Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Material Weakness in Internal Controls over Compliance and Instance of Noncompliance Department of Education Federal Assistance Listing Number: 84.031 Federal Program Name: Higher Education Institutional Aid Federal Award Number: P031S210057, P031C210038 Award Year: 2023-24, 2022-23, 2021-22 Criteria – Compensation costs are allowable to the extent they satisfy requirements of 2 CFR section 200.430, and the total compensation for individual employees is determined and supported as provided in 2 CFR section 200.430(i), including charges to Federal awards for salaries and wages be based on records that accurately reflect the work performed. Condition/context – A sample of 13 employees out of a population of 24 employees whose compensation was charged to the awards was selected. Of the 13 samples selected we found 5 employees who either had no records to support the actual allocation of time that was charged to each award or the amount allocated to the award did not agree to the time and effort reporting. The personnel action form that is completed upon hire indicated the allocation of time worked in some instances, however in accordance with 2 CFR section 200.430 (i)(1)(viii) estimates determined before the services are performed do not qualify as support for charges to Federal awards. Our sample was not, and was not intended to be, statistically valid. Questioned costs – Undeterminable Cause/effect – The University does not have the proper controls in place to ensure time and effort reporting is completed or completed accurately. The lack of records supporting the actual allocation of time charged increases the risk of unallowable compensation costs being charged to the federal award. Repeat finding – Yes, 2023-002 Recommendation – We recommend the University implement an internal control policy that requires employees whose compensation is charged to a federal award complete time and effort reporting to accurately reflect the work performed on each federal award and ensure supporting documentation is maintained for those who do charge time and agrees to amount allocated to the award. Views of responsible officials and planned corrective actions – Heritage implemented a new system, however Heritage continues to encounter mistakes on correctly completing the time & efforts due to the differences in length of faculty contracts. Even though DOE noted that “this finding resolved and closed.” Heritage continues to work on the process to improve with further training.
Allowed or Unallowed and Allowable Costs/Cost Principles – Material Weakness in Internal Controls over Compliance and Instance of Noncompliance Department of Education Federal Assistance Listing Number: 84.184 Federal Program Name: Mental Health Service Professional Demonstration Grant Program Federal Award Number: S184X230057 Award Year: 2023-24 Criteria – Compensation costs are allowable to the extent they satisfy requirements of 2 CFR section 200.430, and the total compensation for individual employees is determined and supported as provided in 2 CFR section 200.430(i), including charges to Federal awards for salaries and wages be based on records that accurately reflect the work performed. Condition/context – A sample of 8 employees out of a population of 14 employees whose compensation was charged to the awards was selected. Of the 8 samples selected we found 7 employees who either had no records to support the actual allocation of time that was charged to each award or the amount allocated to the award did not agree to the time and effort reporting. The personnel action form that is completed upon hire indicated the allocation of time worked in some instances, however in accordance with 2 CFR section 200.430 (i)(1)(viii) estimates determined before the services are performed do not qualify as support for charges to Federal awards. Our sample was not, and was not intended to be, statistically valid. Questioned costs – Undeterminable Cause/effect – The University does not have the proper controls in place to ensure time and effort reporting is completed or completed accurately. The lack of records supporting the actual allocation of time charged increases the risk of unallowable compensation costs being charged to the federal award. Repeat finding – No Recommendation – We recommend the University implement an internal control policy that requires employees whose compensation is charged to a federal award complete time and effort reporting to accurately reflect the work performed on each federal award and ensure supporting documentation is maintained for those who do charge time and agrees to amount allocated to the award. Views of responsible officials and planned corrective actions – Heritage implemented a new system, however Heritage continues to encounter mistakes on correctly completing the time & efforts due to the differences in length of faculty contracts. Heritage continues to work on the process to improve with further training.
Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Material Weakness in Internal Controls over Compliance and Instance of Noncompliance National Science Foundation Federal Assistance Listing Number: Various Federal Program Name: Research and Development Cluster Federal Award Number: Various Award Year: 2023-24 Criteria – Compensation costs are allowable to the extent they satisfy requirements of 2 CFR section 200.430, and the total compensation for individual employees is determined and supported as provided in 2 CFR section 200.430(i), including charges to Federal awards for salaries and wages be based on records that accurately reflect the work performed. Condition/context – A sample of 6 employees out of a population of 18 employees whose compensation was charged to the awards was selected. Of the 6 samples selected we found 4 employees who either had no records to support the actual allocation of time that was charged to each award or the amount allocated to the award did not agree to the time and effort reporting. The personnel action form that is completed upon hire indicated the allocation of time worked in some instances, however in accordance with 2 CFR section 200.430 (i)(1)(viii) estimates determined before the services are performed do not qualify as support for charges to Federal awards. Our sample was not, and was not intended to be, statistically valid. Questioned costs – Undeterminable Cause/effect – The University does not have the proper controls in place to ensure time and effort reporting is completed or completed accurately. The lack of records supporting the actual allocation of time charged increases the risk of unallowable compensation costs being charged to the federal award. Repeat finding – No Recommendation – We recommend the University implement an internal control policy that requires employees whose compensation is charged to a federal award complete time and effort reporting to accurately reflect the work performed on each federal award and ensure supporting documentation is maintained for those who do charge time and agrees to amount allocated to the award. Views of responsible officials and planned corrective actions – Heritage implemented a new system, however Heritage continues to encounter mistakes on correctly completing the time & efforts due to the differences in length of faculty contracts. Heritage continues to work on the process to improve with further training.
2 CFR § 3474.1 gives regulatory effect to the Office of Management Budget guidance in 2 CFR § 200 for the Department of Education. 2 CFR § 200 Subpart E which states, in part, costs must be adequately documented in order to be considered allowable. 2 CFR § 200.430(g)(1)(i) 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. The Ohio Department of Education and Workforce’s Grants Manual states, in part, semi-annual certifications are allowed when an employee’s compensation is funded by only one federal grant and works solely on a single cost objective. An employee funded by a federal grant and the general fund would fall under this category. The Ohio Department of Education and Workforce’s Grants Management Guidance 2014-002 states, in part, employees who meet [the criteria to use semi-annual certifications] are not required to maintain time-and-effort records if their job description clearly shows the employee is assigned 100% to the program or single cost objective. Each employee must certify in writing, at least semi-annually, that he/she worked solely on the program or single cost objective for the period covered by the certification. The certification is signed by the employee or by the supervisor having first-hand knowledge. Charges to the grant must be supported by these semi-annual certifications. The semi-annual certification is executed after the work has been completed, and not before. Due to insufficient controls over records management, the District did not maintain semi-annual certifications, or other time and effort documentation, for employees paid from the Special Education Cluster. As a result, $170,293 of payroll and benefits charged to the Special Education Cluster were not supported by records that accurately reflect the work performed and are questioned costs under 2 CFR § 200.516. Lack of controls over records management could lead to the District not being able to support charges against federal programs and potentially losing funding. The District should ensure semi-annual certifications are accurately and timely completed and subsequently retained to support payroll and benefits charged to the program. This documentation should be used to determine the allocation of salary among the various programs, grants, activities, etc. We further recommend the District’s management review the requirements of the Uniform Guidance to determine the documentation needed and other requirements related to the allowability of costs to Federal awards to prevent such noncompliance in the future.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) Compliance and Internal Control over Compliance Finding Inaccurate Payroll Charges Due to Timesheet Discrepancies (Significant Deficiency) AL Number and Title: 84.362A - Native Hawaiian Education Program Award Number: S362A200024-22 Award Period: October 1, 2022 - September 30, 2024 Federal Agency: Department of Education Criteria: Under 2 CFR § 200.430(g)(1)(i), charges to federal awards for salaries and wages must be based on records that accurately reflect work performed and must be supported by a system of internal controls that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of compliance and internal controls over compliance for Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we selected a haphazard sample of 20 payroll disbursements. We noted discrepancies between employee timesheets and corresponding payroll registers for two disbursements, as follows: • For the pay period ending September 2, 2023, the employee’s approved timesheet indicated 44 hours, while the payroll register indicated 45 hours charged to the program. • For the pay period ending December 23, 2023, the employee’s approved timesheet indicated 42.62 hours, while the payroll register indicated 54.54 hours charged to the program. Cause: The discrepancies between the timesheet and payroll register hours appear to have resulted from manual data entry errors during payroll processing. Effect: The lack of adequate review procedures increases the risk that payroll charges to the program may not be based on accurate and approved time documentation. Although the extrapolated error identified during testing was below the $25,000 threshold for reporting questioned costs under 2 CFR §200.516(a)(3), the control deficiency represents a significant deficiency in internal control over compliance. Repeat Finding? No Recommendation: We recommend that the Organization implement a review and reconciliation process to ensure that hours recorded in payroll registers agree to approved timesheets before payroll is processed and charges are allocated to federal programs. Views of Responsible Officials and Planned Corrective Action: Mana Maoli agrees with the finding and the recommendation. See Part V, Corrective Action Plan.
Finding: 2024-001 Time/Salary Allocations (Significant Deficiency) Information on the Federal Programs: ALN #10.937 Partnerships for Climate-Smart Commodities Criteria or Specific Requirement (including Statutory, Regulatory, or Other Citation): CFR §200.430 Compensation—personal services. States; (g) 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; (vii) 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: During our audit of CIF’s compensation practices, we noted that salaries and benefits charged to Federal programs were allocated using predetermined estimates rather than contemporaneous records reflecting actual time spent. These allocations were not supported by detailed documentation, such as timekeeping records or personnel activity reports. Cause: CIF has not implemented a system for documenting time and effort in a manner that complies with Federal requirements. The current process relies on estimates rather than actual, verifiable work performed. Effect or Potential Effect: Without accurate and documented time and effort reporting, there is a risk that Federal awards are either overcharged or undercharged for salaries and benefits. This creates the potential for noncompliance with Federal cost principles, and could lead to disallowed costs in the event of a monitoring or program audit. For this program under audit, we identified $466,789 in questioned costs, representing the total amount of unsupported salary charges to this program. Such deficiencies could also impair the Organization's eligibility for future Federal funding.Questioned Costs: $466,789 (all salaries and benefits changed to ALN #10.937) Context: We tested a statistically valid sample of employee salaries charged to Federal awards. The deficiencies noted were consistent across the sample population, indicating a systemic issue rather than isolated exceptions. Identification as a Repeat Finding, if Applicable: N/A Recommendation: We recommend that CIF strengthen its payroll allocation procedures to ensure compliance with 2 CFR §200.430. Specifically, we advise the following steps: 1. Implement Time and Effort Reporting: All employees whose salaries are charged in whole or in part to Federal awards should complete project-specific timesheets that record actual time spent on each cost objective or funding source. 2. Certifications and Approvals: Timesheets should be signed by the employee and reviewed and certified by their direct supervisor to confirm accuracy. 3. Allocate Based on Actual Time: Salaries and benefits should be allocated to funding sources based on the proportion of actual time worked, as indicated in approved timesheets, rather than based on estimates. 4. Incorporate into Internal Controls: These procedures should be incorporated into CIF’s internal control system and formally documented in its accounting policies and procedures manual. 5. Training and Oversight: Staff responsible for managing payroll allocations and Federal reporting should receive training on Federal time and effort requirements. Periodic internal reviews should be conducted to ensure adherence. By implementing these practices, CIF will significantly reduce the risk of questioned costs, improve compliance with Federal grant requirements, and strengthen the reliability of its financial reporting.
2024-008: Payroll Costs Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Section 8 Choice Housing Vouchers Assistance Listing Number: 14.871 Federal Award Identification Number and Year: CA103AF0154-0160, CA103AFR323, CA103EH0005-0006, CA103VO0201-0206, CA103VO0208-0211, and CA103VOPR23; All 2024 Award Period: July 1, 2023 – June 30, 2024 Compliance Requirement Affected: AB Activities Allowed /Allowable Costs Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matter Criteria or Specific Requirement: 2 CFR § 200.430: 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: The City did not maintain supporting time and effort documentation for certain employees who partially charged their time to the program. The City used a budgeted payroll allocation to charge employee amounts to the program and did not true-up the budgeted payroll allocation to actual time and effort. Questioned Costs: Costs not supported by time and effort documentation totaled $32,257 for the year. Context: 5 of the 20 payroll transactions tested were not supported by time and effort documentation. Due to system limitations, the City could not produce supervisor timesheet approvals that occurred through the electronic workflow process in the City’s financial system for 7 of the 20 payroll transactions. Total payroll costs charged to this grant program for the year were $516,331. Cause: City used budgeted percentages to determine the allocation of payroll costs for certain employees who provided services to the grant on a part-time basis. The City did not true-up the budgeted amounts to actuals as part of their year-end closing process. In addition, due to system limitations, the City’s ERP system was unable to generate a report evidencing the electronic approval of specific time sheets by the employee’s supervisor. Effect: Unsupported payroll charges for time and effort pertaining to grant programs may be disallowed by the grantor. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the City review and update internal controls to ensure that supporting documentation for allowable time charges to grant programs is properly maintained. Views of Responsible Officials and Corrective Action: Management agrees with this finding. Staff has updated timekeeping for individuals charging partial time to the Housing Section 8 program to track actual hours spent rather than through budget allocation. Staff has in addition identified a method by which the City can produce supervisor approval documentation through the financial system’s electronic workflow.
FA 2024-001 Strengthen Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: 84.010 – Title I Grants to Local Educational Agencies Federal Award Numbers: S010A220010 (Year: 2023), S010A230010 (Year: 2024) Questioned Costs: $9,307.29 Repeat of Prior Year Findings: FA 2023-001, FA 2022-001 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it related to the Title I Grants to Local Educational Agencies program. Background: The Title I Grants to Local Educational Agencies (Title I) program was authorized under the Elementary and Secondary Education Act of 1965 to help local educational agencies (LEAs) improve teaching and learning in high-poverty schools in particular for children failing or most at-risk of failing, to meet challenging State academic standards. LEAs may operate targeted assistance programs in which children who are failing or most at-risk of failing may be served or schoolwide programs in which all children in eligible schools may be served. Title I funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. Title I funds totaling $812,681 were expended and reported on the Talbot County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non- Federal entity… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (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; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: All journal entries and general ledger adjustments that impacted Title I program expenditures were selected for testing. For six of the 14 items tested, appropriate evidence of review and approval was not maintained. Additionally, a sample of nine employees was randomly selected for testing using a non-statistical sampling approach. Personal services expenditures for these employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For three employees, supporting documentation was not maintained for additional payments totaling $400.00. • Timesheets to support additional payments totaling $950.00 were not approved for three employees. • One employee was underpaid by $100.00 per review of supporting documentation associated with additional pay amounts. • For one employee, the amount paid did not agree to the contract provided and resulted in an overpayment of $8,907.29. Questioned Costs: Upon testing a sample of $43,178.26 in personal services expenditures, known questioned costs of $9,307.29 were identified for expenditures not supported by adequate documentation. Using the total personal services expenditures population of $381,740.79 (excluding benefits payments), we project the likely questioned costs to be approximately $82,286.14. Cause: In discussing this deficiency with the School District, they believe that these issues are primarily due to improper documentation retention. Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the Title I program. Failure to ensure that documentation exists to support the allowability of payments from the Title I fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to Title I program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District's purchasing and employee compensation policies and procedures. Views of Responsible Officials: We concur with this finding.
FA 2024-002 Improve Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425W – American Rescue Plan Elementary and Secondary School Emergency Relief Fund – Homeless Children and Youth Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021), S425W210011 (Year: 2021) Questioned Costs: $8,763.69 Repeat of Prior Year Findings: FA 2023-002, FA 2022-002 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund program revealed that the School District’s internal control procedures were not operating to ensure that expenditures were appropriately documented to support allowability. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to the coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,581,012 were expended and reported on the Talbot County School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) …Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (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; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: A sample of 16 nonpersonal services expenditures was randomly selected for testing using a nonstatistical sampling approach. The expenditures were reviewed to determine if internal controls were implemented and applicable compliance requirements met. The following deficiencies were noted: • For three expenditures, evidence of review and approval was not reflected within the voucher package. • For one expenditure, unallowable costs totaling $14.35 were identified. All journal entries and general ledger adjustments impacting program expenditures were selected for testing. The following deficiencies were noted: • For five of the 13 items tested, appropriate evidence of review and approval was not maintained. • Sufficient supporting documentation was not provided for four journal entries posted to reverse expenditure activity. • For two journal entries used to record expenditures totaling $4,263.19 in the ESSER fund, it was determined that the charges recorded were not allowable and were not approved on the GaDOE consolidated application. Additionally, a sample of 23 employees was randomly selected for testing using a non-statistical sampling approach. Personal services expenditures for these employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements met. The following deficiencies were noted: • For four employees, supporting documentation was not maintained for additional payments totaling $3,560.05. • For one employee, supporting documentation was not maintained for a pay adjustment resulting in a decrease of $500.00. • For three employees, the amount paid did not agree to board-approved salary scales and resulted in underpayments totaling $1,450.81 for two employees and an overpayment of $926.10 for one employee. Questioned Costs: Upon testing $64,812.64 of nonpersonal services expenditures, known questioned costs of $14.35 were identified for expenditures not supported by adequate documentation. Using the total nonpersonal services expenditures population of $560,743.52, we project the likely questioned costs to be approximately $124.15. In addition, upon testing a sample of $176,911.22 in personal services expenditures, known questioned costs of $4,486.15 were identified for overpayments and expenditures not supported by adequate documentation. Using the total personal services expenditures population of $873,826.11 (excluding benefits payments), we project the likely questioned costs to be approximately $22,158.66. Further, known questioned costs of $4,263.19 were identified for expenditures not supported by adequate journal entry documentation and were not tested as part of a sample; therefore, the known and likely questioned costs identified for unallowable payments throughout the expenditure testing totaled $8,763.69 and $26,546.00, respectively. Cause: In discussing these deficiencies with the School District, they believe these issues are due to improper documentation retention and the need for updated policies and procedures. Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the ESSER program. Failure to ensure that documentation exists to support the allowability of payments from the ESSER fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District’s purchasing and employee compensation policies and procedures. Views of Responsible Officials: We concur with this finding.
FINDING 2024-011 Subject: Title I Grants to Local Educational Agencies - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A210014, S010A220014 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-010. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls to ensure that proper documentation was retained for audit. A sample of 60 transactions charged to the Title I grant during the audit period was selected for testing. The following errors were noted: • A total of 29 transactions, totaling $13,621, were fringe benefit claims; however, the supporting documentation provided did not include details to identify the employees for which the benefit was paid. As a result, we were unable to determine if the payments were on behalf of allowable staff related to the Title I program. • The School Corporation was unable to provide supporting documentation for 2 transactions totaling $551. As such, these transactions were unable to be verified as allowable activities or costs for the Title I program. The errors noted above were considered questioned costs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 39 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for the Federal awards that are renewed quarterly or annual, from the date of submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 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 (for IHE, this per the IHE's definition of IBS); . . . (vii) 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. . . ." Cause Due to turnover of staffing in the School Corporation's administrative office, the School Corporation's management had not established an effective system of internal controls that would have ensured compliance, or that supporting documentation would have been maintained and made available for audit, related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. INDIANA STATE BOARD OF ACCOUNTS 40 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without a proper system of internal controls in place that operated effectively, the School Corporation did not retain and provide appropriate supporting documentation. This prevented the determination of the School Corporation's compliance with the compliance requirements listed above. Questioned Costs We identified $14,172 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that the School Corporation's management establish an effective system of internal controls to ensure documentation will be maintained and made available for audit as related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Criteria: 2 CFR 200.430 Compensation – personal services. (g) 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 that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (v) Comply with the established accounting policies and procedures of the recipient or subrecipient Condition: • Timesheets were not submitted for 2 out of 18 of the items selected for testing. • 15 out of 18 timesheets were not approved. Cause: • Written policies and procedures outlined in the entity’s employee handbook were not followed. • Management did not ensure proper approvals for timesheets. Effect: • Time incorrectly charged to federal award programs. • Possible reduction of future funding due to noncompliance with federal award program requirements. Questioned Costs: N/A Repeat Finding: No Recommendation: We recommend that the WIB review its timesheet policy to ensure it aligns with federal award requirements, is communicated to employees, and provide necessary training. We also recommend management ensure that a process is in place for proper timesheet approvals.
2024-004 Federal Agencies: U.S. Department of Agriculture Federal Program Names: The Child Nutrition Cluster: National School Lunch Program Summer Food Service Program Child and Adult Care Food Program Assistance Listing Numbers: 10.555 10.559 10.558 Pass-Through Agency: Commonwealth of Pennsylvania, Department of Education Pass-Through Number: 359-46-477-8 Award Period: July 1, 2023 through June 30, 2024 Type of Finding: • Material Weakness in Internal Control over Compliance Criteria: Per 2 CFR 200.430 (“Compensation—personal services”), compensation charged to federal awards must be accurately documented, supported by appropriate records, and approved in accordance with established personnel policies. Additionally, federal program agreements—including the Commonwealth of Pennsylvania’s SFSP contract—require that any additional employee compensation charged to the award must be authorized, supported by documentation, and allowability must be verifiable. Internal control requirements under 2 CFR 200.303 mandate entities to establish and maintain effective controls over payroll processing, including documented approval of pay rate changes and personnel actions. Condition: As part of our audit procedures, we selected a sample of 40 payroll transactions for review. This process included examination of employee human resource files (such as signed W-4 and I-9 forms), management-approved pay rates, time sheets with supervisory sign-off, and corresponding payroll reports. We recalculated total hours per timesheet using the employees' pay rates and compared these figures to the relevant payroll reports. During our review, we observed that two employees received additional compensation ranging from $25 to $75 for undertaking extra responsibilities related to the administration of the CBS Food Program’s Summer Food Service Program by the former Chief Executive Officer. Management was unable to provide supporting documentation evidencing approval by the former Chief Executive Officer or confirmation from the Commonwealth of Pennsylvania, Department of Education, indicating that such additional compensation complied with the contractual agreement governing the Summer Food Service Program. Additionally, of the 40 payroll transactions sampled, we noted one employee’s required payroll change documentation (e.g., an approved payroll change form) was not present in their personnel file. Questioned Costs: None Cause: Management did not consistently maintain or enforce internal controls over payroll documentation, including the requirement for retaining approval of supplemental compensation and payroll change forms. Additionally, there was no centralized electronic document management system to ensure secure and consistent retention of personnel and payroll support. Effect: Without proper documentation and approval, the Organization may have charged unallowable or inadequately supported compensation to the federal program. Payroll changes could be processed without appropriate authorization, increasing the risk of errors or unauthorized transactions. The lack of adequate payroll documentation may lead to questioned costs and reduce the reliability of payroll charges reported to the federal awarding agency. Recommendation: We recommend that management improve internal controls for payroll authorization by making sure every payroll change form and supplemental compensation approval is filled out, approved, and kept on file. Introducing a central electronic document management system will help securely store records, standardize documentation, and create clear audit trails for all payroll and personnel files. Management should also regularly review payroll records to confirm that all necessary paperwork, such as personnel forms, pay rate approvals, and backup for extra pay, is included. Views of Responsible Officers and Corrective Action Plan: Please refer to Community Benefit Solutions dba CBS Food Program’s Corrective Action Plan.
Finding 2024-003 – Lack of Internal Controls over Expenditure Documentation (Material Weakness) Name of Federal Agency: U.S. Environmental Protection Agency Federal Program Name: Nonpoint Source Implementation Grants Assistance Listing Numbers: 66.460 Pass-Through Entity: Oregon Department of Environmental Quality Name of Federal Agency: U.S. Department of Commerce – National Oceanic and Atmospheric Administration Federal Program Name: Pacific Coast Salmon Recovery Program Assistance Listing Numbers: 11.438, 15.015, 15.244 Pass-Through Entity: State of Oregon – Oregon Watershed Enhancement Board (OWEB) Name of Federal Agency: U.S. Department of Agriculture Federal Program Name: National Fish and Wildlife Foundation Assistance Listing Numbers: 10.665 Pass-Through Entity: U.S. Forest Service Name of Federal Agency: U.S. Department of Agriculture Federal Program Name: Natural Resources Conservation ServiceName of Federal Agency: U.S. Department of the Interior Federal Program Name: Wildlife, Sport Fish and Restoration Program Assistance Listing Numbers: 15.244 Pass-Through Entity: Bureau of Land Management Name of Federal Agency: U.S. Department of the Interior Federal Program Name: Secure Rural Schools and community Self-Determination – Watershed and water-quality improvements Assistance Listing Numbers: 15.234 Pass-Through Entity: Bureau of Land Management Criteria: Title 2 CFR §200.303 requires nonfederal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the awards in compliance with federal statutes, regulations, and the terms and conditions of the award. Additionally, 2 CFR §200.302(b)(3) requires entities to maintain records that adequately identify the source and application of funds, including supporting documentation for expenditures, and 2 CFR §200.430 requires documentation for compensation for personal services. Condition: During our review of expenditures charged to the federal programs, the entity was unable to provide invoice copies or other sufficient supporting documentation for certain expenditures tested. As a result, we could not verify the allowability, accuracy, and proper approval of these costs in accordance with federal requirements. In addition, records were unavailable for Personnel expenditures that were charged to grant awards, and no support or evidence of time per grant was available. Cause: Partnership for the Umpqua Rivers does not have effective internal controls in place to ensure that invoice documentation and other supporting records are retained, centrally filed, and readily available for audit and monitoring purposes. In addition, management did not perform ongoing monitoring to verify that required documentation was maintained prior to reimbursement or reporting. Effect or Potential Effect: because supporting documentation was not available, expenditures from detail documentation could not be substantiated. This increases the risk that the unallowable, unsupported, or inaccurate costs may be charged to the federal program and reported in the Schedule of Expenditures of Federal Awards (SEFA). Questioned Cost: Yes, $332,409 related to Personnel costs, equipment and other purchases that were not documented with detailed support. Context: During our audit, it was found that the Partnership for the Umpqua Rivers experienced complete staff turnover in Financial Management for the year being audited. No current finance employees had worked for the organization during the year being audited. No financial files for Accounts Payable, invoices, or reporting were available to the current financial staff. Not adequately retaining supporting documents and invoices to support the expenditures of the general ledger and requests for reimbursement for grants, the organization records may be insufficient for testing and review, for internal controls or meeting federal documentation and reporting requirements. Repeat of a Prior-Year Finding: No, Prior- year did not require a Single Audit.Recommendation: Partnership for the Umpqua Rivers should implement policies and procedures requiring invoice copies and supporting documentation to be maintained for all grant expenditures. Management should strengthen record retention practices, provide training to staff on documentation requirements, and implement periodic internal reviews to ensure compliance. District Response: Partnership for the Umpqua Rivers acknowledges the deficiencies. Corrective Action Plan: _____________ (To be completed by Partnership for the Umpqua Rivers) Planned Implementation Date: _________ Responsible Person: Partnership for the Umpqua Rivers Finance Manager
Reference Number: 2024-015 Prior Year Finding: 2023-009 Federal Agency: U.S. Department of the Treasury State Agency: Department of Housing and Community Development Federal Program: COVID-19 – Homeowner Assistance Fund Assistance Listing Number: 21.026 Award Number and Year: 11/1/2021 – 9/30/2026 Compliance Requirement: Allowable Costs/Activities – Time and Effort Reporting Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or specific requirement: Compliance: 2 CFR Section 200.430 (8)(i) Standards for Documentation of Personnel Expenses 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 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) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (vii) 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. Internal Control: Per 2 CFR section 200.303(a), a 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 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). Condition: The Department of Housing and Community Development (Department) did not have effective controls in place for monitoring and obtaining adequate support to validate actual payroll expenses charged to the federal program. Context: One of sixty timesheets selected for testing could not be located by the Department and was unavailable for testing. Cause: Controls were not operating effectively to ensure that time and effort reporting was performed and documented in a timely manner in accordance with federal requirements. Effect: Documentation could not be provided for costs charged to the program. Questioned costs: Undetermined. Recommendation: The Department should reevaluate current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless they can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Views of responsible officials: Management agrees with the finding.
Audit Finding 2024-005 – Lack of Required Time and Effort Documentation Identification of the Federal Programs: Title I, Part A; Assistance Listing Number 84.010; Year 2024 Education Stabilization Funds; Assistance Listing Number 84.425D, 84.425U, 84.425W; Year 2024 Criteria: Under 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 controls; • Be incorporated into the official records of the non‑Federal entity; • Reasonably reflect total activity for which the employee is compensated; • Support distribution among specific activities or cost objectives. Commonly accepted forms of support include Personal Activity Reports (PARs), timesheets, or an equivalent system documenting actual time worked. Condition: During our testing of payroll charges for employees whose salaries were allocated to the programs, we noted that the entity did not maintain Personal Activity Reports or other acceptable time‑and‑effort documentation supporting the distribution of time to the federal program. Context: Documentation was not maintained for support of all employees' salaries and wages tested. Cause: The District has had vacancies in certain positions that are key parts of the District's control processes which led to the District not maintaining proper documentation. Effect or Potential Effect: Without adequate time and effort documentation, there is an increased risk that payroll costs charged to the federal award are inaccurate or unallowable. The lack of supporting records may result in questioned costs related to unsupported salary expenditures. Questioned Costs: None Recommendation: We recommend that the entity: • Implement and enforce policies requiring Personal Activity Reports or an equivalent method that meets 2 CFR 200.430. • Train employees and supervisors responsible for documenting and approving time charged to federal programs. • Maintain documentation that accurately reflects actual time worked on federal awards.
2024-002 Payroll Costs Federal Program - U.S. Department of the Treasury – Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Federal Award Number - SLFRP0136 Compliance Requirement - Allowable Costs/Cost Principles (2 CFR § 200.430) Repeat Finding - This is a repeat finding of 2023-002. Corrective action was not completed prior to or during the audit period due to the timing of audit completion and recommendations to management. Criteria - Under 2 CFR § 200.430(g), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Compensation for leave must be granted under established leave policies and must be allocable and reasonable for the services rendered. Costs for leave that is not earned or used, or that is forfeited, are generally not allowable under federal awards. Condition - The organization uses a calculated hourly rate to allocate payroll costs to programs. This rate includes a pro rata amount for vacation and sick time earned each pay period. However, the organization’s leave policy does not allow for carryover of unused vacation or sick time. As a result, some of the accrued leave may never be used or paid out but was still charged to federal programs through the calculated rate. Cause - The organization’s methodology for allocating payroll costs does not differentiate between earned and used leave and does not account for the forfeiture of unused time at year-end. Effect - Federal awards may have been charged for leave benefits that were never realized or paid to employees, resulting in an overstatement of payroll costs charged to the program. However, based on our analysis, the financial impact of this condition was not material to the federal award and the estimated questioned costs were below the $25,000 reporting threshold. Questioned Costs - $0. No questioned costs are reported as the estimated impact is below the reporting threshold and not material to the award. Recommendation - We recommend that the organization revise its payroll allocation methodology to ensure only used or vested leave is charged to federal awards. If estimates are used, they should be supported by documentation and periodically reconciled to actual costs. Non-vested leave that may be forfeited should not be included in federally funded rates. Views of Responsible Officials - We agree with the findings and determined it was due to outdated processes and a gap in technical expertise utilizing the payroll allocations within the accounting software.
FA 2024-001 Improve Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Reporting Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021) Questioned Costs: $819,799.49 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Elementary and Secondary School Emergency Relief Fund program. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan (ARP) Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $3,951,662.00 were expended and reported on the Hancock County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” In addition, to assist school districts in improving their financial management systems and associated compliance over federal programs, GaDOE published the Financial Management for Georgia Local Units of Administration (FMGLUA) manual. The FMGLUA manual requires that LEAs submit a budget as part of each federal program’s Consolidated Application process. The program budget reflects details regarding the manner in which each school district intends to expend the program funds. The Consolidated Application, including the budget, for each program must be reviewed and approved by GaDOE personnel before the LEA is authorized to expend program funds. Amendments to the budget are to be submitted to and approved by GaDOE when a school district intends to spend funds in a manner not initially reported. LEA personnel must also provide program-specific assurances related to the ESSER program within the Consolidated Application system. These assurances are reflected in the Uniform Guidance, Section 200.415 – Required Certifications, and include provisions that require LEAs “to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets...” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation- Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (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; (ii) Be incorporated into the official records of the non-Federal entity…” Lastly, provisions included in the Uniform Guidance, Section 200.302(a) state in part that “the non- Federal entity’s financial management systems must… be sufficient to permit the preparation of reports required by general and program-specific terms and conditions.” In addition, provisions included in the Uniform Guidance, Section 200.302(b)(2) state in part that the non-federal entity’s financial management system must provide for “accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements.” Condition: A review of the School District’s accounting records and approved expenditures reflected within the ESSER program Consolidated Application reviewed the following deficiencies: • A sample of 13 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. It was noted that prior approval was not obtained from GaDOE for two expenditures totaling $505,229.40 as these expenditures were not reflected in the approved budget or subsequent amendment within the Consolidated Application system as required. • A sample of 37 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if internal controls were implemented and applicable compliance requirements were met. It was noted that prior approval was not obtained from GaDOE for 29 expenditures totaling $181,761.00 as these expenditures were not reflected in the approved budget or subsequent amendment within the Consolidated Application system as required. • A review of indirect cost amounts charged to the ESSER program revealed that the total indirect cost amount budgeted by the School District, which totaled $600,000.00, was recorded as indirect cost expenditures during the period under review. However, the School District should have applied the indirect cost rate approved by the GaDOE to actual expenditures incurred during the fiscal year to calculate a maximum indirect cost amount of $467,190.96. Therefore, unallowable indirect costs totaling $132,809.04 were recorded within the ESSER fund. • Expenditures reported on the ARP ESSER completion report for the period July 1, 2023 through September 30, 2024 were not supported by the general ledger for several functions and objects reflected in the amended consolidated application. Questioned Costs: Upon testing a sample of $690,319.93 in nonpersonal services expenditures, known questioned costs of $505,229.40 were identified for expenditures not properly approved through the Consolidated Application process. Using the total nonpersonal services expenditures population of $2,507,902.88, we project the likely questioned costs to be approximately $1,835,476.87 In addition, upon testing a sample of $418,831.17 in personal services expenditures, known questioned costs of $181,761.05 were identified for expenditures not approved in the consolidated application. Using the total personal services expenditures population of $1,303,995.07 (excluding benefits payments), we project the likely questioned costs to be approximately $565,897.50. Furthermore, known questioned costs $132,809.04 were identified for unallowable indirect costs charged to the ESSER program. Therefore, the known and likely questioned costs identified for all unallowable payments totaled $819,799.49 and $2,534,183.41, respectively. The following Assistance Listing Numbers were affected by known and likely questioned costs: 84.425D & 84.425U. Cause: In discussing this deficiency with the School District, they stated that they did not consider the expenditure purchases unallowable and recorded them in the wrong account number due to oversight. Indirect costs were charged according to the budget without regard of the appropriate indirect cost rate. Effect: The School District is not in compliance with the Uniform Guidance or GaDOE guidance related to the ESSER Program. Failure to accurately develop and amend budget information through the Consolidated Application process and verify compliance with applicable policies and regulations prior to the expenditure of federal program funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unapproved and unallowable expenditures. Recommendation: The School District should evaluate current internal control procedures related to the ESSER Program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that potential expenditures are approved through the Consolidated Application process and deemed to be allowable before spending federal funds. In addition, management should develop and implement a monitoring process to ensure that control procedures are being followed. Views of Responsible Officials: We concur with this finding.
2024-012 (2023-006) PAYROLL Federal Agency: U.S. Department of Education Federal Program Title and Assistance Listing Number: Higher Educational Institutional Aid, 84.031 Type of Finding: Significant Deficiency in Internal Controls over Compliance/Material Non-compliance Compliance Area: Activities Allowed or unallowed, Allowable cost/cost principles Federal Award Year: 2024 Questioned Costs: None Condition The College’s supporting documentation did not agree to the amount of employee’s pay charged to grant. Of the 40 payroll disbursement samples tested, 10 samples (25%) lacked time sheets with evidence of supervisory approval or review. Management indicated that the College no longer has access to ADP, the payroll system used during the first half of FY2024, and therefore was unable to provide the required supporting documentation Criteria Per 2 CFR 200.303(a), 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 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). Per 2 CFR section 200.430(i)(1) – Compensation – personal services, Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause The College does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. Effect Lack of approval and inaccurate documentation for costs charged to grants puts the College at risk of charging unallowable costs, which in turn could result in required repayment to grantor agencies.
2024-004 – Allowable Costs/Cost Principles – Internal Control and Compliance over Payroll Expenditures Identification of the Federal Program: Assistance Listing Number: 14.218 Assistance Listing Title: CDBG - Entitlement/Special Purpose Grants Cluster Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Identification Number: B-21-MC-06-0026, B-23-MC-06-0026, B-20-MW-06-0026, Program Income Assistance Listing Number: 14.231 Assistance Listing Title: Emergency Solutions Grant Program Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Identification Number: E-23-MC-06-0026, E-20-MW-06-0026 Assistance Listing Number: 21.027 Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of the Treasury Pass-Through Entity: N/A Federal Award Identification Number: N/A Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Total salaries charged to federal awards (including extra service pay) are subject to the Standards of Documentation as described by 2 CFR §200.430(i). Per this section, salaries and wages charged to Federal awards must be based on records that accurately reflect the work performed. These records must: Be incorporated into the organization’s official records; Reasonably reflect the total activity for which the employee is compensating across all grant related and non-grant related activities (100% effort); Support the distribution of employee salary across multiple activities or cost objectives (for example, effort spent on multiple federal awards, spent on general/or administrative activities, vacation, sick leave, leave without pay, etc.); and Utilize an "after-the-fact" review of the employee’s actual hours worked during the reporting period for identifying and correcting significant changes (as defined by the organization’s written policies). Condition: CDBG - Entitlement/Special Purpose Grants Cluster For two (2) out of forty (40) payroll samples tested, employees’ benefits and compensated leave were charged to the CDBG program for the pay periods selected even though the employees did not have any actual hours charged to the program. Emergency Solutions Grant Program (ESG) For two (2) employees out of the seven (7) tested with ESG and ESG-CV charges, payroll-related costs were charged to the ESG program even though these employees were not included on the official budget allocation file used to support the distribution of payroll costs. The exceptions consisted of benefits and compensated leave and occurred in five (5) of twenty-three (23) total payroll transactions tested. In addition, our review of the disbursement reports during fiscal year 2024 identified three (3) additional employees with ESG or ESG-CV payroll charges who were not included on the official budget allocation file, bringing the total to five (5) employees not included on the official budget allocation file. Coronavirus State and Local Fiscal Recovery Funds (ARPA) Our review of the distribution reports indicated that one (1) employee who did not work on ARPA during the pay period tested had benefit costs allocated to ARPA. In addition, for one (1) out of the forty (40) employees tested, certain benefit amounts were charged twice to the ARPA program, with duplicate lines posted to the same expense account as regular salaries. The City indicated that the duplicate charges were due to a system setup error. Cause: The condition appears to have occurred because the City did not perform sufficient review procedures over payroll allocations to federal programs. Payroll charges were allowed to post based on budget allocation files and system configurations that were not regularly validated to underlying timekeeping records. In addition, system setup issues that resulted in duplicate postings of certain benefits were not identified and corrected in a timely manner. Effect or Potential Effect: As a result of these conditions, payroll and related benefit costs charged to ESG, ARPA, and CDBG was not be fully supported or was allocated properly to the respective federal programs. Federal expenditures reported to the grantor may therefore be misstated, and there is an increased risk that the City could be required to reclassify or refund portions of the costs charged to these awards. Questioned Costs: None. Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Yes. See prior year finding 2023-003. Recommendation: We recommend that the City enhance its internal controls over payroll processes by implementing policies and procedures that ensure employee compensation charged to federal programs is supported by contemporaneous or after-the-fact documentation of actual time and effort spent on federal program activities. Views of Responsible Officials: Management concurs with the finding.
MATERIAL WEAKNESS Finding Number: 2024-003 Material Weakness in Internal Control over Compliance Federal Program: 84.027 & 84.173 Special Education Cluster (IDEA) Federal Program: 84.425D/84.425U Education Stabilization Fund Criteria: 2 CFR §200.318(a) requires non-federal entities to establish and maintain effective internal control over procurement transactions to ensure compliance with applicable federal statutes and regulations. 2 CFR §§200.317–200.327 require non-federal entities to maintain written procurement policies and procedures that address procurement methods, documentation requirements, and contract administration. 2 CFR §200.430(i) requires charges to federal awards for salaries and wages to be supported by documentation that accurately reflects the work performed and supports the allowability and allocation of payroll costs.2 CFR §200.302(b)(3) requires financial management systems to maintain records that adequately identify the source and application of funds for federally funded activities. Condition: The entity did not maintain adequate internal controls over procurement and payroll expenditures charged to the federal program. Specifically: • The entity does not have a formally adopted, written procurement policy that complies with federal procurement requirements. • Invoices tested did not include supporting documentation such as purchase orders, executed contracts, or memoranda of understanding (MOUs) to substantiate the procurement of goods or services, approval of the transactions, or the basis for the costs incurred. • Payroll expenditures charged to the federal program lacked sufficient supporting documentation, including employment contracts or documentation identifying the employee’s placement on the applicable salary chart within the Teacher and Support Staff Association agreement. • As a result, the entity was unable to demonstrate that payroll costs were calculated in accordance with approved pay rates and were allowable and properly supported. Cause: The deficiencies resulted from the absence of formal procurement policies and insufficient internal controls over documentation standards and record retention for procurement and payroll transactions. Effect: Due to the lack of written procurement policies and insufficient supporting documentation for procurement and payroll expenditures, the entity is unable to demonstrate compliance with federal procurement and cost principles. These deficiencies increase the risk that unallowable or improperly supported costs could be charged to the federal program and not be detected in a timely manner. Identification of Questioned Costs:None identified. Context: The absence of formal procurement policies and consistent supporting documentation limited the ability to readily demonstrate compliance with federal procurement and cost principles and increased the extent of audit procedures required. Repeat Finding: This is a repeat finding of 2023-03.Recommendation: We recommend that management update its procurement policy to include all current requirements under 2 CFR 200 and implement a process to periodically review and revise the policy to remain compliant with future federal regulation changes. Require that all procurement transactions be supported by purchase orders, executed contracts, MOUs, invoices, and evidence of approval and receipt. Ensure payroll expenditures charged to federal programs are supported by employment contracts and documentation identifying employee placement on the applicable salary schedule in accordance with collective bargaining agreements, as required by 2 CFR §200.430. Implement monitoring and training procedures to ensure consistent compliance with federal documentation requirements. Views of Responsible Officials and Corrective Action Plan: Please see the Corrective Action Plan issued by the entity.
2024-005: Federal Awards – Allowable Costs: Condition: The City charged CDBG payroll expenses to the program based a timesheet allocation and did not adjust the charges to reconcile to actual time incurred per employee timesheets. Criteria 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, states, in part: “Charges to Federal awards for salaries and wages must be based on records thataccurately reflect the work performed…” Charges 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;…” And “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Cause The City's payroll system charges time for employees each pay period based on an allocation rather than actual hours documented on the employee’s timesheet. Effect Payroll costs charged to the program were greater than amounts supported by thedocumentation. Questioned Costs There were questioned costs in the amount of $68,488. Recommendation We recommend that the City charge time to the program based on actual hours worked perthe employees' timesheets.
2024-006: Federal Awards – Allowable Costs Federal Agency: U.S. Department of Housing and Urban Development CFDA No.: 14.871 Federal Program: Housing Choice Voucher Program Federal Award Year: 2024 Control Category: Allowable Costs Questioned Costs: $116,045 Condition The City charged HCV payroll expenses to the program based a timesheet allocation and did not adjust the charges to reconcile to actual time incurred per employee timesheets. Criteria 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, states, in part: “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed…” Charges 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;…” And “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Cause The City's payroll system charges time for employees each pay period based on an allocation rather than actual hours documented on the employee’s timesheet. Effect Payroll costs charged to the program were greater than amounts supported by the documentation. Questioned Costs There were questioned costs in the amount of $116,045. Recommendation We recommend that the City charge time to the program based on actual hours worked per the employees' timesheets. Management’s Response Regarding Corrective Action Taken or Planned Management acknowledges the importance of ensuring that payroll costs charged to the program are consistent between the payroll system and the employee’s timesheet. The City continues to monitor its internal control process to ensure thorough review procedures are being followed. Timesheets are reviewed, bi-weekly, by payroll and adjusted to reflect actual hours as they relate to a specific activity. The City was able to hire a permanent accountant hiring who will provide additional oversight of these processes ensuring that hours worked are both reported correctly on the timesheets and are following the funding allocations that are approved by the grant.
Finding 2024-006: Improve Documentation and Controls over Allowable Costs Federal Program(s) Information Federal Agency: Department of Education Cluster/Program: Special Education Cluster Award Name: Special Education Grants to States and Special Education Preschool Grants Assistance Listing Number: 84.027/84.173 Award Year: 2024 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Type of Finding - Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Per Uniform Guidance (2 CFR § 200.430), charges to federal grants for salaries and wages must be based on records that accurately reflect the work performed. Time and effort documentation—such as personnel activity reports, after-the-fact certifications, or properly maintained timesheets for hourly employees—must support that the amount charged to the grant is allocable and appropriate. Condition and Context Of the 40 payroll selections tested for the Special Education Cluster, 28 lacked required time and effort documentation to support the time worked on the grant. In addition, for 21 hourly employees, timesheets were not maintained, preventing verification that only hours spent on grant functions were charged to the grants. Cause The Town did not have effective controls in place to ensure required time and effort documentation and timesheets were completed and retained for all employees whose salaries or wages were charged, in whole or in part, to federal grant programs. Effect or Potential Effect Lack of proper time and effort support and failure to maintain timesheets for hourly employees increases the risk of unallowable or unsupported costs being charged to the grants, resulting in material noncompliance and the potential for disallowed costs. Questioned costs are reported as follows: AL Number(s): Name of Federal Program or Cluster Questioned Costs 84.027/84.173 Special Education Cluster $1,251,490 Recommendation The Town should implement and enforce procedures to ensure all employees whose salaries or wages are charged to federal grants maintain and retain appropriate time and effort documentation, including timesheets for hourly staff and semi-annual certifications for salaried staff, in compliance with Uniform Guidance. Views of Responsible Official See corrective action plan included herein.
Finding 2024-003 U.S. Department of Housing and Urban Development (HUD) Assistance Listing Number 14.218 – CDBG - Entitlement Grants Cluster Significant Deficiency and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) Repeat Finding: No Criteria: In accordance with 2 CFR §200.303, The non-federal entity must: (a) Establish and maintain effective internal controls 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 In accordance with 2 CFR 200.430: (i) 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) Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (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; 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 and Context: For the 3 out of 3 employees selected for testing, the timesheet does not support the allocation of work performed to be funded by the federal program. Cause: Timesheets do not report hours by program, so payroll expenses are not allocated to the federal programs based off actual time spent on the grant program. Effect or Potential Effect: Failure to allocate employee pay in accordance with federal requirements could result in a loss of funding. Unallowed costs could be charged to the grant. Questioned Costs: Unknown. Recommendation: The department should maintain support and rationale for all allocations of payroll costs for employees charged to federal awards. Additionally, employees should earmark their timesheets with the number of hours worked on each program. Views of Responsible Officials: Management agrees with the finding. Refer to the Corrective Action Plan Section of this report
Finding 2024-008 U.S. Department of Health and Human Services Assistance Listing Number 93.224, 93.527 – Health Center Program Cluster Significant Deficiency and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) Repeat Finding: No Criteria: In accordance with 2 CFR §200.303, 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 In accordance with 2 CFR 200.430: (i) 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) Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (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; 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 and Context: For the 4 out of 4 employees selected for testing, the timesheet does not support the allocation of work performed to be funded by the federal program. Cause: Timesheets does not report hours by program, so payroll expenses are not allocated to the federal programs based off actual time spent on the grant program. Effect or Potential Effect: Failure to allocate employee pay in accordance with federal requirements could result in a loss of funding. Unallowed costs could be charged to the grant. Section III - Federal Award Findings and Questioned Costs (continued) Finding 2024-008 (continued) Questioned Costs: Unknown. Recommendation: The department should maintain support and rationale for all allocations of payroll costs for employees charged to federal awards. Additionally, employees should earmark their timesheets with the number of hours worked on each program. Views of Responsible Officials: Management agrees with the finding. Refer to the Corrective Action Plan Section of this report.
State Agency: Illinois Department of Children and Family Services (DCFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Foster Care – Title IV-E Adoption Assistance, Temporary Assistance for Needy Families ALN and Program Expenditures: 93.658 ($157,279,978) 93.659 ($103,674,138), 93.558 ($583,126,272) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Activities Allowed/Unallowed and Allowable Costs/Cost Principles Finding 2024-023: Failure to Provide Supporting Documentation for Payroll and Related Costs Condition Found: DCFS could not provide adequate supporting documentation to substantiate payroll and related costs claimed for federal reimbursement under the Foster Care – Title IV-E (Foster Care), Adoption Assistance, and Temporary Assistance for Needy Families (TANF) programs. On a weekly basis, DCFS employees complete and sign timesheets to report and certify their time. These timesheets are then reviewed and approved by the employee’s immediate supervisor. The supervisor approves the timesheets based on their knowledge of the employee’s hours worked during the pay period. Timesheets are scanned for archiving once a month by the payroll department. Timesheets are manually entered into the time reporting system (Employee Monthly Time Report) which is used to accumulate the costs related to each cost center. Cost pool data from the time reporting system is used to identify personal service expenditures attributable to DCFS’s State and federal programs and to calculate and allocate the related fringe benefit charges and indirect costs. During our testing of 25 direct payroll expenditures charged to the cost pools allocated to the Foster Care, Adoption Assistance, and TANF programs (totaling $127,344) during the year ended June 30, 2024, we noted the following: • The timesheet for one employee (supporting cost pool payroll expenditures sampled of $3,735) could not be provided for testing. DCFS personnel stated they were unable to locate the timesheet for this employee for the sampled period. Upon further review, DCFS personnel noted timesheets were unable to be located for this employee and all employees within the same department (totaling four additional employees) for the entire fiscal year, resulting in approximately 120 missing timesheets (related to payroll, fringe benefits, and indirect costs included in the cost pool totaling $497,277, $399,834, and $194,253, respectively). As a result, the personal service (payroll and fringe benefit) expenditures, as well as related indirect costs, were not appropriately supported in accordance with the requirements of the applicable cost principles. Accordingly, the personal service expenditures and indirect costs were not allowable. • The hours reported for three employees (with sampled personal services expenditures from the cost pool of $15,727) in the timekeeping system used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by the agency exceeded the hours reported on manual timesheets prepared by the employees and approved by supervisors. The unsupported hours reported in the timekeeping system ranged from half an hour to 13.2 hours resulting in unsupported personal service expenditures from the cost pool of $783. Additionally, we noted the controls to ensure required documentation is obtained to support payroll and related costs and maintained to evidence management approval of payroll information were not operating effectively. We also noted adequate internal controls have not been established to ensure the data included in the timekeeping system and used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by DCFS is consistent with the hours reported on manual timesheets prepared by the employees and approved by supervisor. Personal service (payroll and fringe benefit) expenditures and related indirect costs charged to the Foster Care, Adoption Assistance, and TANF programs for the year ended June 30, 2024, were as follows: "See Table in the Audit Report" Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that the expenditure be adequately documented. According to 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be, among other things, supported by a system of internal control, comply with the established accounting policies and practices of the non-Federal entity, and support the distribution of the employee’s salary or wages amount across specific activities or cost objectives if the employee works on more than one 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. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, 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. Effective internal controls should include procedures to ensure required documentation is obtained to support payroll and related costs and to maintain documentation evidencing management approval of payroll information. Cause: In discussing these conditions with DCFS officials, they stated these exceptions were due to human error and the limitations of keeping a complete file record for the paper-based overtime approval and timesheet process. Possible Asserted Effect: Failure to accurately document and maintain required timesheets results in noncompliance with federal regulations and unallowable costs. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding code 2024-023) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCFS review its current procedures and consider any changes necessary to ensure supporting documentation for payroll and related costs is maintained and accurately reflects work performed in accordance with the applicable federal regulations. Views of DCFS Officials: The Department has improved communication with and the training of its timekeepers to ensure accurate and consistent timekeeping standards. The Department has also instituted new quality control procedures to identify and correct errors. All timesheets are digitally archived to ensure proper record retention. The Department is also actively pursuing modernization efforts for both payroll and timekeeping, whether it is e-Time and CMS Payroll or the statewide ERP solutions.
The Department of Emergency and Military Affairs’ Emergency Management Division did not always retain documentation supporting payroll, increasing the risk that $103,045 may not have been spent in accordance with award terms and conditions Assistance Listings number(s) and name(s): 97.042 Emergency Management Performance Grants Award number(s) and year(s): EMF-2021-EP-0016-S01 October 1, 2020 through September 30, 2023 EMF-2021-EP-0018-S01 October 1, 2020 through June 30, 2025 EMF-2022-EP-0009-S01 October 1, 2021 through September 30, 2025 EMF-2023-EP-0008-S01 October 1, 2022 through September 30, 2025 Federal agency: U.S. Department of Homeland Security Compliance requirement(s): Activities Allowed or Unallowed/Allowable Costs/Cost Principles Questioned costs: $103,045 Condition Contrary to federal regulations and its policy, the Department of Emergency and Military Affairs’ Emergency Management Division (Division) did not always retain documentation supporting the payroll costs it charged to the program. Specifically, the Division did not retain personnel action forms supporting and approving employees’ pay rates and/or authorization to work on the program for 5 of 40 employees we tested totaling $103,045, as follows: X $95,080 for 2 employees’ annual payroll costs lacked supported pay rates and authorization to work on the program. These employees transferred to other State agencies after the fiscal year ended, and contrary to Division policy and federal regulation, the Division did not retain their personnel records. X $7,965 for 3 employees annual payroll costs lacked supported pay rates. Previous personnel action forms authorized these 3 employees to work on the program. Effect The Division’s failure to retain documentation supporting payroll costs increased the risk that $103,045 may not have been spent in accordance with award terms and conditions. Consequently, the Division may be required to return monies to the federal agency in accordance with federal requirements.1 The Division’s $1.7 million overall program payroll costs paid to 76 employees, or 23% of $7.3 million total program costs during fiscal year 2024, are at an increased risk of not being spent in accordance with the award terms and conditions. Finally, the Division is at risk that this finding applies to other federal programs it administers. Cause The Division’s Administrative Services Office (Office) was not trained on or aware of Division policy requirements to prepare personnel action forms authorizing all employee pay rate changes and program assignments and to retain the records of employees who subsequently transferred to another State agency. Criteria Federal regulation requires the Division to maintain records for salaries and wages charged to federal awards that accurately reflect the work performed to ensure they are accurate, allowable, and properly allocated (2 CFR §200.430 [g][1][i]) and retain these records for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or passthrough grantor (2 CFR §200.334). In addition, the Department of Emergency and Military Affairs’ policy requires the Division to prepare and retain for 5 years after an employee’s termination all the employee’s employment records, including personnel action forms authorizing employee pay rate changes and program assignments. It also requires the Division to retain necessary personnel records of employees who transfer to another State agency for no less than 5 years.2 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). 1 Federal Uniform Guidance requires federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Division, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 2 State of Arizona, Department of Emergency and Military Affairs. (2007). DEMA Directive 20.1: State Human Resources Administration, Sections 1.3: The Official Personnel File, 1.5: Employees Transferring to Another State Agency. Recommendations to the Division 1. Retain documentation for all payroll costs, including personnel action forms, to demonstrate employees’ salaries and wages are authorized to be charged to the federal program and spent in accordance with the program’s award terms and conditions. 2. Review the fiscal year 2024 payroll costs for the program to ensure they were properly supported and spent in accordance with the award terms and conditions and coordinate with the U.S. Department of Homeland Security, as necessary, to adjust future federal reimbursement requests or repay any unallowable costs the Division charged to the program. 3. Implement its written policy and train employees to prepare and retain for no less than 5 years the personnel action forms authorizing all employee pay rate changes and program assignments, including those who transfer to another state agency. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
The University of Arizona did not support salary and employee-related expenses costs of over $4.8 million that it may be required to repay to the federal agency Cluster name(s): Research and Development Cluster Assistance Listings number(s) and name(s): Various Award number(s) and year(s): Various, 2024 Federal agency: Various Compliance requirement(s): Allowable costs/cost principles Questioned costs: $4,849,561 Condition Contrary to federal regulation and the University of Arizona’s (University) policies and procedures, the University did not properly support the distribution of salary and employee-related expenses (ERE) costs of $4,849,561 to ensure they were accurate, allowable, and properly allocated to the Research and Development Cluster during fiscal year 2024. Specifically, principal investigators or supervisors who had knowledge of work performed on the federally funded Research and Development Cluster projects either did not review and approve effort certification reports or approved them late. We tested 17 employees’ salary and ERE costs charged to the Research and Development Cluster and found that principal investigators or supervisors:1 X Did not approve 3 effort-certification reports for 2 employees. X Did not approve 5 effort-certification reports for 5 employees within the required 30 working-day time frame. Reports were approved between 4 and 35 days late. Further, we obtained a report from the University’s financial system of outstanding effortcertification reports for fiscal year 2024 and found 240 reports supporting salary and ERE costs that were charged to the Research and Development Cluster were not approved, as shown in Table 1, page 184. 1 ERE are determined by applying the appropriate percentage to actual salary expense. Benefits provided to employees, which may include health, dental, long-term disability, retirement, unemployment compensation, qualified tuition remission—employee, termination leave, employee wellness, FICA taxes, workers compensation, and liability insurance. Employees are charged a flat fringe benefit rate regardless of participation. University of Arizona. ERE Rates Overview and FAQs. Retrieved 11/28/25 from https://finance.arizona.edu/accounting/ere-rates/ overview Effect The University’s not approving the effort-certification reports or approving them late increased the risk that the University received $4,849,561 in Research and Development Cluster monies it was not entitled to and may be required to repay to the federal agency. In fact, for 1 of the employees for whom a principal investigator failed to approve effort-certification reports, the University informed us that it improperly paid this former employee $99,762 of salary and ERE for approximately 1 year and 10 months past the employee’s resignation date in June 2023. The University placed a hold on the former employee’s Arizona State Retirement System (ASRS) account and reclaimed the employee’s and employer’s ASRS contribution amounts, resulting in a recovery of $21,648. The University’s improper payments to the former employee resulted in a net loss of $78,114 to the University as of June 30, 2025.2 However, the University reimbursed the Research and Development Cluster by transferring the costs to State appropriated funds for local funding of departments in May 2025; therefore, no questioned cost resulted from this instance of noncompliance. Finally, the University is at risk that this finding applies to other federal programs it administers. 2 Arizona Auditor General. (2025). Report on Internal Control and on Compliance Year Ended June 30, 2025. Retrieved 02/9/2026 from https:// www.azauditor.gov/sites/default/files/2026-02/UniversityofArizonaJune30_2025ReportonInternalControlandonCompliance.pdf Cause Despite periodic notifications by the University’s Sponsored Projects Services, the principal investigators or supervisors either did not review and approve effort certification reports or approved the effort certification reports after the 30-working-day requirement because the policies and procedures for effort certification do not contain enforcement actions for noncompliance. In addition, the University’s policies and procedures did not provide separate time frames for the 2 required effort-certification report reviews, including the fiscal officers and principal investigators or supervisors, to approve the effort-certification reports. For example, for 2 effort-certification reports we tested that were 5 and 17 days late, the principal investigators were given limited time to complete their reviews after the fiscal officers approved the reports in 26 and 28 working days, respectively. Criteria Federal regulation requires the University to base charges to federal awards for salaries on records that accurately reflect the work performed. These records must comply with the University’s established accounting policies and procedures. Federal regulation also allows budget estimates to be used for interim accounting purposes, provided that the University’s system of internal controls includes processes to perform periodic after-the-fact reviews of interim charges made to a federal award based on budget estimates. All necessary adjustments must be made so that the final amount charged to the federal award is accurate, allowable, and properly allocated (2 CFR §200.430[g][1]). University policies and procedures require the University to perform periodic after-the-fact reviews of effort certification reports that include budgeted percentages charged to the federal awarding agency and the distribution of salary and ERE costs based on budgeted percentages amongst all applicable federal awards. These policies and procedures require a fiscal officer to perform the first review and approval of the effort-certification report in the University’s financial system. Then, the principal investigators of federally sponsored projects should approve the effort-certification reports of all employees who are paid fully or partially from federal sources for work performed on a project. If the principal investigator does not have specific knowledge of the work performed, then a direct supervisor who has knowledge of work performed should approve the report. Effort-certification reports are due within 30 working days of the document-creation date in the University’s financial system.3,4 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). 3 University of Arizona. Research & Partnerships – Effort Reporting Policy. Retrieved 11/18/2025 from https://research.arizona.edu/researchsupport 4 University of Arizona. Research & Partnerships – Effort Reporting Procedure. Retrieved 11/18/2025 from https://research.arizona.edu/ research-support Recommendations to the University 1. The principal investigators or supervisors should approve the effort-certification reports within the required 30-working-day time frame. The University should improve its written policies and procedures over effort-certification to include: 2. Enforcement actions when principal investigators or supervisors do not approve the effort certifications within the required time frame. 3. Establish separate time frames in the approval process over effort-certification reports for fiscal officers and principal investigators and supervisors. Views of responsible officials University management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
DEPARTMENT OF HEALTH ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2024-027 Strengthen Controls to Ensure Compliance with Allowable Costs Requirements of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN Number(s) 10.557 - Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Federal Award 205MS707W5003 (10/1/2019 – 9/30/2021) 215MS707W5003 (10/1/2020 – 9/30/2022) 235MS704W1003 (10/1/2022 – 9/30/2023) 235MS704W1006 (10/1/2022 – 9/30/2023) 245MS704W1003 (10/1/2023 – 9/30/2024) 245MS704W1006 (10/1/2023 – 9/30/2024) PAN-WIC-ARPA-TECH-IMPL (5/23/2023 – 9/30/2027) Questioned Costs N/A Criteria The Code of Federal Regulations (2 CFR 200.430(8)(i)) Standards for Documentation of Personnel Expenses 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 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) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (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; 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. The Code of Federal Regulations (2 CFR 200.303(a)), a 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 the terms and conditions of the Federal award. These internal controls should comply 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). Condition During testwork performed over allowable costs requirements for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that payroll costs charged to the program were accurate. The auditor noted the following: • For 40 of 40 timesheets selected for testing, the Department was unable to provide documentation supporting that the recorded time and pay rates were appropriately charged to the grant. • For 40 of 40 employees, who worked 100% or less than 100% and charged to the grant, auditor was unable to obtain evidence supporting the predetermined allocation was appropriately charged to the grant. Cause The Department’s procedures and controls were not sufficient to ensure that time and effort reporting was accurately performed and documented, nor that employee time was properly allocated. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation We recommend the Department should reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Repeat Finding No. Statistically Valid Yes.
DEPARTMENT OF HEALTH ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2024-031 Strengthen Controls to Ensure Compliance with Allowable Costs Requirements of the Immunization Cooperative Agreements program ALN Number(s) 93.268 – Immunization Cooperative Agreements Federal Award NH23IP922605 (7/1/2019 – 6/30/2024) Questioned Costs N/A Criteria Code of Federal Regulations (2 CFR 200.430(8)(i)) Standards for Documentation of Personnel Expenses 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 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) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (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; 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. Code of Federal Regulations (2 CFR 200.303(a)), a 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 the terms and conditions of the Federal award. These internal controls should comply 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). Condition During testwork performed over allowable costs requirements for the Immunization Cooperative Agreements program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that payroll costs charged to the program were accurate. The auditor noted the following: • For 40 of 40 timesheets selected for testing, the Department was unable to provide documentation supporting that the recorded time and pay rates were appropriately charged to the grant. • For 40 of 40 employees, who worked 100% or less than 100% and charged to the grant, auditor was unable to obtain evidence supporting the predetermined allocation was appropriately charged to the grant. Cause The Department’s procedures and controls were not sufficient to ensure that time and effort reporting was accurately performed and documented, nor that employee time was properly allocated. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation We recommend the Department should reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Repeat Finding No. Statistically Valid Yes.
DEPARTMENT OF HEALTH ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2024-032 Strengthen Controls to Ensure Compliance with Allowable Costs Requirements of the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program ALN Number(s) 93.323 – Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Award NU50CK000550 (8/1/2019 – 7/31/2026) Questioned Costs N/A Criteria Code of Federal Regulations (2 CFR 200.430(8)(i)) Standards for Documentation of Personnel Expenses 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 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) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (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; 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. Code of Federal Regulations (2 CFR 200.303(a)), a 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 the terms and conditions of the Federal award. These internal controls should comply 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). Condition During testwork performed over allowable costs requirements for the Epidemiology and Laboratory Capacity for Infectious Diseases program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that payroll costs charged to the program were accurate. The auditor noted the following: • For 40 of 40 timesheets selected for testing, the Department was unable to provide documentation supporting that the recorded time and pay rates were appropriately charged to the grant. • For 40 of 40 employees, who worked 100% or less than 100% and charged to the grant, auditor was unable to obtain evidence supporting the predetermined allocation was appropriately charged to the grant. Cause The Department’s procedures and controls were not sufficient to ensure that time and effort reporting was accurately performed and documented, nor that employee time was properly allocated. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation We recommend the Department should reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Repeat Finding No. Statistically Valid Yes.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Community Service Block Grant Assistance Listing Number: 93.569 Federal Award Identification Numbers and Year: 2301MDCOSR 2401MDCOSR Pass-Through Agency: Maryland Department of Housing and Community Development Pass-Through Number(s): CSBG-ND-2023-NSCI CSBG-ND-2024-NSCI Award Period: 10/1/2022 - 9/30/2024 10/1/2023 - 9/30/2025 Compliance Requirement: Allowable Costs Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: Per 2 CFR Section 200.430 (g)(i) Standards for Documentation of Personnel Expenses 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 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) Encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; (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; a Federal award and nonFederal 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. Control: Per 2 CFR section 200.303(a), a 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 the terms and conditions of the federal award. These internal controls should comply with the 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). Condition/Context: The Neighborhood Service Center, Inc. was unable to provide documentation to substantiate that time and effort was dedicated to the federal program. Neighborhood Service Center, Inc. did not have effective controls in place for monitoring and obtaining adequate support to validate actual payroll expenses charged to the federal program. Questioned costs: Undeterminable Cause: Controls were not operating effectively to ensure that time and effort reporting was performed and documented in a timely manner, in accordance with federal requirements. Effect: There is an increased risk of charging unallowed payroll costs to the program. Repeat Finding: No. Recommendation: We recommend the Neighborhood Service Center, Inc. reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Neighborhood Service Center, Inc. should not report salaries and wages unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Views of responsible officials: In response to the recommendations, effective for immediate implementation, the Neighborhood Service, Inc. will require employees whose salaries are allocated to several funding areas to do periodic (at least 2 times per year) time studies to provide documentation to support how salaries are being allocated in the payroll system to grants and other funding areas. These documents will be signed on June 15 and December 15 of each year.
Finding 2024-002 Corporation for National and Community Service Federal Assistance Listing No. 94.006 AmeriCorps State and National Material Weakness In Internal Controls and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) Repeat Finding: Yes, 2023-002 Condition: For 12 out of 28 payroll selections, we did not receive support to test that payroll charges to the AmeriCorps program were for actual time and effort spent on the grant. 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: (i) 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 controls 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) Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (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; 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. Cause: BCI did not have proper controls in place to ensure that payroll activities charged were based on actual work performed on the grant. Effect: BCI is not in compliance with activities allowed and allowable costs (payroll) requirement for the AmeriCorps program. Unallowed payroll costs could be charged to the grant. Questioned Costs: Unknown. Recommendation: We recommend that BCI establish written procedures related to federally funded payroll to ensure the charges are based on time and effort spent working on the grant and implement these procedures immediately. Auditee Response and Corrective Action Plan: Refer to management’s corrective action plan. Auditor’s Conclusion: Finding remains as stated.
Finding 2024-002: Improper Controls over Personnel Expenses Federal Agency: U.S. Department of Treasury Program Name: COVID-19: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Award Year: June 1, 2023 – May 31, 2024 Program Expenditures: $1,119,206 Questioned Costs: None Criteria: Uniform Grant Guidance (2 CFR 200.430(g)(1)(i)) states 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. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure personnel activity reports are approved. Condition: A KHSU supervisor did not properly document approval for one employee’s personnel activity reports. Cause: KHSU officials stated that this issue was an isolated incident resulting from an unintentional oversight at multiple levels of approval. While established procedures generally ensure proper documentation of personnel activity reports, in this case, the required documentation was inadvertently missed during the review and approval process. Effect: If employee’s personnel activity reports are not properly reviewed and approved, KHSU could submit unallowable costs for the program. Questioned Costs: None Context: Of the 8 employee personnel activity reports sampled, one report did not contain the proper approval by a KHSU supervisor. Repeat Finding: No. Recommendation: We recommend KHSU strengthen internal controls around the approval of personnel activity reports to confirm that a reasonable person can confirm the control occurred. Views of Responsible Officials: Management agrees with the finding. Please see corrective action plan attached.
Finding 2024-002: Improper Controls over Personnel Expenses Federal Agency: U.S. Department of Treasury Program Name: COVID-19: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Award Year: June 1, 2023 – May 31, 2024 Program Expenditures: $1,119,206 Questioned Costs: None Criteria: Uniform Grant Guidance (2 CFR 200.430(g)(1)(i)) states 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. Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure personnel activity reports are approved. Condition: A KHSU supervisor did not properly document approval for one employee’s personnel activity reports. Cause: KHSU officials stated that this issue was an isolated incident resulting from an unintentional oversight at multiple levels of approval. While established procedures generally ensure proper documentation of personnel activity reports, in this case, the required documentation was inadvertently missed during the review and approval process. Effect: If employee’s personnel activity reports are not properly reviewed and approved, KHSU could submit unallowable costs for the program. Questioned Costs: None Context: Of the 8 employee personnel activity reports sampled, one report did not contain the proper approval by a KHSU supervisor. Repeat Finding: No. Recommendation: We recommend KHSU strengthen internal controls around the approval of personnel activity reports to confirm that a reasonable person can confirm the control occurred. Views of Responsible Officials: Management agrees with the finding. Please see corrective action plan attached.
#2024-001: Grant Program: Department of Health and Human Services – National Institutes for Health Research and Development Cluster – Cancer Control – Assistance Listing #93.399 – Lack of Required Written Policies Condition: The Consortium does not have written policies and procedures in place as required by 2 CFR § 200.302 and § 200.313. Specifically, the Consortium lacks documented policies for: • The timing of federal cash draws; • The allowability of costs charged to federal awards; and • Documentation of time-and-effort for personal services. Criteria: 2 CFR § 200.302(b)(6)–(7) requires nonfederal entities to have written procedures for (a) cash drawdowns and (b) determining cost allowability. § 200.305 requires written cash-management procedures that minimize the time between draw and disbursement. § 200.430 requires a written policy that is consistently applied to both federal and nonfederal activities for documentation of compensation for personal services. Context: At the time of completion of the audit for the year ended May 31, 2024, the written policies were not in place. Cause: The Consortium has not yet developed or adopted the required written policies due to limited administrative capacity and reliance on informal practices. Effect: The absence of written policies increases the risk of noncompliance with federal requirements, mismanagement of federal funds, and audit findings in future periods. It may also impair the Consortium’s ability to consistently apply federal cost principles and properly safeguard assets. Recommendation: We recommend that the Consortium develop and implement written policies and procedures that comply with the requirements of Uniform Guidance. Management Response: See Corrective Action Plan.
Health Center Program Cluster – Assistance Listing Nos. 93.224 and 93.527 U.S. Department of Health and Human Services Award No. 6 H80CS00751-22-03, April 1, 2023 – March 31, 2024 Community Health Center Program – State Identifying No. 435.151301 Wisconsin Department of Health Agreement No. 435100-G24-3919588107-90, July 1, 2023 – June 30, 2024 Criteria or Specific Requirement – Period of Performance – Federal: 45 CFR 75.309. State: 2 CFR 200.430. Condition – Costs charged to the grant award were incurred prior to the start of the period of performance. Questioned Costs – Federal: $103,466. State: $5,195. Questioned costs were determined by identifying salaries and wages incurred prior to the beginning of the period of performance based on payroll periods and pay dates. Questioned costs by federal or state award identification number are: • Assistance Listing No. 93.527 Award No. 6 H80CS00751 – $103,466 • Agreement No. 435100-G24-3919588107-90 – $5,195 Context – Salaries and wages from the first pay period paid during the period of performance was charged to the federal and state awards. For Award No. 6 H80CS00751 within Health Center Program Cluster (HCP), payroll paid on April 7, 2023, was charged to the federal award, while 100% of payroll costs were incurred as of March 31, 2023. For Agreement No. 435100-G24-3919588107-90 within Wisconsin Department of Health Community Health Center Program (CHCG), payroll paid on June 14, 2023, was charged to the state award, while 50% of payroll costs were incurred as of June 30, 2023. Effect – The Organization charged salaries and wages incurred prior to the beginning of the period of performance in both HCP and CHCG. Cause – Salaries and wages are charged to federal and state awards based on payroll documentation summarized monthly based on pay date rather than accrual-based salary and wage expense. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should implement cut-off procedures to ensure grant expenditures are captured on the accrual-basis consistent with period of performance compliance requirements and generally accepted accounting principles. To more easily accomplish this, the Organization should identify allowable salaries and wages by payroll period rather than from payroll data summarized monthly by pay date. Views of responsible officials and planned corrective actions – Upon identification of costs incurred prior to the beginning of the period of performance, the Organization identified allowable costs incurred within the period of performance and previously charged to program income in order to reallocate grant expenditures without creating other instances of noncompliance (such as cash management). Although the initial support provided to auditors contained instances of expenditures incurred prior to the beginning of the period of performance, expenditure justification has been updated to reflect corrections and all subsequent grant expenditure detail has been reviewed to ensure no recurrence in the subsequent period. The Organization has also reviewed our internal processes for cut-off procedures related to grant expenditures. We will implement additional internal controls at the end of the grant and the beginning of the grant to ensure accuracy of the salaries being posted are in the correct period of performance. We are also working with our accounting software vendor and payroll vendor to automate the allocation of grant salaries based on time and effort of each individual rather than after-the-fact allocations to grants. This will reduce the need to maintain manual spreadsheets to track staff by lining up grant expenditures with pay periods instead of monthly allocations. Further, relevant staff participated in a training focused on CHC grants management matters in December 2024 and will continue to look for learning opportunities to support and challenge compliance matters.
Health Center Program Cluster – Assistance Listing Nos. 93.224 and 93.527 U.S. Department of Health and Human Services Award No. 6 H80CS00751-22-03, April 1, 2023 – March 31, 2024 Community Health Center Program – State Identifying No. 435.151301 Wisconsin Department of Health Agreement No. 435100-G24-3919588107-90, July 1, 2023 – June 30, 2024 Criteria or Specific Requirement – Period of Performance – Federal: 45 CFR 75.309. State: 2 CFR 200.430. Condition – Costs charged to the grant award were incurred prior to the start of the period of performance. Questioned Costs – Federal: $103,466. State: $5,195. Questioned costs were determined by identifying salaries and wages incurred prior to the beginning of the period of performance based on payroll periods and pay dates. Questioned costs by federal or state award identification number are: • Assistance Listing No. 93.527 Award No. 6 H80CS00751 – $103,466 • Agreement No. 435100-G24-3919588107-90 – $5,195 Context – Salaries and wages from the first pay period paid during the period of performance was charged to the federal and state awards. For Award No. 6 H80CS00751 within Health Center Program Cluster (HCP), payroll paid on April 7, 2023, was charged to the federal award, while 100% of payroll costs were incurred as of March 31, 2023. For Agreement No. 435100-G24-3919588107-90 within Wisconsin Department of Health Community Health Center Program (CHCG), payroll paid on June 14, 2023, was charged to the state award, while 50% of payroll costs were incurred as of June 30, 2023. Effect – The Organization charged salaries and wages incurred prior to the beginning of the period of performance in both HCP and CHCG. Cause – Salaries and wages are charged to federal and state awards based on payroll documentation summarized monthly based on pay date rather than accrual-based salary and wage expense. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should implement cut-off procedures to ensure grant expenditures are captured on the accrual-basis consistent with period of performance compliance requirements and generally accepted accounting principles. To more easily accomplish this, the Organization should identify allowable salaries and wages by payroll period rather than from payroll data summarized monthly by pay date. Views of responsible officials and planned corrective actions – Upon identification of costs incurred prior to the beginning of the period of performance, the Organization identified allowable costs incurred within the period of performance and previously charged to program income in order to reallocate grant expenditures without creating other instances of noncompliance (such as cash management). Although the initial support provided to auditors contained instances of expenditures incurred prior to the beginning of the period of performance, expenditure justification has been updated to reflect corrections and all subsequent grant expenditure detail has been reviewed to ensure no recurrence in the subsequent period. The Organization has also reviewed our internal processes for cut-off procedures related to grant expenditures. We will implement additional internal controls at the end of the grant and the beginning of the grant to ensure accuracy of the salaries being posted are in the correct period of performance. We are also working with our accounting software vendor and payroll vendor to automate the allocation of grant salaries based on time and effort of each individual rather than after-the-fact allocations to grants. This will reduce the need to maintain manual spreadsheets to track staff by lining up grant expenditures with pay periods instead of monthly allocations. Further, relevant staff participated in a training focused on CHC grants management matters in December 2024 and will continue to look for learning opportunities to support and challenge compliance matters.
2 CFR §2400.101 gives regulatory effect to the Department of Housing and Urban Development for 2 CFR §200.303(a) which states 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 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). Furthermore, 2 CFR §200.430(i)(1)(i) states "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 controls which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. The “City of Columbus Fiscal Policies and Procedures for the Administration of HUD Grants Manual” Part II Section C – Standards for Documentation of Personal Services provides the following: All grant funded staff (both city staff and subrecipient staff) will utilize personal activity reports (timesheets). All timesheets will reflect total hours worked, identify the federal grant hours worked, and be signed by either the employee or the supervisor. Furthermore, the City of Columbus Department of Development has established a procedure of timesheet review which requires supervisors review employee timesheets within one week of the pay period end date. This review is evidenced by an electronic signature on the employee-completed timesheet. While the City does have an internal control policy in place in accordance with 2 CFR 430(i)(1)(i), supervisors were not always adhering to the policy which resulted in a deficiency in the application of the control process. Payroll control testing over AL #14.239 Home Investment Partnership Program, it was noted 13 out of the 19 selected worklogs (68%) were not signed by the supervisor within the one-week requirement as required by City policy. Supervisory sign offs occurred between 7 and 102 working days (not including weekends) following the end of the pay period. Failure to follow the established internal control policy and ensuring all time sheets are appropriately approved by a knowledgeable supervisor, within one week of the pay period end date, could result in unallowable costs being allocated to a federal program and could ultimately result in noncompliance and/or a questioned cost. The City should review established policies and procedures with supervisory personnel and evaluate if additional control procedures should be in place to ensure all timesheets are appropriately reviewed timely prior to allocation to a federal program.
Condition: For 3 out of 25 selected transactions, management did not properly update the Full Time Equivalent (FTE) allocation tables, resulting in an overcharge of personnel costs to its Federal programs. Criteria: In accordance with 2 CFR §200.303: 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. In accordance with 2 CFR 200.430: (i) 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) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; and (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; 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. Cause: Maryland Legal Aid did not have controls in place to detect errors in the FTE allocation tables that were used to allocate personnel costs to its Federal programs. Effect: Unallowed payroll costs could be charged to Federal grants. Questioned Costs: Unknown. Recommendation: We recommend Maryland Legal Aid perform a detailed review of the FTE allocations used to allocate personnel costs to its Federal programs. Auditee Response and Corrective Action Plan: Refer to management’s corrective action plan.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
2023-003: Allowable costs/cost principles – Compensation Cluster: Research and Development Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward) Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482 Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant Assistance Listing Numbers: 16.560, 93.121, and 97.044 Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482) Criteria According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition The Company charges compensation costs to federal awards based on actual hours incurred, however, for certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate range by employee type (versus the actual compensation rate for a given employee). No formal review was performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards. Cause The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates. Effect The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate. Questioned Costs Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have been charged to certain federal awards. Recommendation We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards. Management's Views and Corrective Action Plan Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.
#2023-001 – Significant Deficiency – Authorization and Approval Procedural Controls Victims of Crime Act (VOCA), ALN #16.575 Criteria 2 CFR 200.430 (i) Standards for Documentation of Personnel Expenses states, “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (a) be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated; … (e) and comply with the established accounting policies and practices of the non-Federal entity.” Condition When selecting timesheets for testing, it was noted that the Executive Director was approving their own timesheet. Cause The cause is human error, as the normal internal control process is for the Executive Director to review all time allocated to the grants and approve all timesheets. Effect The potential effects of self-review and approval of payroll records could include an over or understatement of salary expenses charged to the grants. Questioned Costs None Perspective Information The finding noted related to all pay periods in calendar year 2023. Identification as a repeat finding There was no similar finding in the prior year. Recommendation We recommend delegating the approval of the Executive Director’s timesheet to another member of management involved in regular office procedures. View of Responsible Official Effective immediately, the Assistant Director signs the biweekly timesheets of the Executive Director.
#2023-001 – Significant Deficiency – Authorization and Approval Procedural Controls Victims of Crime Act (VOCA), ALN #16.575 Criteria 2 CFR 200.430 (i) Standards for Documentation of Personnel Expenses states, “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (a) be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated; … (e) and comply with the established accounting policies and practices of the non-Federal entity.” Condition When selecting timesheets for testing, it was noted that the Executive Director was approving their own timesheet. Cause The cause is human error, as the normal internal control process is for the Executive Director to review all time allocated to the grants and approve all timesheets. Effect The potential effects of self-review and approval of payroll records could include an over or understatement of salary expenses charged to the grants. Questioned Costs None Perspective Information The finding noted related to all pay periods in calendar year 2023. Identification as a repeat finding There was no similar finding in the prior year. Recommendation We recommend delegating the approval of the Executive Director’s timesheet to another member of management involved in regular office procedures. View of Responsible Official Effective immediately, the Assistant Director signs the biweekly timesheets of the Executive Director.
#2023-001 – Significant Deficiency – Authorization and Approval Procedural Controls Victims of Crime Act (VOCA), ALN #16.575 Criteria 2 CFR 200.430 (i) Standards for Documentation of Personnel Expenses states, “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (a) be supported by a system of internal control which provides reasonable assurance that the changes are accurate, allowable, and properly allocated; … (e) and comply with the established accounting policies and practices of the non-Federal entity.” Condition When selecting timesheets for testing, it was noted that the Executive Director was approving their own timesheet. Cause The cause is human error, as the normal internal control process is for the Executive Director to review all time allocated to the grants and approve all timesheets. Effect The potential effects of self-review and approval of payroll records could include an over or understatement of salary expenses charged to the grants. Questioned Costs None Perspective Information The finding noted related to all pay periods in calendar year 2023. Identification as a repeat finding There was no similar finding in the prior year. Recommendation We recommend delegating the approval of the Executive Director’s timesheet to another member of management involved in regular office procedures. View of Responsible Official Effective immediately, the Assistant Director signs the biweekly timesheets of the Executive Director.
Criteria: 2 CFR 200.430(i)(1)(viii) states that “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim changes made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition: Grant hours are not tracked on the employee monthly timesheet. Wages charged to the program are based on estimated hours worked. The Alliance does not have procedures in place to convert estimated to actual hours. Cause: Management used to record actual hours worked by grant. Based on instructions from a prior auditor, the accounting function stopped tracking actual hours and used estimated hours to apply wages and related costs to its various grants. Effect: Management is not in compliance with requirements for federal awards. Any costs disallowed by a federal agency, or a pass-through entity, could require repayment of those costs to the funding source. Repeat finding of 2022-003 Questioned costs: Not determined – For program personnel that worked solely on the federal award, their time worked was charged 100% to the federal award and there is a written time record of this, so there is no question about these costs. In addition, the Alliance incurred more costs for the program than were reimbursed under the major program federal award or reimbursed under matching funds. Perspective: Management was following a prior auditor’s incorrect advice that such detail of actual time spent on each grant and other functions was not necessary. Due to the predecessor auditor firm’s schedule, the 2022 audit was not complete until March of 2024. This did not allow management to implement their corrective action plan until 2024. Recommendation: Management should ensure that their procedures for recording time worked, for both exempt and nonexempt employees, is a real-time written or electronic record of time worked for each program/grant. The total hours worked should agree with the total hours being paid. For employees that work on more than one program during a day, the time record should reflect all of the programs/grants on which the employee spent time as a program service, or on administrative or fundraising functions. Views of Responsible Officials: The Alliance has reinstituted an hourly timesheet format in order to account for positions with multiple funding sources.
Criteria: 2 CFR 200.430(i)(1)(viii) states that “budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim changes made to a Federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition: Grant hours are not tracked on the employee monthly timesheet. Wages charged to the program are based on estimated hours worked. The Alliance does not have procedures in place to convert estimated to actual hours. Cause: Management used to record actual hours worked by grant. Based on instructions from a prior auditor, the accounting function stopped tracking actual hours and used estimated hours to apply wages and related costs to its various grants. Effect: Management is not in compliance with requirements for federal awards. Any costs disallowed by a federal agency, or a pass-through entity, could require repayment of those costs to the funding source. Repeat finding of 2022-003 Questioned costs: Not determined – For program personnel that worked solely on the federal award, their time worked was charged 100% to the federal award and there is a written time record of this, so there is no question about these costs. In addition, the Alliance incurred more costs for the program than were reimbursed under the major program federal award or reimbursed under matching funds. Perspective: Management was following a prior auditor’s incorrect advice that such detail of actual time spent on each grant and other functions was not necessary. Due to the predecessor auditor firm’s schedule, the 2022 audit was not complete until March of 2024. This did not allow management to implement their corrective action plan until 2024. Recommendation: Management should ensure that their procedures for recording time worked, for both exempt and nonexempt employees, is a real-time written or electronic record of time worked for each program/grant. The total hours worked should agree with the total hours being paid. For employees that work on more than one program during a day, the time record should reflect all of the programs/grants on which the employee spent time as a program service, or on administrative or fundraising functions. Views of Responsible Officials: The Alliance has reinstituted an hourly timesheet format in order to account for positions with multiple funding sources.