in accordance with federal requirements. Criteria: 2 CFR § 200.430 require grantees to support charges to federal awards for salaries and wages with records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated, be incorporated into the official records of the recipient or sub-recipient, reasonably reflect the total activity for which the employee is compensated by the recipient or sub-recipient, encompass federally assisted and all other activities compensated by the recipient or sub-recipient, comply with the established accounting policies and procedures of the recipient or sub-recipient, and support the distribution of the employee’s salary or wages among specific activities or cost objectives. Budget estimates alone do not qualify as support for charges to federal awards, but may be used for interim purposes. If the records do not meet the standards described, personnel activity reports may be required, including prescribed certifications, or equivalent documentation supporting the records. Condition: HopeSparks had no regular monitoring procedures to ensure personnel cost charged to the federal program are supported with documentation of the work performed. As a result, certifications were obtained seven (7) months after the close-out period. Cause: HopeSparks did not implement periodic monitoring procedures to ensure payroll expenses charged to the federal award is supported as required on a timely basis. Effect or potential effect: Without monitoring internal controls to support compliance, HopeSparks risks noncompliance to the terms and conditions of the Congressional Directives grant. A grantor may take actions for noncompliance including withholding funds, disallowance of costs, suspension and debarment, terminating the award, and denial of future funding. Identification of a repeat finding: Not a repeat finding Known questioned cost amount: None Recommendation: Implement procedures for regular monitoring of personnel activities and evaluation of work performed as it relates to personnel cost charged to a federal sponsored program. Views of responsible officials and planned corrective actions: HopeSparks acknowledges the auditor's finding that certifications of personnel activity for staff whose compensation was charged in whole or in part to the federal award were not completed on a periodic basis during the grant period, as required by 2 CFR 200.430. Going forward, HopeSparks will establish a periodic, contemporaneous certification process for personnel whose compensation is charged to federal awards, with implementation details to be finalized and incorporated into HopeSparks' written policies and procedures.
Significant Deficiency in Internal Control over Compliance Finding number: 2025-001 AL number: 17.259 AL title: Workforce Innovation and Opportunity Act (WIOA) Name of federal agency: U.S. Department of Labor Repeat finding: Yes - 2024-002 Criteria: Uniform Guidance (2 CFR 200.303 and 2 CFR 200.430) requires that charges to federal awards be accurate, allowable, and supported by sufficient documentation. Internal controls should be designed and implemented to provide reasonable assurance that payroll costs are accurately billed to federal programs. Condition: During testing of payroll disbursements for allowable costs and activities under the Workforce Innovation and Opportunity Act ("WIOA"), two payroll billing errors were identified totaling $151. The errors related to payroll costs charged to the grant for two individuals in July 2025. Specifically, the reimbursement calculation utilized total compensation amounts that included incentive pay rather than the eligible salary amounts required for grant reimbursement purposes. Payroll charges are entered by accounting staff and subject to monthly review by the CFO. While this review process represents a key control, the errors identified indicate that the review was not sufficiently detailed to detect all inaccuracies in the reimbursement calculations. Cause: The errors resulted from insufficient internal control over the review of grant reimbursement calculations and supporting documentation prior to submission. Specifically, controls were not operating effectively to verify that salary amounts used in reimbursement requests agreed to approved payroll records and allocation schedules. Effect or potential effect: The absence of a robust review process increases the risk of noncompliance with grant requirements and the potential for inaccurate billing to federal programs, even if the financial impact is not material. Recommendation: We recommend enhancing the existing review process to ensure payroll charges billed to federal programs are supported by underlying documentation such as payroll registers, time records, and allocation spreadsheets. This could include developing a standardized reconciliation checklist or requiring secondary review for accuracy. Strengthening the existing control will help minimize the risk of billing errors due to human oversight. Views of responsible officials: Management acknowledges that errors occurred in the July 2025 WIOA reimbursement calculations due to the use of compensation amounts that included incentive pay rather than the appropriate base salary amounts. While management had revised reimbursement calculations in other periods to exclude incentive compensation, the July calculations were not fully updated resulting in these exceptions. Management believes the errors were isolated and immaterial in nature but recognizes the opportunity to strengthen review procedures surrounding grant reimbursement calculations. Additional review procedures and reconciliation steps will be implemented to enhance the accuracy of future grant billings. Management also notes that participation in the WIOA program concluded in October 2025, reducing the likelihood of similar issues occurring within this specific program in future periods. Responsible party: Nora Davis, Chief Financial Officer
Criteria: Uniform Guidance (2 CFR §200.430 – Compensation for Personal Services) requires that charges to federal awards for salaries and wages be supported by a system of internal controls that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Personnel expenses must be supported by records that accurately reflect the work performed and must reasonably reflect the total activity for which the employee is compensated. These records must also be incorporated into the official records of the organization. Condition/context: During our testing of payroll expenditures charged to federal awards, we identified a discrepancy between approved time and effort documentation and payroll allocations charged to the grant. Specifically, supporting documentation reflected that 20 percent of the employee’s time was allocated to the federal award; however, 25 percent of employee’s compensation was charged to the federal grant for one employee. Questioned costs: None Effect: The control designed to ensure payroll expenditures were charged to federal awards in accordance with approved time and effort documentation did not operate effectively. This increases the risk that payroll costs charged to federal awards may not be accurately allocated or properly supported. Cause: The discrepancy occurred because controls over the review and processing of payroll allocations were not operating effectively to ensure payroll charges agreed to the approved time and effort documentation prior to being charged to the federal award. Repeat finding: No. Recommendation: The Entity should establish and implement documented procedures for reviewing and approving payroll allocations charged to federal grants to ensure charges are accurate and supported by approved time and effort documentation. Views of responsible officials and planned corrective actions: Management agrees with the recommendation. NDN Collective has strengthened its review procedures over payroll allocations charged to federal awards. When a Program Manager identifies a change to an employee's payroll allocation, the change will be communicated directly to the Finance team for timely review and processing. The Finance team will review payroll allocations to ensure they are consistent with approved time-andeffort documentation prior to processing. In addition, there will be a secondary review of payroll allocations and supporting documentation to verify that charges to federal awards are accurate, properly supported, and consistently applied in accordance with Uniform Guidance requirements. These review procedures have been documented and incorporated into the Organization's payroll allocation process for all federal awards. Management believes these enhanced controls will strengthen compliance over allowable costs and reduce the risk of payroll allocation discrepancies in future reporting periods.
Federal Agency: U.S. Department of Energy Federal Program: Conservation Research and Development Assistance Listing Number: 81.086 Federal Award Identification Number(s) and Federal Award Year(s): DE-EE0010632 (2024) Pass-Through Entity: Electric Power Research Institute, Inc. Pass-Through Identification Number: 10017391 Compliance Requirement: B—Allowable Costs/Cost Principles Criteria or Specific Requirements: Under 2 CFR §200.430, salary and wage charges to Federal awards must be supported by records that accurately reflect the work performed. Budget estimates alone do not qualify as support for charges to Federal awards. When budget estimates are used for interim accounting purposes, the Organization must perform periodic after-the-fact reviews and make necessary adjustments so that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition: During reconciliation of Federal award revenue to expenditures reported on the SEFA, we identified that the Organization used budgeted compensation rates exceeding actual allowable compensation costs to prepare reimbursement requests under this award. The Organization did not reconcile and adjust the amounts billed to actual allowable costs, resulting in excess reimbursement of $20,997. Cause: The Organization did not have an effective review process to ensure that compensation charges included in reimbursement requests were reconciled to actual allowable compensation costs and that differences were appropriately resolved. Effect: The Organization received $20,997 in reimbursement exceeding actual allowable compensation costs, resulting in noncompliance with the applicable cost principles. An audit adjustment was recorded to reduce government grant revenue and recognize a refundable advance for this amount. Perspective Information: The matter involved the Charging Infrastructure Interconnection Simplification Resource project under one nonmajor Federal program. Federal expenditures reported on the SEFA for this award totaled $97,738 for 2025. The excess reimbursement of $20,997 was identified during SEFA reconciliation procedures rather than major-program compliance testing. Questioned Costs: $20,997, representing compensation reimbursements exceeding actual allowable costs. Repeat Finding: None. Recommendations: We recommend that management establish and document procedures to reconcile compensation charges included in reimbursement requests to actual allowable compensation costs. When budget estimates are used for interim billing, management should perform periodic after-the-fact reviews and promptly adjust subsequent billings or arrange repayment, as appropriate. An individual other than the preparer should review and approve the reconciliations and related adjustments, with documentation retained to support the review. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. See attached corrective action plan.
Finding 2025-001 Program Affected Under the U.S. Department of Treasury - Award Year July 1, 2024 – June 30, 2026: Assistance Listing 21.027 Coronavirus State and Local Fiscal Recovery Funds Criteria 2 CFR §200.430(i) specifies that "Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated..." Condition and Context During our program audit procedures related to the payroll cycle, we noted an internal control deficiency related to allocation of payroll costs among federally funded programs. Management did not perform sufficient review and retention of payroll allocations to identify that payroll expenses allocated to the program were being recorded in accordance with readily available wage and time and effort data. Cause and Effect The condition identified was caused by infrequent and periodic review of program-related payroll costs which were reconciled on a biannual basis. This process did not occur on a pay period basis. This resulted in an overstatement of program-related payroll expenses of $6,348. Questioned Costs $498,189.43 Identification as a Repeat Finding, if Applicable Not applicable. Recommendation We recommend the Organization strengthen controls surrounding program-related record keeping, including increasing the frequency of reconciliations and program wage allocation procedures to match the payroll cycle. Views of Responsible Officials and Corrective Action Plan Management agrees with the finding. See attached Corrective Action Plan.
Finding 2025-003 – Allowable Costs/Cost Principles U.S. Department of Health and Human Services – Passed through PA DHS - Foster Care – Title IV-E (ALN 93.658 and Pennsylvania Department of Human Services Children, Youth, and Families (CYF) Program (Major DHS Program) Condition: The County did not have a documented process to ensure that payroll costs charged to the Foster Care—Title IV-E program and other state and federal programs were allocated based on records that accurately reflected the work performed. During the audit, the County allocated payroll costs using a semiannual two-week time study. The County did not document an evaluation of whether the two-week periods were representative of employees’ activities for the remainder of the year. The County also did not document periodic after-the-fact reviews or adjustments to verify that the final payroll allocations were accurate, allowable, and properly allocated among the applicable programs and cost objectives. Criteria: Under 2 CFR 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Those records must be supported by internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. When interim estimates are used, the system must produce reasonable approximations of actual activity, significant changes must be identified timely, and periodic after-the-fact reviews and necessary adjustments must be performed. Cause: The County had not established and implemented written procedures requiring management to evaluate the representativeness of the time-study periods, document changes in employee activities, perform periodic after-the-fact reviews, and make adjustments when payroll allocations did not reasonably reflect actual activity. Effect: Because the County did not document that the time-study periods were representative or perform documented after-the-fact reviews, payroll costs charged to the program may not have been accurately or equitably allocated. This condition could result in unsupported or unallowable Federal charges and inaccurate program expenditures. Questioned Costs: All but one Children and Youth employee has their time included in the cost pool that is spread out between each of the Children and Youth programs based on the two-week time study. As there is no true up, the amount of questioned costs, if any, is not able to be determined. Recommendation: We recommend that the County establish procedures that provide a system and related documentation to support an equitable allocation of payroll costs. Views of Responsible Officials: See separate Corrective Action Plan.
2025-001 Internal Controls over Compliance - Allowable Activities and Costs - Payroll (Significant Deficiency) Legal Services Corporation 09.744060 Basic Field Grant Grant Period: 1/1/2025 – 12/31/2025 Contract Number: 744060 U.S Department of Justice 16.575 Victims of Crime Act Grant Periods: 10/1/24 – 9/30/25 and 10/1/25 – 9/30/26 Contract Number: 4055105; 4055106 Supreme Court of Texas Basic Civil Legal Services Program Grant Period: 9/1/2023 – 8/31/2026 Contract Number: 26030 Criteria: Under 2 CFR Section 200.303(a) a non-Federal entity is required to establish and maintain internal controls over compliance with Federal statutes, regulations, and the terms and conditions of the Federal grant. In addition, under 2 CFR Section 200.430 – Compensation – personal services, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Budget estimates may be used for interim accounting purposes, but budget estimates alone do not qualify as support for charges to Federal awards. The entity’s system of internal controls must include a process to review after-the-fact interim charges made to a Federal award to budget estimates and make any necessary adjustments such that the final amount charged to the Federal award is accurate, allowable and properly allocated. Texas Grant Management Standards also contains provisions for selected items of cost for Compensation – personal services which mirrors the requirements of 2 CFR Section 200.430. Condition: The Organization’s internal control process to compare actual time charged on the employee’s time sheet to the budget allocation charged to the grant to determine if budget estimates reflect reasonable approximations of the activities performed did not consistently occur. For 8 of 74 payroll transactions selected for testing for the two major federal programs, the underlying time sheet provided was not signed by either the employee or the supervisor and/or was completed or approved several months after the pay period. The same condition was noted for the Organization’s BCLS Program. For 4 of the 40 payroll transactions selected for testing the underlying time sheet provided was not signed by either the employee or the supervisor and/or was completed or approved several months after the pay period. In addition, for 3 of 40 payroll transactions selected for testing, the Organization was unable to provide a time sheet to substantiate the employee’s time for that period. The finding appears to be a systemic issue. The samples were not statistically valid. Cause: While the Organization's internal control processes require that time sheets be completed and reviewed and approved by appropriate personnel on a timely basis, these policies are not consistently followed. In some cases, time sheets are completed, reviewed, or approved only when required for grantor or auditor review. Time sheets supporting personnel costs for employees that have subsequently left the Organization may not be available or reproducible. Effect: Failure to review time sheets or maintain time sheets to support compensation allocations could result in an over/under statement of compensation charged to the grants. Questioned Costs: There were no questioned costs for Legal Services Corporation Basic Field Grant ALN 09.77460 or Victims of Crime Act ALN 16.575. For the Basic Civil Legal Services Grant Contract No. 26030, known questioned costs for the three missing time sheets totaled $2,291. Likely questioned costs which were extrapolated from known questioned costs to the remaining payroll population for the grant were calculated to be $16,322. Perspective: There is not consistent evidence of the Organization’s review and reconciliation of time sheets to budget estimates which affects both the allowable activities and allowable costs requirements. Repeat Finding: Yes Auditor’s Recommendation: We recommend the Organization review its timekeeping policies and procedures to ensure time sheets are retained for all payroll transactions to support the allocation of compensation between cost objectives and that these are provided timely to the Director of Finance to reconcile the allocation of personnel costs charged on the time sheets to the budget estimates used to bill grantors. This should be done in conjunction with monthly or quarterly billings (or other determined regular interval), at fiscal year-end, and at the end of the grant year (if different from the Organization’s fiscal year). Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
Payroll and Related Cost Allocations Repeat Finding: No Condition: The Organization did not maintain sufficient documentation to support the allocation of salaries for certain employees whose activities benefited both the Federal award and other activities of the Organization. Salary costs were generally charged to the Federal award using allocation percentages established as part of the grant budget. Management indicated that periodic evaluations of employee allocations were performed during the year; however, documentation of these evaluations was not maintained. The Organization's written financial policies provide for the use of timesheets to monitor and support employee cost allocations; however, timesheets were not utilized during the year and the Organization did not consistently adhere to its established payroll allocation policies. Certain employees performed activities benefiting multiple programs and grants. Sufficient records were not maintained to support the allocation of salary costs that should have been charged to the Federal award. Additionally, payroll taxes and employee benefits were not consistently allocated to the Federal award in a manner consistent with the allocation of the related salaries. Audit procedures identified $10,370 of payroll taxes and employee benefits charged to the Federal award in excess of the amounts supported by the allocation of the related salaries. Criteria: Under 2 CFR § 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Such records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Budget estimates or other distribution percentages determined before services are performed may be used for interim accounting purposes; however, the Organization's system of internal controls must include processes to review the interim charges after the fact and make adjustments as necessary so that final amounts charged to Federal awards accurately reflect the work performed. In addition, costs charged to Federal awards must be allocable in accordance with the relative benefits received. Payroll taxes and employee benefits associated with compensation should be allocated to Federal awards on a reasonable and consistent basis in relation to the underlying compensation costs. Cause: The Organization did not have sufficient controls in place to ensure that payroll allocations were adequately supported, that established payroll allocation policies were consistently followed, and that payroll taxes and employee benefits were allocated consistently with the related salary costs. Effect: The lack of sufficient documentation supporting employee salary allocations increases the risk that payroll costs charged to Federal awards may not accurately reflect the work performed. Additionally, the inconsistent allocation of payroll taxes and employee benefits resulted in $10,370 of costs being charged to the Federal award in excess of the amounts supported by the allocation of the related salaries. Questioned Costs: $10,370, related to payroll taxes and employee benefits that were not properly allocated based on the allocation of the related salaries. Questioned costs associated with salary allocations for employees working on multiple activities are undetermined due to the lack of sufficient records supporting the actual allocation of employee activity. Perspective Information: For certain employees whose compensation was allocated among multiple activities, salary costs were charged to the Federal award primarily using allocation percentages established as part of the grant budget. Although management indicated that employee allocations were periodically evaluated, documentation of those evaluations was not maintained. Accordingly, sufficient evidence was not available to determine whether the final salary allocations accurately reflected the work performed or to quantify any resulting questioned salary costs. Separately, audit procedures identified $10,370 of payroll taxes and employee benefits that were not allocated consistently with the related salaries and were determined to be questioned costs. Recommendation: We recommend that the Organization establish and consistently follow procedures to ensure that salaries, payroll taxes, and employee benefits charged to Federal awards are accurate, properly allocated, and adequately supported. As a best practice, the Organization should implement timesheets or similar personnel activity records for employees whose compensation is allocated among multiple Federal awards or other activities. Such records would provide contemporaneous documentation of employee activity and a direct basis for allocating compensation costs. While Uniform Guidance does not specifically require timesheets, a timekeeping system would strengthen the Organization's internal controls and would also bring its practices into conformity with its existing written financial policies. The Organization should also establish controls to ensure that payroll taxes and employee benefits are allocated consistently with the related salary costs and that payroll allocation calculations are periodically reviewed and documented by appropriate management personnel. Reporting Views of Responsible Officials: Management agrees and concurs with the recommendation. The Organization is process of engaging a consultant to assist in revising financial policies and procedures to include additional procedures to evaluate payroll to ensure allocations of payroll charged to the grant is reasonable.
2 CFR § 300.1 gives regulatory effect to the Department of Health and Human Services for 2 CFR § 200.430 which states, in part, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Per the Belmont County Department of Job and Family Services, employees complete their timesheet which are turned into their supervisor. From the timesheets, the supervisors prepare a ‘Hours Reported for Pay Ending’ form for each pay period end date which shows the employee name, hours worked, hours at time and One-half, on-call pay, etc. The Fiscal Administrator will ‘checkmark’ the employee hours on the ‘Hours Reported for Pay Period Ending’ form to verify that the amount is correct and added to the payroll transmittal report. Evidence of this approval on the ‘Hours Reported for Pay Ending’ are necessary to acknowledge that the expenditures are allowable, per specific grant regulations, and are compliant with Uniform Guidance requirements contained in Subpart E of 2 CFR part 200. Due to the lack of the control procedures over the review of payroll reports, two out of sixty (3%) employees tested did not have overtime hours from their time sheets reported on the ‘Hours Reported for Pay Period Ending’ form, which resulted in an underpayment. This weakness could result in unallowable expenditures (employees) being charged to programs administered by the County Department of Job and Family Services. Formal written procedures should be developed, implemented, and consistently applied to the approval of federal grant expenditures prior to payment. Procedures should include how approvals by management or administrators are documented for each expenditure and the approvals should be done by personnel knowledgeable about the federal program and, for payroll expenditures, the actual work performed by employees. Implementing a formal control process with help ensure only allowable expenditures are made using federal grant funds and will ensure that employees are paid properly.
Criteria: In accordance with 2 CFR Section 200.430(g)(i), charges to Federal awards for salaries and wages must be based on records that reflect the actual work performed. The charges must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and must be incorporated into the official records of the non-Federal entity. In addition, 2 CFR Section 200.430(g)(1)(vii) states that budget estimates alone do not qualify as support for charges to Federal awards, but may be used for interim accounting, provided certain additional internal controls are implemented. Condition: During our testing of salaries and wages, we noted that all 176 sampled transactions did not include detail by program. Charges to Federal awards for salaries and wages were based on estimated allocations, rather than use of a system of internal controls that accounts for actual time and effort. Cause: While there is a time keeping system implemented to track daily hours worked by employees, the Corporation’s current internal control system does not allow for specific coding for time actually spent on each federally funded program that would support the amount charged to the Federal award. Effect or Potential Effect: We were unable to determine whether charges to Federal awards for salaries and wages reflect specific time worked or amounts allocated by employee to specific Federal programs. Allowable costs incurred by the Corporation exceeded the amount of approved grant funding, therefore no questioned costs are reported. Questioned costs: None Context: We selected 176 salary transactions charged to the Federal programs to test controls over allowable costs. All transactions charged to the Federal programs were based on budgeted Full Time Equivalents (FTE), and not actual hours employees worked for each Federal program. No analysis or true-up was performed to determine the accuracy of employee titles or amounts charged versus actual time and effort incurred. This is a condition identified per review of the Corporation’s compliance with specified requirements using a statistically valid sample. Repeat finding: This is a repeat finding from prior year. This was reported as finding 2024-001 in the 2024 report. Recommendation: We recommend the Corporation develop and incorporate internal controls in order to track specific time spent on each Federal program. This can include, time and effort reports completed on a routine basis, such as monthly, and adjust program expenditures as needed to properly reflect actual work performed. Completed time and effort reports should be reviewed and verified by management for accuracy. View of Responsible Officials: The time keeping system and process does not currently allow tracking of time based on funded resources. The past practice had been for the Finance Department manually calculated salary allocations. Due to the influx of grants and staffing resources the Corporation was unable to maintain this process.
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.
2 CFR 200 outlines the following policies required for a County spending Coronavirus State and Local Fiscal Recovery Funds: • 2 CFR 200.302(b)(7) for determining the allowability of costs in accordance with Subpart E-Cost Principles; • 2 CFR 200.430 for allowability of compensation costs; • 2 CFR 200.318(c)(2) for organizational conflicts of interest; • 2 CFR 200.320(b)(2) for selection and awarding of contracts for competitive proposals; and • 2 CFR 200.319(d) for minimum evaluation criteria for bids and proposals During testing we noted that the County Commissioner’s department did not have sufficient written policies addressing the above requirements. Failure to adopt and implement policies could lead to noncompliance with federal requirements. We recommend the County approve and implement the above policies to ensure compliance with federal requirements.
Standards for Documentation of Personnel Expenses Charged to Federal Awards Significant Deficiency in Internal Control Over Compliance - Federal Program: Assistance Listing No. 10.719 - Infrastructure Investment and Jobs Act Firewood Bank Program Federal Agency: U.S. Department of Agriculture, Forest Service (direct award; no pass-through entity) Federal Award Identification: 22-DG-11132544-049 (federal award year 2022) and 25-DG-11132544- 082 (federal award year 2025); USDA Forest Service Firewood Bank Program grant agreements identified by the Organization as contract 049 and contract 082 Compliance Requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Significant deficiency in internal control over compliance Known Questioned Costs: None in addition to the $64,969 reported in Finding 2025-003. The personnel costs claimed without supporting records are included in that amount and are not questioned a second time here. Criteria: 2 CFR 200.430(g) (2 CFR 200.430(i) for awards subject to the guidance in effect before October 1, 2024) requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed, be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable and properly allocated, be incorporated into the official records of the entity, and reasonably reflect the total activity for which the employee is compensated, encompassing both federally assisted and all other activities. Budget estimates alone do not qualify as support for charges to federal awards. 2 CFR 200.303 requires the entity to establish and maintain effective internal control over the federal award. Condition: The Organization does not maintain records reflecting the work performed by employees whose salaries and related benefits are charged to the federal award. Personnel costs are assigned to programs, and between federal and non-federal activities, on the basis of management’s estimates rather than records of actual activity. For the year ended December 31, 2025, salaries, payroll taxes and related benefits of $177,331 were allocated on that basis, of which $158,372 was assigned to program services. No after-the-fact activity records, certifications or equivalent documentation covering the total compensated time of those employees are prepared, reviewed or retained, and no reconciliation of amounts charged to the award against records of actual effort is performed. Cause: The Organization has not adopted a time and effort reporting process or written policies addressing the documentation required to support personnel costs charged to federal awards. Effect or Potential Effect: Personnel costs charged to the award are not supported by records that meet the standards in 2 CFR 200.430, and unallowable or misallocated personnel charges could occur and not be prevented, or detected and corrected, on a timely basis. The same condition affects the allocation of expenses among functions presented in the financial statements, as described in Note 11 to the financial statements. Should the award impose a cost-sharing or matching requirement satisfied in whole or in part by personnel effort, the amounts claimed toward that requirement would likewise not be verifiable from the Organization’s records as required by 2 CFR 200.306(b)(1). Context: The condition is systemic and applies to all personnel costs charged to the award for the year ended December 31, 2025. Salaries, payroll taxes and related benefits totaling $177,331 were recorded for the year, against total expenditures of the major federal program of $1,244,996. The absence of activity records was established by inquiry and by examination of the Organization’s payroll and allocation records in their entirety; no sampling was used. Recommendation: We recommend that the Organization implement a personnel activity reporting process under which each employee whose compensation is charged to a federal award prepares, not less frequently than monthly, an after-the-fact record accounting for the employee’s total compensated time across federal and non-federal activities. Each record should be reviewed and approved by a supervisor, reconciled to payroll at least quarterly, used as the basis for amounts charged to the award, and retained in accordance with 2 CFR 200.334. Other documentation methods that satisfy the standards in 2 CFR 200.430 are acceptable provided they are applied consistently and are supported by a system of internal control. Repeat Finding: No Views of Responsible Officials: Management agrees that the Organization should maintain specific records of time and activity worked on federal awards. The Organization will implement a monthly process for documenting and reviewing employee activity to support personnel costs charged to federal awards.
Known Questioned Costs, Program Not Audited as a Major Program Noncompliance; Known Questioned Costs Reported Pursuant to 2 CFR 200.516(a)(4) - Federal Program: Assistance Listing No. 10.681 - Wood Education and Resource Center (WERC) Federal Agency: U.S. Department of Agriculture, Forest Service (direct award; no pass-through entity) Federal Award Identification: 23-DG-11094200-451 (federal award year 2023), as modified July 15, 2024; USDA Forest Service Wood Education and Resource Center grant agreement Compliance Requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Noncompliance; known questioned costs for a federal program not audited as a major program Known Questioned Costs: $62,404 Criteria: 2 CFR 200.403 requires that costs charged to a federal award be adequately documented and otherwise allowable under the cost principles in 2 CFR 200 Subpart E, and 2 CFR 200.430 requires that charges for salaries and wages be supported by records that accurately reflect the work performed. 2 CFR 200.516(a)(4) requires the auditor to report known questioned costs greater than $25,000 for a federal program that is not audited as a major program. Condition: The Organization submitted requests to the Wood Education and Resource Center award totaling $163,960 for administrative costs for the year ended December 31, 2025. The Organization’s accounting records and supporting documentation substantiate administrative costs of $101,556 applicable to the award. The remaining $62,404 was claimed, and reimbursed by the grantor, without supporting documentation. The condition arises from the same practices described in Findings 2025-003 and 2025-004. Cause: See Findings 2025-003 and 2025-004. Effect or Potential Effect: Costs of $62,404 were claimed and reimbursed without documentation supporting their allowability. The amount was recorded as due to the grantor through an audit adjustment. This program was not audited as a major program, and we express no opinion on compliance with respect to it; the questioned costs are reported because they became known during the audit of the financial statements. Context: The condition was identified through examination of all administrative cost reimbursement requests submitted under the award for the year ($163,960) and comparison of those requests to the Organization’s accounting records in their entirety; no sampling was used. Total expenditures of the program for the year ended December 31, 2025 were $101,556. The program was classified as a Type B program and was not selected for audit as a major program. Recommendation: We recommend that the corrective action described in Findings 2025-003 and 2025- 004 be applied to all federal awards, and that the Organization coordinate with the awarding agency regarding repayment or offset of the amount recorded as due to the grantor. Repeat Finding: No Views of Responsible Officials: Management agrees that more specific and thorough review of reimbursement requests and the time allocated to individual projects should be implemented. The Organization will apply these strengthened review procedures to all federal awards and coordinate with the USDA Forest Service regarding the questioned costs.
2025-001. Allowable Costs/Cost Principles United States Department of Housing and Urban Development Continuum of Care Program ALN: 14.267 Criteria: Uniform Guidance 2 CFR 200.430, covers standards for documentation of compensation-personal services. Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and time spent. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Furthermore, these records should 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; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: The Organization implemented procedures during the current year whereby expected payroll allocations are prepared by the Director of Finance and subsequently reviewed and signed by employees. However, the documentation maintained does not sufficiently demonstrate that employees' final payroll allocations were determined based upon a documented after-the-fact evaluation of the activities actually performed during the applicable period. The signed allocation records generally reflect the predetermined or expected allocation of employee time, and the employee certification does not specifically document that the allocation was evaluated against actual activities performed. Cause: The Organization's payroll allocation process continues to utilize expected employee activity as the basis for allocating payroll among programs. Although employees review and sign the allocation records, the Organization has not established a sufficiently documented process demonstrating that expected allocations are periodically compared with actual employee activity and adjusted as necessary. Effect: Without sufficient documentation of the after-the-fact review of expected payroll allocations, the Organization may not be able to demonstrate that compensation charged to federal awards accurately reflects work performed and is properly allocated among applicable programs and funding sources. Identification of a Repeat Finding: This is a repeat finding from the prior year, 2024-002. The Organization has implemented corrective measures during the current year; however, additional procedures are necessary to fully address the prior-year finding. Questioned Costs: Dollar amount undetermined. Recommendation: The Organization should further strengthen its payroll allocation procedures by documenting the after-the-fact review of expected payroll allocations. Employee certifications should clearly indicate that, after completion of the applicable reporting period, the employee reviewed the allocation in relation to activities actually performed and communicated any necessary adjustments prior to finalization of the payroll allocation. Evidence of adjustments identified through this review should be retained as part of the Organization's payroll allocation documentation. Views of Responsible Officials of Auditee: The Organization agrees with the finding and will maintain documentation supporting employees' after-the-fact review of payroll allocations to ensure that amounts charged to federal awards reasonably reflect actual activities performed. Any necessary adjustments identified through this review will be documented.
Finding SA 2025-001: Allowable Cost/Cost Principles – Internal Controls Over the Documentation of Cost Allocation (Repeat Finding) Federal Program Information Assistance Listing Number: 93.914 Federal Program Name: HIV Emergency Relief Project Grants (Ryan White HIV/AIDS Program Part A) Federal Agency: U.S. Department of Health and Human Services Pass-through Entities: County of Los Angeles, CA Department of Public Health, RW Part A Contract Number and Name: PH-003738 Medical Care Coordination; PH-005706 Medical Care Coordination; PH-003799 Oral Health Care Services Compliance Requirement: Allowable Cost/Cost Principles Criteria or Specific Requirements Per 2 CFR Part 200.430 (g)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must support the distribution of the employee's salary or wages among specific activities or cost objectives. Per Uniform Guidance Compliance Supplement part 6 – Internal Control, non-federal entities are required to establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Condition Summary Description A. Improved Documentation for Basis of Cost Allocation for Employee Time Charges For 5 of the 60 employees selected for allowable costs / cost principles testing, the timesheet hours did not agree with the hours billed on the related reimbursement request invoice. In each case, the invoice hours exceeded the timesheet hours. B. Improved Documentation of Routinary Reviews of Employee Hours Charged to the Grants For 1 of the 60 employees selected for allowable costs/cost principles testing, the review of tracked hours was performed more than 90 days after the reimbursement month. Questioned Costs A. Improved Documentation for Basis of Cost Allocation for Employee Time Charges None. The Foundation corrected the noted discrepancies for the related employees in subsequent monthly reimbursement requests. We consider this an internal control finding. B. Improved Documentation of Routinary Reviews of Employee Hours Charged to Grants None. We consider this an internal control finding. Cause and Effect A. Improved Documentation for Basis of Cost Allocation for Employee Time Charges Although procedures were in place to review payroll costs charged to grants, the control activities were not consistently performed or sufficiently documented to ensure that hours billed on reimbursement requests agreed to supporting timesheets and that related payroll reallocations were completed timely. Documentation supporting certain employee time charges was therefore not consistently maintained or reconciled to reimbursement requests. The Foundation should improve how it demonstrates that payroll costs charged to federal awards are complete, accurate, and supportable. B. Improved Documentation of Routinary Reviews of Employees' Hours Charged to Grants. This exception related to one employee occurred before the Foundation's corrective action plan and formal policy were implemented effective August 1, 2025. The formal policy requires timely review of payroll allocations and related reclassifications. For this employee, the review and reclassification were not completed within the timeframe required under the policy effective August 1, 2025. Recommendation A. Improved Documentation for Basis of Cost Allocation for Employee Time Charges We recommend that the Foundation require a documented reconciliation of employee timesheets, payroll allocation records, and reimbursement invoices before each reimbursement request is submitted. The reconciliation should evidence preparation and supervisory review and identify the timely resolution of any differences. Management should also ensure that payroll reallocations and cost transfers are completed timely and supported by appropriate documentation. These procedures will help support the accuracy, completeness, and supportability of personnel costs charged to federal awards. B. Improved Documentation of Routinary Reviews of Employee Hours Charged to Grants We recommend that the Foundation enforce its established review policy and retain documentation demonstrating that employee hours and related payroll reclassifications are reviewed and completed within the required timeframe. This will help support the accuracy and allowability of payroll costs charged to grant programs.
Criteria or specific requirement: Uniform Guidance § 200.430(g) Standards for Documentation of Personal Expenses 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. Condition: 11 of the 26 payroll transactions samples were improperly calculated. CLA and the Organization could not recalculate the amount charged to the grant either due to error or lack of documentation. Questioned costs: Undeterminable. Context: 11 of the 26 payroll transactions samples were improperly calculated. CLA and the Organization could not recalculate the amount charged to the grant either due to error or lack of documentation. Cause: Policies and procedures were not in place to properly calculate allocation of wages and salaries charged to the grant. Effect: The failure to properly calculate allocation of wages and salaries charged to the grant may lead to unsupported personnel costs being charged to federal awards, potentially resulting in questioned costs, compliance findings, repayment of federal funds. Repeat finding: No. Recommendation: We recommend that the Organization implements policies and procedures to ensure appropriate allocation calculation is used and retains support for calculation. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: Uniform Guidance § 200.430(g) Standards for Documentation of Personal Expenses: 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. Condition: 2 out of the 26 payroll transaction sampled did not have support for an employees pay rate. Questioned costs: $403. Context: 2 out of the 26 payroll transaction sampled did not have support for an employees pay rate. Cause: Policies and procedures were not in place to ensure all pay rate change letters were retained. Effect: The failure to retain pay rate change letters may lead to unsupported personnel costs being charged to federal awards, potentially resulting in questioned costs, compliance findings, repayment of federal funds. Repeat finding: No. Recommendation: We recommend that the Organization implement policies and procedures to ensure all pay rate change letters or forms are retained in personnel file. Views of responsible officials: There is no disagreement with the audit finding.
Finding number: 2025-001 AL number and title: WIOA Cluster - 17.258, 17.259 and 17.278; VA Supportive Services for Veteran Families Program - 64.033 Name of federal agency: U.S. Department of Labor, U.S. Department of Veterans Affairs Name of pass-through entity: State of California Employment Development Department; County of Los Angeles Workforce Development, Aging, and Community Services Department; City of Los Angeles Economic and Workforce Development Department; Repeat finding: Yes - 2023-005 Criteria: Under the Uniform Guidance, specifically 2 CFR 200.430, organizations are permitted to use budgeted amounts to allocate time to Federal programs, as long as there is a process in place to true-up the costs on a regular basis. Condition: In general, JVS personnel prepare manual timesheets to record the actual time worked on the organization's various programs. No process is currently in place to compare or revise the time if the budgeted time differs from the actual time. Cause: The organization lacked sufficient accounting resources to prepare these updates. During the year, management did implement the review,. Effect or potential effect: Hours charged to certain programs did not agree to the timesheets completed by employees and reviewed by their supervisors. Context We tested a total of 40 timesheets over the two major programs and noted 10 instances in which time allocated was not properly supported by a timecard and/or time-and-effort supporting documentation. Nine of these instances were employees within the WIOA program, and eight of the occurences were in the first half of the year, before implementation of additional procedures. One of the instances related to the VA program. Recommendation: Management should establish procedures to ensure payroll costs charged to federal awards are supported by records that accurately reflect the work performed. This should include reviewing available project-level labor data, reconciling payroll allocations to supporting time and effort records, and updating allocations as necessary each pay period to ensure costs are charged to the appropriate programs and funding sources based on actual activity. SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of Responsible Official: We agree with the finding. During 2025, JVS implemented enhancements within Paylocity that allow employees to electronically review and update their labor allocations, strengthening internal controls over payroll cost allocation. Management has also enhanced its review and monitoring procedures surrounding labor allocation changes. While these improvements have significantly reduced the risk of misallocations, remediation efforts remain ongoing. JVS continues to refine its processes to ensure labor costs are accurately recorded and that any necessary allocation corrections are
Finding 2025-001 United States Department of Agriculture - Forest Service Federal Assistance Listing No. 10.727 Inflation Reduction Act (IRA) Significant Deficiency in Internal Controls and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Nonpayroll) Repeat Finding: No Condition: During our testing and review of the non-payroll transactions, BTT did not provide evidence that charges for 10 out of 40 transactions on the grant were approved by supervisory personnel. Criteria: In accordance with 2 CFR 200.514: (c) Internal controls, (1) The compliance supplement provides guidance on internal controls over federal programs based upon the guidance in Standards for Internal Control in the Federal Government issued by the Comptroller General of the United States and the Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). COSO requires entities to establish and maintain effective internal controls to achieve operational, reporting and compliance objectives. In accordance with 2 CFR 200.430: Test direct costs charged to federal awards with the following criteria: a. Costs were approved by the federal awarding agency, if required. (See 2 CFR 200.407 for items of cost that require prior written approval and Exhibit 1, Selected Items of Cost, in this part of the Supplement.) b. Costs were necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR 200, Subpart E. c. Costs conformed to any limitations or exclusions set forth in 2 CFR 200, Subpart E, or in the federal award as to types or amount of cost items. d. Costs were consistent with policies and procedures that apply uniformly to both federally financed and other activities of the NPO. e. Costs were accorded with consistent treatment. Costs were not assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances was allocated to a federal award as an indirect cost. f. Costs were not included as a cost of any other federally financed program in either the current or a prior period. g. Costs were not used to meet the costsharing or matching requirements of another federal program, except where authorized by federal statute. h. Costs were adequately documented. Cause: BTT did not have proper controls in place to ensure that federal activities charged were reviewed by appropriate approver and that all approvers are listed in the approval policy. Effect: Failure to document supervisory approval of grant charges increases the risk of unallowable or unsupported costs being charged to the grant, potentially leading to noncompliance and jeopardizing current or future funding. Questioned Costs: Unknown. Recommendation: We recommend that BTT establish and update written procedures related to federally funded expenses to ensure the charges are approved and allowable for the grant. Auditee Response and Corrective Action Plan: Refer to management’s corrective action plan. Auditor’s Conclusion: Finding remains as stated.
Criteria: In accordance with 2 CFR 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Budget estimates alone do not qualify as support for charges to Federal awards. Condition: During our testing of payroll expenditures charged to the Weatherization Assistance Program, we noted that salary and wage costs were allocated to the Federal program using budgeted allocation percentages rather than documentation that demonstrates the actual distribution of employee activities. While the employees whose salaries were charged to the program performed work supporting program operations, AEA did not maintain records sufficient to support the percentage of time charged to the Federal award based on actual work performed. As a result, management could not demonstrate that payroll costs allocated to the program reasonably reflected employee effort devoted to program activities. Cause: AEA did not maintain a documented process for periodically reviewing and supporting payroll allocations using records that reflect employees' actual activities. Instead, payroll costs were allocated based on budgeted amounts established at the beginning of the contract period. Effect: AEA cannot demonstrate that salary and wage charges allocated to the Federal award were supported by records that accurately reflect the distribution of employee activities as required by 2 CFR 200.430(i). Consequently, there is an increased risk that payroll costs charged to the Federal award may not accurately reflect the relative benefit received by the program. Questioned Costs: Undeterminable. Context: A random sampling of the federal expenditures. Repeat Finding: This finding was not corrected. See finding item 2024-005 in the prior year findings. Recommendation: We recommend that AEA establish procedures to periodically review and document employee activities to support payroll allocations charged to Federal awards. Documentation should be maintained demonstrating the basis for salary allocations and should reasonably reflect the actual work performed in support of program and non-program activities. View of Responsible Officials: Refer to management’s corrective action plan.