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.
Criteria: Uniform Guidance (2 CFR 200.302(b)(7) and 2 CFR 200.430) requires entities to establish and maintain effective internal control over federal awards, including ensuring that expenditures are properly authorized and supported by adequate documentation. Condition: During testing, the Organization was unable to provide documented evidence of disbursement approvals, as approvals are frequently communicated verbally or via text message and are not retained. In addition, the Organization was unable to provide employment agreements or other documentation supporting employee pay rates for individuals whose compensation was charged to the federal program. Cause: The condition appears to result from inadequate policies and procedures over documenting and retaining evidence of approval for expenditures, including both disbursement authorization and employee compensation arrangements, as well as a lack of formal controls requiring retention of such documentation. Effect: As a result, there is an increased risk that expenditures charged to federal programs may be unauthorized, improperly approved, unsupported, or not allowable under Uniform Guidance. The lack of documentation also limits the effectiveness of audit procedures and increases the likelihood that noncompliance could occur and not be detected. No questioned costs were identified as a result of this finding. Recommendation: We recommend that the Organization establish formal procedures requiring documented authorization for all disbursements and ensure that such approvals are retained in an organized and accessible manner. Additionally, the Organization should implement procedures requiring formal documentation of employee compensation arrangements, including established pay rates, and ensure that this documentation is consistently maintained and readily available for audit and compliance purposes. Management’s Response: Management agrees with the finding and indicates that it will implement formal approval procedures requiring documented authorization for all disbursements and will retain such documentation within its accounting records. Management also plans to implement standardized employment agreements and compensation authorization documentation for all employees and strengthen document retention practices to ensure compliance with federal requirements.
Criteria: Uniform Guidance (2 CFR 200.403 and 2 CFR 200.430) requires that costs charged to federal awards be properly classified, allowable, and reflect the nature of the expenditure. Compensation for personal services must be accurately categorized and charged to appropriate cost objectives. Condition: During testing, it was identified that the Organization recorded $2,143 of employee compensation, paid through its payroll process as a bonus or stipend, to a travel and development line item rather than classifying the cost as payroll-related expense. Cause: This condition appears to result from inadequate controls over the classification and coding of expenditures, as well as a lack of review procedures to ensure payroll-related costs are recorded in the appropriate accounts. Effect: As a result, $2,143 compensation costs were misclassified in the accounting records and improperly charged to the federal program under an incorrect cost category. This increases the risk that financial reports submitted for federal awards may be inaccurate and that costs may not be evaluated appropriately for allowability. Recommendation: We recommend that the Organization implement procedures to ensure that all payroll-related costs, including bonuses and stipends, are properly classified within the accounting system. Management should also establish review controls over coding of expenditures to ensure consistency with Uniform Guidance and grant reporting requirements. Management’s Response: Management agrees with the finding and indicates that it will strengthen review procedures over expense classification and ensure that compensation costs are properly recorded within payroll-related accounts going forward.
Assistance Listing Number: 93.558 Name of Federal Program or Cluster: Temporary Assistance for Needy Families (TANF) Name of Federal Agency: Department of Health and Human Services Name of Pass-Through Entity: Virginia Department of Social Services Pass-Through Entity Identifying Number: BEN-21-029 Award Period: July 1, 2023 through June 30, 2024 Criteria or Specific Requirement: 2 CFR 200.430 requires salary and benefit charges to be based on records that accurately reflect work performed. Condition and Context: UCM did not maintain effective internal controls to ensure that payroll and employee benefits charged to the federal award were allowable. Auditor tested 100% of personnel and related benefits charged to the federal award. Specific issues included: Payroll costs – time and effort reporting o No internal controls existed over time-and-effort reporting for 2 out of 12 employees charged to the federal award. o Required after-the-fact documentation of actual time worked was not maintained. Retroactive time and effort certifications were received during audit for 10 out of 12 employees who worked within the program. Employee benefits – lack of controls and overcharging o There were no internal controls to ensure that employee benefits charged to the award reflected actual costs incurred. o UCM charged budgeted benefit amounts, which were greater than actual costs. Cause: UCM lacked formal written policies and procedures governing time and effort reporting, employee benefit allocations, and documentation standards. Significant management personnel turnover resulted in inadequate federal grant knowledge and inconsistent application of Uniform Guidance requirements. Effect or Potential Effect: Unallowable, unsupported, or inaccurately allocated costs were charged to the federal award. UCM may be required to repay federal funds and implement corrective actions. Questioned Costs: Questioned costs include the 2 out of 12 unsupported time and effort costs, excess employee benefits than actual allocable to the employees within the program, and 10% de minimis charged on the questioned costs. Payroll: $15,037 Employee benefits: 77,118 Indirect overcharge on above questioned costs: 9,216 Total known questioned costs: $101,371 Recommendation: UCM should develop and implement comprehensive written policies and procedures addressing time and effort, employee benefits, payroll allocations, and documentation standards. Staff responsible for grant accounting should receive Uniform Guidance training. Views of Responsible Officials: Management acknowledges the finding and will work to implement appropriate corrective actions to address the deficiency and improve compliance going forward.
Payroll Allocation Documentation for Federal Awards 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. Internal controls should provide reasonable assurance that payroll costs charged or allocated to federal awards are properly supported and consistently applied. Condition SELF maintained employee timesheets documenting hours worked, however, the timesheets did not identify the specific programs or cost objectives on which employees worked. Employees assigned to a single program were generally charged directly to their home department through the payroll system. For employees performing administrative, management, and other shared functions, payroll costs were not allocated to individual federal programs during the fiscal year. Following audit procedures and confirmation from the City of Philadelphia that certain City contracts included federal pass-through funding, management performed after-the-fact allocations of shared payroll costs to the applicable federal awards. SELF did not maintain contemporaneous documentation supporting the basis for these allocations during the audit period. Cause Management was not aware during the fiscal year that certain City of Philadelphia contracts contained federal passthrough funding subject to the Uniform Guidance requirements. As a result, procedures had not been established to identify federal awards or to contemporaneously document and allocate shared personnel costs benefiting those awards. Effect Without documentation supporting payroll allocations, the Organization cannot demonstrate that salaries charged to federal awards accurately reflect the work performed or that shared personnel costs were allocated using a consistently applied, reasonable methodology. This increases the risk that payroll expenditures charged to federal awards may not comply with Uniform Guidance requirements. Questioned Costs We were unable to determine the amount, if any, of questioned costs. Auditors’ Recommendation Management should establish procedures to identify all federal funding, including pass-through funding received through nonfederal entities, at the time awards are executed. The Organization should implement written policies requiring that payroll costs charged or allocated to federal awards be supported by contemporaneous documentation reflecting the work performed and that shared personnel costs be allocated using a documented, reasonable, and consistently applied methodology that complies with 2 CFR 200.430. Management’s Response and Corrective Action Plan Management was unaware that certain City of Philadelphia contracts contained federal pass-through funding until confirmation was received from the City during the audit. Upon becoming aware of the federal funding, management developed an allocation methodology for shared personnel costs and has begun implementing procedures to identify federal funding at award inception and to document payroll allocations contemporaneously for future reporting periods.
FINDING NO: 2024-028 (Repeat 2023-047) Develop and Implement Internal Controls Over the Payroll Allocation Process STATE AGENCY: Oklahoma State Department of Education (OSDE) FEDERAL AGENCY: United States Department of Education (USDE) ALN: 84.010; 84.425 – 84.425D & U FEDERAL PROGRAM NAME: Title I – Grants to Local Educational Agencies; Education stabilization Fund (ESF) - Elementary and Secondary School Emergency Relief (ESER) Fund and American Rescue Plan – Elementary and Secondary Schools Emergency Relief Fund (ARP ESSER) FEDERAL AWARD NUMBER: S010A230036; S425D210024, S425U210024 FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed and Allowable Costs/Cost Principles QUESTIONED COSTS: $0 Condition and Context: During our review and follow up on the prior year finding, we requested the time and effort data for payroll charged to the Title IA and the ESF – ESSER II and ARP ESSER III programs; current OSDE staff were not able to provide the data requested due to significant staff turnover and inadequate record retention processes. We were unable to determine the following payroll costs were properly allocated to their respective program during the audit period: • Title I: $1,138,740 (0.49%) compared to total program expenditures of $234,255,756. • ESSER II: $301,888 (1.21%) compared to total program expenditures of $24,855,831.06. • ARP ESSER III: $2,023,891 (0.46%) compared to total program expenditures of $441,707,269. The United States Department of Education (USDE) Consolidated Performance Review of Oklahoma (dated July 25, 2024) covering the SFY 23 audit period noted OSDE had used estimates to allocate payroll costs to federal awards but had not reconciled those estimates to the actual work performed on each federal program as required per 2 CFR § 200.430. The OSDE’s time and attendance system did not allow the agency to accurately charge time for employees who are paid from both State and Federal sources simultaneously. Time would be charged to the Federal funding source for the first split of the fiscal year (FY) and then charged to a state funding source for the remainder of the fiscal year. During our follow-up with OSDE, we were informed that this had not been corrected during the audit period. Cause: Technical issues with the State’s recently adopted time and attendance system did not allow OSDE to accurately charge fringe benefits for employees who are paid from both State and Federal sources and OSDE had not implemented an alternative process to accurately allocate payroll costs to federal awards. In addition, OSDE’s record retention process lacked the necessary strength and consistency to ensure retention of time and effort data. Effect: Charges to Federal awards (Title IA and ESF – ESSER II and ARP ESSER III) for salaries and wages were not based on records that accurately reflect the work performed and were not properly allocated. Inaccurate allocation methods for payroll costs increases the risk of incorrect or unallowable costs charged to Federal programs, which increases the risk of inappropriate allocation of funds between federal and state dollars. Recommendation: We recommend OSDE develop and implement system changes or an alternative process to accurately allocate payroll cost to Federal awards in compliance with the time and effort requirements of 2 CFR § 200.430. We also recommend OSDE develop and provide staff members with policies and procedures and adequate training to understand and appropriately apply 2 CFR § 200.430 federal requirements for recording time and effort data and allocating salaries and wages to Federal awards. Additionally, we recommend OSDE develop record retention policies and procedures to ensure all records are appropriately retained, especially when staff turnover is high. Criteria: 2 CFR § 200.430(g)(1) 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: (i) Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the recipient or subrecipient; (iii) Reasonably reflect the total activity for which the employee is compensated by the recipient or subrecipient, not exceeding 100 percent of compensated activities (for IHEs, this is the IBS); (iv) Encompass federally-assisted and all other activities compensated by the recipient or subrecipient on an integrated basis but may include the use of subsidiary records as defined in the recipient's or subrecipient's written policy; (v) Comply with the established accounting policies and procedures of the recipient or subrecipient; 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 allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (vii) Budget estimates (meaning, 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 performed; (B) Significant changes in the related work activity (as defined by the recipient's or subrecipient's written policies) are promptly identified and entered into records. Short-term (such as one or two months) fluctuations between workload categories do not need to be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The recipient's or subrecipient'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. (viii) Because practices vary as to the activity constituting a full workload (for example, the Institutional Base Salary (IBS) for IHEs), records may reflect categories of activities expressed as a percentage distribution of total activities.” 2 CFR § 200.334 states in part: “The recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to, financial records, supporting documentation, and statistical records. Federal agencies or pass-through entities may not impose any other record retention requirements except for the following: (a) The records must be retained until all litigation, claims, or audit findings involving the records have been resolved and final action taken if any litigation, claim, or audit is started before the expiration of the three year period.” 2 CFR § 200.303(a) states in part: “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.” Management Response Contact Person: Tammy Smith | Senior Director of Federal Programs Anticipated Completion Date: January 2025 Corrective Action Planned: The Oklahoma State Department of Education agrees with the finding. See corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-024 (Repeat 2023-088; 2022-085) Strengthen Internal Controls Over Reviewing Administrative Claims STATE AGENCY: State of Oklahoma, Office of Management and Enterprise Services FEDERAL AGENCY: US Department of Treasury ALN: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance (ERA 1 and ERA 2) FEDERAL AWARD NUMBER: ERA028 and ERAE0259 FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed/Unallowed and Allowable Costs/Cost Principles QUESTIONED COSTS: $1,080,309 Condition and Context: Administrative costs charged to the ERA 1 and ERA 2 grants must be attributable to providing financial assistance and housing stability services to eligible households and must be necessary and reasonable for the performance of the ERA 1 and ERA 2 Federal award and be allocable to the ERA 1 and ERA 2 Federal award. Also, any direct and indirect administrative costs in ERA1 or ERA2 must be allocated by the grantee to either the provision of financial assistance or the provision of housing stability services. To the extent administrative costs are not readily allocable to the provision of financial assistance or the provision of housing stability services, the grantee may assume an allocation of the relevant costs of 90 percent to financial assistance and 10 percent to housing stability services. In order to determine if the subrecipient Communities Foundation of Oklahoma (CFO)/Communities Cares Partners (CCP), only charged administrative costs to the ERA 1 and ERA 2 grants in compliance with the grant requirements described above, we performed the following procedures: Analysis of Program Expenditures and Administrative Cost Charged over the Period of Performance: We obtained the SFY24 transaction data for the ERA 1 and ERA 2 grants from CFO/CCP and identified the transactions coded to the ERA 1 and ERA 2 grant by 1) awardee (i.e., State of Oklahoma, Cleveland County, Oklahoma County, Oklahoma City); and 2) type of expenditure (i.e., rent and utility assistance payments, rent and utility assistance administrative expenditures, housing stability payments, housing stability administrative expenditures). We noted that the subrecipient had zero expenditures during SFY24 for actual rent and utility assistance, however, $1,845,942 (ERA 2) and $137 (ERA 1) in rent and utility assistance administrative costs were charged to the State of Oklahoma ERA awards. We also noted that the subrecipient had $6,908,183 (ERA 2) in housing stability payments during SFY24 and charged $155,252 in housing stability administrative expenditures to the State of Oklahoma ERA2 award. We also reviewed a timeline provided by CFO/CCP that outlined the activities the subrecipient was engaged in related to the ERA awards over the period of performance. Of note, CFO/CCP stopped accepting rent and utility assistance applications at the end of August 2022 and, by the end of December 2022, CFO/CCP stopped paying virtually all rent and utility assistance applicants and marked all remaining qualified applications in the Neighborly system as Unpaid - Funds Exhausted with the exception of a few Office of Refugee Resettlement (ORR) applications that were processed through the end of June, 2023. In December of 2022, CFO/CCP closed social media channels and platforms and disbanded the Qualifications Team, Client Relations Team, Communications Team, and Processing Team with several contractors held over to continue to address remaining issues. In January of 2023, CFO/CCP created a Clean-up Team to identify and resolve remaining issues and organize files to ensure any staff at the Communities Foundation of Oklahoma could quickly find information they may need upon the closure of CCP. CFO/CCP also began funding 13 ERA-2 Housing Stability Partners. The following table shows the percentage of administrative expenditures (not including the 16 million in unallowable management fees) for the State of Oklahoma ERA 1 and ERA 2 programs administered by CFO/CCP from SFY 21 to SFY 24. CCP/CFO Administrative Expenditures for the State of Oklahoma ERA 1 and ERA 2 Programs Compared to Rent & Utility (RU) Assistance Payments and Housing Stability Expenditures SFY23 ERA 1 & ERA 2 SFY 21 & SFY 22 As of December 31, 2022 As of June 30, 2023 SFY 24 RU Assistance Payments $188,753,605.17 $72,779,085.51 $2,030,717.31 -$334,805.10 RU Assistance Admin Payments $9,113,762.73 $7,099,473.23 $1,524,364.43 $1,846,079.25 Admin % of Assistance Payments 4.83% 9.75% 75.07% -551.39% Housing Stability Payments $17,773,884.27 $1,906,561.94 $4,551,171.62 $6,908,182.87 Housing Stability Admin Payments $274,224.14 $935,236.26 $0.00 $155,252.45 Admin % of Assistance Payments 1.54% 49.05% 0.00% 2.25% Total RU Assistance & HS Payments $206,527,489.44 $74,685,647.45 $6,581,888.93 $6,573,377.77 Total RU Assistance & HS Admin Payments $9,387,986.87 $8,034,709.49 $1,524,364.43 $2,001,331.70 Total Admin % of Program Expenses 4.55% 10.76% 23.16% 30.45% Of note, the 10 % and 15% limit means that administrative costs must not exceed these limits, however, the costs still have to be attributable to providing financial assistance and housing stability services to eligible households and must be necessary and reasonable for the performance of the ERA 1 and ERA 2 Federal award and be allocable to the ERA 1 and ERA 2 Federal award. We identified several issues with CFO/CCP in relation to the amount of administrative expenditures charged to the federal awards in comparison to the actual activities that were performed and/or would have been reasonable and necessary to perform given the type of program expenditures the subrecipient was incurring at the time. Based on our analysis, it appears that CFO/CCP significant increase in administrative costs coincided with the increase to a 15% administrative limit for the ERA 2 grant award instead of the 10% limit under the ERA 1 grant award. We noted that, during this period, (mainly SFY 2023) CFO/CCP made large increases to contractor rates, paid out unallowable bonus payments of approximately 38% of the total contractor payroll (an over 470% increase over the prior period) and increased other administrative costs as well. Almost all rent and utility assistance applications were processed and paid as of the end of December 2022. Administrative costs relevant to processing and paying rent and utility assistance applications far exceed any costs relevant to administering the housing stability activities related to the relatively small number of HS contracts paid in SFY23 and SFY24; however, CFO/CCP’s administrative costs were rising in comparison to the assistance payments. Also, CFO/CCP had 6 months in SFY23 in which very little assistance applications were processed and paid, yet CFO/CCP charged over $500,000 more in SFY24 for admin costs than it did during the last 6 months of SFY23 when the majority of the closeout activities would have been completed. We also noted that CFO/CCP stopped funding qualified applications when they had expended the required 80% of the ERA I award and 75% of the ERA 2 award and not because the funds available to the subrecipient to pay the assistance applications were exhausted. At that time, CFO/CCP had already retained millions in unallowable management fees, earned millions in interest as a result of OMES advancing ERA funds far in advance of when the funds were being expended, and had set aside millions in ERA funds they intended to use for future administrative costs and management fees even though the amount retained was far in excess of what was actually needed to close out the program and administer the remaining housing stability contracts. While performing an analysis on FY21-FY24 payroll expenditures from the ERA program for the subrecipient Communities Foundation of Oklahoma (CFO)/Communities Cares Partners (CCP), we obtained the ERA data and noted the following related to payroll and bonus payments for each year: Bonuses Payroll Total Bonus % FY21 131,500 2,337,034 2,468,534 5.63% FY22 546,826 8,185,607 8,732,433 6.68% FY23 2,407,500 6,318,905 8,726,405 38.10% FY24 139,500 1,182,889 1,322,389 11.79% 3,225,326 18,024,434 21,249,760 17.89% The bonus payments are 17.89% of total payroll expenditures and 11.79% of the total for FY24. We were informed that CFO/CCP management arbitrarily distributed bonuses that were not based on specific criteria, did not adhere to CCP Bonus Policies and Procedures, and were approved after the payments were made. It appears that all bonus payments did not adhere to 2 CFR 200.430 and are unallowable. For FY24, this results in $113,963 (State of Oklahoma federal share) of questioned costs. (Note: $113,963 represents 81.6% of total bonuses of $139,500 for FY24, which is the percentage of State of Oklahoma admin to total admin which includes all other jurisdictions of ERA program funds). In addition, we tested a sample of 48 of 980 (4.90%) payroll administrative expenditures, and identified: • 48 of 48 (100%) claims are not supported with timesheets to reflect the distribution of the employee’s wages among specific activities or cost objectives for the Federal award and do not accurately reflect the work performed specifically for the State of Oklahoma ERA award. CFO also administers the ERA awards for Oklahoma County, The City of Oklahoma and Cleveland County. Also, CFO created four different non-profits internally (Sidexside, Shelterwell, Afghan Legal Network and Latitude Legal) with significant crossover in CCP staff and resources. In addition, CCP appears to have significant private funding attributed to the CCP division, but there is no indication of what projects this money is being used for or which staff members worked on privately funded projects. This results in $56,972.74 in questioned costs (excluding bonus payments). • Nine of 48 (18.75%) claims included unallowable bonus payments totaling $85,000; however, those questioned costs are already included in the SFY24 total amount of $139,500 above. Because CCP confirmed that no time and effort distribution records were kept for the State of Oklahoma ERA programs, and the timesheets did not include the number of hours worked by program, all payroll expenditures are unsupported; therefore, all payroll expenditures are questioned, totaling $966,346 (State of Oklahoma federal share). (Note: $966,346 represents 81.6% of total payroll of $1,182,889 for FY24, which is the percentage of State of Oklahoma admin to total admin which includes all other jurisdictions of ERA program funds) We also observed through CCP’s timeline that the application portal was closed as of August 31, 2022, and, as of December 2022, CCP disbanded the following teams Qualifications, Client Relations, Communications, and Processing; however, we noted that five employees in these divisions were still being paid. In addition, two employees from the fraud department were paid over $100,000 each; however, CCP has been unable to provide a list of applicants, landlords, or payments that were sent to this department for review. Cause: OMES did not timely take corrective action to address prior year findings from the SFY 21 to SFY 23 audits. OMES did not timely take corrective action to require OMES personnel to obtain, review, approve, or maintain adequate supporting documentation for housing stability program costs and housing stability administrative costs. The required corrective action would have included transferring administration of the ERA grant to the GMO office or other personnel with the experience and expertise to administer Federal grant funds before the majority of the ERA funds were expended by the subrecipient. OMES did not establish and maintain effective internal control over its claims process to provide reasonable assurance the Federal award was administered in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, OMES’s subrecipient monitoring process lacked the strength and consistency to ensure subrecipients established and maintained effective internal control over the Federal award to provide reasonable assurance that the non-Federal entity was managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effect: Inadequate review of claims and approving claims without proper supporting documentation increases the risk of unallowable expenses resulting in noncompliance. Furthermore, noncompliance increases the risk of Federal claw backs, which impacts state dollars. Payroll costs totaling $966,346 were not supported by time distribution records. Unallowable bonus payments of $113,963, were charged to the ERA program as payroll administrative expenditures, which could have been used toward Oklahoma applicants in need of ERA funding. OMES’s decision to delay proper oversight of the ERA program and to postpone needed corrective actions until after the majority of grant funds had been expended by a subrecipient, significantly increases the risk that excess funds cannot be recovered. This also greatly increases the risk that the state taxpayers will have to repay more than $23 million in unallowable costs. Recommendation: SAI acknowledges that beginning in FY25, oversight of the ERA program was transferred to the Grants Management Office (GMO). The GMO has two staff members on the team with 20+ years of combined federal grant specific experience. The GMO entered into a subrecipient agreement that does not expire to monitor CFO’s duties and processes. GMO also required CFO to return the remaining ERA 2 program funds to ensure that proper oversight and review of ERA expenditures is performed. The GMO has implemented a multi-level system of internal controls for grant management and oversight that includes routine monitoring, desk review, and site visits for all projects and associated project/administrative expenditures to ensure allowability, accuracy, and to assist in the detection of fraud. For the ERA Program, OMES-GMO conducts bi-weekly monitoring meetings with CFO and is currently reviewing documentation provided by CFO to ensure all current ERA projects are eligible under the ERA guidelines and that CFO is exercising the proper oversight over their subrecipients; therefore, we recommend that the OMES GMO continue implementing the corrective action plan established in FY 2025 to provide proper oversight and monitoring of ERA program expenditures. Criteria: U.S. Department of the Treasury Emergency Rental Assistance Grantee Award Form (8) (a-b) Compliance with Applicable Law and Regulations, states in part, “a. Recipient agrees to comply with the requirements of Section 501 and Treasury interpretive guidance regarding such requirements. Recipient also agrees to comply with all other applicable federal statutes, regulations, and executive orders, and Recipient shall provide for such compliance in any agreements it enters into with other parties relating to this award. b. Federal regulations applicable to this award include, without limitation, the following: i. Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2 C.F.R. Part 200, other than such provisions as Treasury may determine are inapplicable to this Award and subject to such exceptions as may be otherwise provided by Treasury.” 2 CFR § 200.303(a) – Internal Controls states in part, “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.” For ERA 1, the Consolidated Appropriations Act § Section 501 (c)(5) Use of Funds - Administrative Costs states in part, “A. IN GENERAL.- Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. B. No OTHER ADMINISTRATIVE COSTS.- Amounts paid under this section shall not be used for any administrative costs other than to the extent allowed under subparagraph (A)” For ERA 2, the American Rescue Plan Act of 2021 § Section 3201(C) Administrative Costs states, “Not more than 15 percent of the total amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance, housing stability services, and other affordable rental housing and eviction prevention activities, including for data collection and reporting requirements related to such funds.” 2 CFR § 200.334 – Retention requirements for records state 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 Federal awards that are renewed quarterly or annually, from the date of the 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 § 200.337 – Access to records states in part, “(a) Records of non-Federal entities. The Federal awarding agency, Inspectors General, the Comptroller General of the United States, and the pass-through entity, or any of their authorized representatives, must have the right of access to any documents, papers, or other records of the non-Federal entity which are pertinent to the Federal award, in order to make audits, examinations, excerpts, and transcripts. The right also includes timely and reasonable access to the non-Federal entity's personnel for the purpose of interview and discussion related to such documents.” 2 CFR § 200.403 – Factors affecting allowability of costs states in part, “Except where otherwise authorized by statute, costs must meet the following criteria 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.” 2 CFR § 200.430 – Compensation – personal services states in part, “(f) Incentive compensation. Incentive compensation to employees based on cost reduction, efficient performance, suggestion awards, or safety awards is allowable to the extent that the overall compensation is determined to be reasonable and such costs are paid or accrued according to an agreement entered into in good faith between the recipient or subrecipient and the employees before the services were rendered, or according to an established plan followed by the recipient or subrecipient so consistently as to imply, in effect, an agreement to make such payment. (g) (i and iv) 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; (iv) Encompass federally-assisted and all other activities compensated by the recipient or subrecipient on an integrated basis but may include the use of subsidiary records as defined in the recipient's or subrecipient's written policy.” For ERA 1, the Consolidated Appropriations Act § Section 501 (c)(5) Use of Funds (c) USE OF FUNDS.— (1) IN GENERAL.—"An eligible grantee shall only use the funds provided from a payment made under this section to provide financial assistance and housing stability services to eligible households. (2) FINANCIAL ASSISTANCE.— (A) IN GENERAL.—Not less than 90 percent of the funds received by an eligible grantee from a payment made under this section shall be used to provide financial assistance to eligible households, including the payment of (i) rent; (ii) rental arrears; (iii) utilities and home energy costs; (iv) utilities and home energy costs arrears; and (v) other expenses related to housing incurred due, directly or indirectly, to the novel coronavirus disease (COVID-19) outbreak, as defined by the Secretary.” For ERA 2, the American Rescue Plan Act of 2021 § Section 3201(C) Administrative Costs states, (D) OTHER AFFORDABLE RENTAL HOUSING AND EVICTION PREVENTION ACTIVITIES.-“An eligible grantee may use any funds from payments made under this section that are unobligated on October 1, 2022, for purposes in addition to those specified in this paragraph, provided that – (i) such other purposes are affordable rental housing and eviction prevention purposes, as defined by the Secretary, serving very low-income families (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b))); and (ii) prior to obligating any funds for such purposes, the eligible grantee has obligated not less than 75 percent of the total funds allocated to such eligible grantee in accordance with this section.” Management Response Contact Person: Brandy Manek, OMES Director of Budget, Policy and Gaming Compliance Anticipated Completion Date: Completed Corrective Action Planned: The Oklahoma Office of Management and Enterprise Services (OMES) concurs with the finding. See corrective action plan located in the corrective action plan section of this report. Auditor’s Response: With regard to the assertion that the State did not have “sufficient and timely notice to make full corrective actions prior to this FY2024 audit, we respectfully disagree per the following reasons: As a recipient of the Federal ERA award, the State of Oklahoma is responsible for understanding the terms and conditions of the award and to ensure the ERA award is administered in accordance with federal regulations, which includes the cost principles per 2 CFR § 200 included in the ‘Criteria’ section of this finding. In May of 2021, the State first received Coronavirus Relief Fund (CRF) Audit Finding # 2020-083 related to the State’s lack of subrecipient monitoring activities and Audit Finding # 2020-081 related to the State’s failure to obtain adequate supporting documentation for subrecipient expenditures prior to paying for goods and services. The same individual served as the State’s audit contact for both the CRF award and the ERA award and, therefore, the State could have begun implementing required subrecipient monitoring activities and ensuring adequate supporting documentation was obtained from the subrecipient in May of 2021. Although the SFY 2021 Single Audit Report was not actually released until June 2023, the SFY 2021 Single Audit Report was originally scheduled for publication near the end of September of 2022, and, on September 6, 2022, SA & I provided OMES Audit Finding # 2021-081 and Audit Finding # 2021-080 which included the following issues applicable to this finding which SA & I had identified as of that date: From Audit Finding # 2021-081: “OMES entered into agreements with two non-profit entities to administer the ERA program for the State of Oklahoma: Communities Foundation of Oklahoma (CFO) and Restore Hope Ministries (RHM). SAI reviewed the agreements for these two entities and determined that both agreements constituted a subrecipient relationship that would be subject to Part M Subrecipient Monitoring requirements. We noted that OMES failed to perform any required subrecipient monitoring activities, specifically: • OMES did not perform any during the award monitoring activities with regard to the rental and utility applications, housing stability and payments approved and paid by the subrecipients, or the administrative expenditures actually incurred by the subrecipients. OMES provided subrecipients advance payments based off expected program rental and utility expenditures for the month and then paid administrative costs on a set percentage of program funds advanced. OMES did not review any supporting documentation related to actual program expenditures for rental and utility assistance, housing stability activities, or administrative expenditures actually incurred by the subrecipients. While OMES did obtain summary information related to rental and utility payments and housing stability payments made for reporting purposes, OMES did not review any actual administrative expenditures to ensure that the administrative costs were attributable to providing financial assistance and housing stability services to eligible households. • OMES did not obtain any financial records and supporting documents from the subrecipients that would support the actual expenditures incurred by the subrecipients.” From Audit Finding # 2021-080: “While documenting controls over subrecipient program and administrative expenditures for the ERA program, we noted that OMES did not review any supporting documentation related to actual program expenditures for rental and utility assistance or housing stability activities or, administrative expenditures actually incurred by the subrecipients and, did not require that subrecipients submit supporting documentation for actual program and administrative expenditures incurred.” “While reviewing ERA administrative expenditures, we noted the following: One subrecipient charged the ERA grant $2,000,000 in unallowable management fees that were not attributable to providing financial assistance and housing stability services under the ERA program. We questioned $1,563,028 of these costs that were allocated to the State of Oklahoma ERA1 grant.” Given the State first received similar findings for the SFY 2020 CRF award in May of 2021 (12 months before the start of SFY 2023 and 24 months before the start of SFY 2024), the State did have sufficient and timely notice to make full corrective actions prior to this SFY 2024 audit and even prior to the SFY 2023 audit. It is the position of our office that the State could have greatly reduced the amount of ERA questioned costs incurred over the past few years if the State had not waited about three and a half years (May 2021 to January 2025) from when SA & I first provided applicable findings to start implementing corrective action.
Federal Agency: U.S. Department of Health and Human Services Federal Programs: Refugee and Entrant Assistance State/Replacement Designee Administered Programs, Refugee and Entrant Assistance Discretionary Grants Federal Assistance Listing Numbers: 93.566; 93.576 Pass-Through Entity Name: Wisconsin Department of Children and Families Pass-Through Grantor's Numbers: 7056, 7060, 7062A, 7065, 7068, 7071, 7072 This is partial repeat of finding 2023-001 Criteria: In accordance with 2 CFR 200.430(g) salaries and wages must be based on records that accurately reflect the work performed. The records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Allocations should reasonably reflect the total activities performed by the employees and support the distribution of payroll costs among federal awards and other activities when employees work on multiple cost objectives. Statement of Condition: The Organization did not allocate payroll expenses to federal awards in accordance with federal requirements. Employees whose compensation was charged to multiple federal awards were not supported by an allocation methodology that accurately reflected the actual work performed. Specifically, payroll costs were allocated using budget estimates or other unsupported methodologies that were not periodically compared to actual activity and adjusted as necessary from July 2023 through October 2023. In addition, management did not maintain sufficient documentation demonstrating that payroll allocations accurately reflected employees' work performed during the reporting period. Cause: The Organization had not implemented effective internal controls over payroll cost allocation as it initially relied on budgeted allocations rather than actual employee activities. Effect: The Organization allocated costs and submitted and received reimbursement from federal awards for payroll costs that were allocated a budget and not based on actual costs or time incurred. Context: For the period from July 1, 2023 through October 31, 2023, payroll costs were allocated based on budgeted amounts. Payroll costs submitted and reimbursed during this period were $73,553 and $69,173 for ALN 93.566 and ALN 93.576, respectively. Starting in November 2023, the Organization allocated its payroll costs based on actual costs incurred. Questioned Costs: Payroll costs for ALN 93.566 of $73,553 were allocated based on budgeted amounts. Payroll costs for ALN 93.576 of $69,173 were allocated based on budgeted amounts. The questioned costs were not based on a statistical sample. Recommendation: We recommend that management strengthen internal controls over payroll allocation by establishing written policies and procedures for allocating payroll costs in accordance with federal requirements. Allocation policies should be based on records that accurately reflect the actual work performed rather than budget estimates or predetermined percentages. The Organization should periodically monitor and adjust payroll allocations to ensure continued compliance with federal requirements. Management Response: The Organization acknowledges the finding regarding the allocation of payroll expenses to federal awards during the period July 2023 through October 2023. Fiscal year 2024 was a significant transition period for the Organization. New payroll and financial systems were implemented during the transition period from June 2023 through January 2024, and management implemented significant corrective actions related to payroll allocation beginning in November 2023. These corrective actions included transitioning away from the prior budget-based payroll allocation methodology, strengthening timekeeping and payroll processes, implementing procedures designed to document actual employee activities, and enhancing supervisory review of payroll allocations. Although aspects of the prior-year condition affected the July through October 2023 period of fiscal year 2024, significant corrective measures were implemented during fiscal year 2024 beginning in November 2023. The Organization continued strengthening these processes throughout fiscal year 2024. Corrective actions implemented and ongoing include: • Implement and maintain written payroll allocation policies and procedures. • Utilize systematic timekeeping practices designed to document actual employee activities. • Allocate payroll costs based on actual work performed and appropriate supporting documentation. • Maintain supervisory review and approval procedures over employee time reporting and payroll allocations. • Maintain appropriate levels of management review and oversight to provide checks and balances over payroll reporting and allocation. • Periodically review payroll allocations for consistency with actual employee activity and make adjustments when necessary.
Finding No. 2024-003: Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) –Significant Deficiency in Internal Control over Compliance Federal Program Name: All Pass-through Entity: All Federal Assistance Listing Number: All Criteria In accordance with 2 CFR §200.430(i), charges to federal awards for salaries and wages are required to be based on records that accurately reflect the work performed. These records must support the distribution of the employee’s salary or wages among specific activities or cost objectives. Condition The Coalition allocated employees’ payroll costs to grants based on estimates and did not maintain documentation to support allocations based on actual time and effort. Questioned Costs Unknown. Context The Coalition allocated payroll costs to multiple funding sources based on estimates during the audit period and did not maintain formal documentation to support how costs were distributed. Effect The employee time and payroll costs that are charged to the grant could differ from the actual time and payroll costs expended in support of the grant activities. Cause The Coalition does not have established procedures to ensure that salaries and wages charged to federal awards are supported by records that accurately reflect the work performed. Documentation of personnel expenses should support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Repeat Finding No Recommendation We recommend that management strengthen processes over payroll cost allocations to ensure amounts charged to funding sources are supported by documented actual time and effort. This may include implementing a formal methodology for allocating payroll costs, establishing procedures for employees to track or otherwise document time spent by program or funding source, and performing periodic reviews and adjustments based on actual activity. In addition, management should ensure that sufficient documentation is maintained to support how payroll costs are allocated and that such processes are consistently applied. Management’s Response/View of Responsible Officials Management agrees with this finding, see the Corrective Action Plan.
ALLOWABLE COSTS/COST PRINCIPLES – PAYROLL ALLOCATIONS Repeat of finding 2023-009 Finding Type: Significant Deficiency in Internal Controls over Compliance ALN/CSFA and Program Title: 93.558 – Temporary Assistance for Needy Families, 93.658 – Foster Care - Title IV-E, 93.676- Unaccompanied Alien Children Program, 60.074 – Out-of-Home Supports Federal/State Agency: U.S. Department of Health and Human Services, Florida Department of Children and Families Pass-Through Entity: Big Bend Community Based Care, Inc. dba NWF Health Network; Brevard Family Partnership; Children’s Network of Hillsborough; Children’s Network of Southwest Florida Social Services; Communities Connected for Kids; Community Partnership for Children; Embrace Families, Inc.; Family Support Services of North Florida, Inc.; Family Support Services of Suncoast; Heartland for Children; Kids Central, Inc.; Partnership for Strong Families; Safe Children Coalition, Inc., Liberty Wilderness Crossroads Camp Contract Number: 0299-22, C0900, PCM783, PCM788, 90ZU0501 Criteria: Under 2 CFR 200.430(g) of the Uniform Guidance, "Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed", and "Budget estimates (meaning, estimates determined before the services are performed) alone do not qualify as support for charges to federal awards...". Per the Reference Guide for State Expenditures of the Florida Department of Financial Services, "Timesheets that support the hours worked on the project or activity must be kept." Additionally, 2 CFR 200.303(a) of the Uniform Guidance requires non-federal entities to establish and maintain effective internal control over federal awards 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, and Section 215.97(10), Florida Statutes, requires nonstate entities to have internal controls in place to provide reasonable assurance of compliance with the provisions of laws, regulations, and other rules, pertaining to state awards that have a material effect on each major state project. Condition: Time and pay for certain employees who perform work for multiple programs is allocated among these programs. The allocations are based on program budgets or other budgeted expectations of the employees’ activity. The Organization's internal control structure does not address adjusting these allocations to reflect actual time and effort expended. Cause: These employees do not record their time to each program, and management was unaware of federal and state requirements for documentation of personnel costs and charged to federal programs and state projects. Effect: Time and pay being allocated charged to the programs may not accurately reflect their actual time spent on each program. Questioned Costs: None Recommendation: We recommend all employees record their time to each program that they work on, or that time studies be completed at least annually by the employees whose time needs to be allocated and those time studies be used to determine how the employes’ time and pay should be allocated. Views of Responsible Officials and Planned Corrective Actions: See management’s response and Corrective Action Plan on page 55.
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.
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.
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.
2023 001 Activities Allowed or Unallowed and Allowable Costs/ Cost Principles U.S. Department of Homeland Security: Passed through the State of New Jersey, Department of Law and Public Safety: Disaster Grants – Public Assistance (Presidentially Declared Disasters) – ALN 97.036 Federal Grant Numbers and Years State of New Jersey pass-through number: UH1WX Project Worksheet #1822 – October 5, 2021 to March 5, 2022 (Application 553330) Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample. Prior Year Findings: None Criteria Compliance – Program Specific The Federal Emergency Management Agency (FEMA), as part of the U.S. Department of Homeland Security, evaluates the eligibility of all costs claimed by the applicant. Not all costs incurred as a result of the incident are eligible. (PAPPG v4) Chapter 4, page(s) 51-54; Chapter 6, page(s) 65 & 93-95. Cost must be: • Directly tied to the performance of eligible work; • Adequately documented (2 CFR section 200.403(g)); • Reduced by all applicable credits, such as insurance proceeds and salvage values (Stafford Act section 312, 42 USC section 5155, and 2 CFR section 200.406); • Authorized and not prohibited under federal, state, territorial, tribal, or local government laws or regulations; • Consistent with applicant’s internal policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the applicant; and • Necessary and reasonable to accomplish the work properly and efficiently (2 CFR section 200.403). 1. Applicant (Force Account) Labor FEMA refers to the applicant’s personnel as “force account.” FEMA reimburses force account labor based on actual hourly rates plus the cost of the employee’s actual fringe benefits. FEMA calculates the fringe benefit cost based on a percentage of the hourly pay rate. Because certain items in a benefit package are not dependent on hours worked (e.g., health insurance), the percentage for overtime is usually different than the percentage for straight-time. Compliance – General Per 2 CFR Section 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; (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 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. 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 and Context The New Jersey Turnpike Authority (the “Authority”), through the State of New Jersey, Department of Homeland Security (the State), administers the federal Disaster Grants – Public Assistance (Presidentially Declared Disasters) program and is reimbursed for eligible expenditures when a presidentially declared disaster occurs. For the Authority’s force account labor costs, the Authority utilizes manual Daily Worksheets (timesheets) as the official records for time and effort worked during an event by the Authority’s personnel. These timesheets are then entered into the Authority’s information system (PeopleSoft) for review and approval, reconciling back to the information entered on the respective timesheet. For two of forty timesheets selected for testwork, the Authority was unable to provide the timesheets as the official record for the time and effort charged to the federal program. However, the Authority successfully demonstrated through PeopleSoft system that the time and effort charged to the federal program was properly reviewed and approved and reconciled to the amounts of reimbursement requested from the State. Cause The Authority did not maintain and make readily available certain timesheets used as the official record for the time and effort charged to the federal program in accordance with the Uniform Guidance. Effect The Authority did not comply with 2 CFR Section 200.430 related to incorporating the physical timesheets into the official records of the Authority. Questioned Costs None as the time and effort amounts charged were determined to be allowable. Recommendation We recommend that the Authority strengthen its processes to ensure that all timesheets for disaster related events that are federally funded are maintained and are made readily available if subject to audit or other inspection in accordance with the Uniform Guidance. Views of Responsible Officials Management agrees with the finding. We are committed to strengthening our processes to ensure that all physical timesheets related to FEMA-declared disaster events are properly maintained and readily accessible. To achieve this, we will implement enhanced procedures and controls to ensure full compliance with the Uniform Guidance requirements.
2023-001- Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles Information on the Major Federal Program U.S. Department of Health and Human Services Center for Disease Control and Prevention Assistance Listing Number: 93.988 Assistance Listing Name: Cooperative Agreements for State-Based Diabetes Control Programs and Evaluation of Surveillance Systems Grant Award Number(s): 1 NU58DP007372-01-00 Award Period: June 30, 2023 to June 29, 2028 Criteria or Specific Requirement – The Uniform Guidance 2 CFR Section 200.303 requires non-Federal entities receiving Federal awards establish and maintain internal control to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, “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. c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally- financed program in either the current or a prior period. g) Be adequately documented. h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).” Furthermore, according to the Uniform Guidance (2 CFR Part 200), specifically §200.430(i), “charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated”. The records must also be supported by the approval of an individual with firsthand knowledge of the work performed. Condition - During our audit, within the tested sample of seven timesheets out of a population of twenty-six, three timesheets for employees charged to the federal program did not have proper approval in the system. The lack of signed approval indicates that the timesheets were not reviewed and approved by an individual with knowledge of the work performed, as required under the Uniform Guidance. ADA has documented expenditure policies and procedures. However, the review and approval process did not operate as designed. Cause – ADA did not adhere to its internal policies and procedures to ensure timesheets were properly reviewed and approved. Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and approved, ADA could unallowably and inaccurately charge salary and wages expenditures to the federal program. Questioned Costs – None Context - This is a condition based on testing of ADA’s compliance. Based on tested samples, we noted four out of seven sampled timesheets were not properly approved in the system. The samples were selected using a non-statistical method. Repeat Finding - This finding is not a repeat finding. Recommendation - BDO recommends that ADA adhere to its documented policies and procedures to ensure all timesheets are reviewed and approved by authorized personnel with knowledge of the work performed. ADA should also provide training to all employees involved in the timesheet preparation and approval process to ensure compliance with the Uniform Guidance requirements. Views of Responsible Officials: The findings were primarily related to a change that ADA made to the Human Resources Information System. Going forward, ADA will adhere to our documented policies and procedures to ensure all timesheets are reviewed and approved by authorized personnel with knowledge of the work performed. Additionally, we will provide training to all employees involved in the timesheet preparation and approval process to ensure compliance with the Uniform Guidance requirements.
Finding 2023-001: Salaries and Wages (Allowable Costs) Criteria: According to 2 CFR Section 200.430(i), charges to Federal grants for salaries and wages must be based on records that accurately reflect the work performed and the 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 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. [Reserved] 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. viii. Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Condition: ASCB has a timekeeping system in place that provides for employees to record hours worked to specific cost objectives, including to US Government grants. However, we noted that in several cases the allocation amounts as per the timekeeping system were different from the amounts ultimately recorded within ASCB's general ledger. While the differences were not significant, these discrepancies indicate a deficiency in the internal controls around recording of salary expenditures to projects. Cause: The primary cause appears to be human error, and the result of manual recordkeeping. Effect or Potential Effect: Salary expenditures that are not charged in accordance with the standards referenced above may be questioned or disallowed by the donor. Questioned Costs: Undetermined Context: This is a condition identified per review of ASCB's compliance with the specified requirements using a statistically valid sample. Identification as a Repeat Finding: Not applicable. Recommendation: We recommend that management revisit its procedures for transferring data from the timekeeping system to the general ledger and implement proper internal controls to ensure that the amounts of salary expenditures charged to grants in the general ledger reconcile to the amounts calculated by the timekeeping system.
Finding 2023-001: Salaries and Wages (Allowable Costs) Criteria: According to 2 CFR Section 200.430(i), charges to Federal grants for salaries and wages must be based on records that accurately reflect the work performed and the 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 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. [Reserved] 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. viii. Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.” Condition: ASCB has a timekeeping system in place that provides for employees to record hours worked to specific cost objectives, including to US Government grants. However, we noted that in several cases the allocation amounts as per the timekeeping system were different from the amounts ultimately recorded within ASCB's general ledger. While the differences were not significant, these discrepancies indicate a deficiency in the internal controls around recording of salary expenditures to projects. Cause: The primary cause appears to be human error, and the result of manual recordkeeping. Effect or Potential Effect: Salary expenditures that are not charged in accordance with the standards referenced above may be questioned or disallowed by the donor. Questioned Costs: Undetermined Context: This is a condition identified per review of ASCB's compliance with the specified requirements using a statistically valid sample. Identification as a Repeat Finding: Not applicable. Recommendation: We recommend that management revisit its procedures for transferring data from the timekeeping system to the general ledger and implement proper internal controls to ensure that the amounts of salary expenditures charged to grants in the general ledger reconcile to the amounts calculated by the timekeeping system.
Department of Education and Passed through State of South Dakota Department of Education FFAL #84.287C, S287C220042 Twenty-First Century Community Learning Centers Activities Allowed or Unallowed and Allowable Costs/Cost Principles Significant Deficiency in Internal Control over Compliance Criteria: The Club is required to have procedures in place to ensure that federal awards are expended only for allowable costs in accordance with Subpart E – Cost Principles of the Uniform Guidance. Allowable costs are supported by appropriate documentation and correctly charged as to account, amount, and period. 2 CFR 200.430(i) establishes requirements for documentation of personnel expenses. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Our testing over expenditures noted the following items: - Two instances where timesheets or bi-weekly activity reports were unable to be provided. - Three instances where the employee’s paid time off and holiday pay was not allocated nor submitted for reimbursement under the federal program, which was inconsistent with other pay periods. - One instance where support did not agree to the amount and time allocated. Cause: Tracking of grant-related payroll is a manual process which increases the likelihood of error. Effect: The Club’s controls did not detect or correct the errors identified, which results in a reasonable possibility that the Club could submit disallowed costs under the federal awards. Questioned Costs: No questioned costs over $25,000. Context/Sampling: A nonstatistical sample of 60 transactions out of approximately 830 total transactions were selected testing, of which 51 of those transactions were payroll transactions and accounted for $45,055 out of $272,463 of total payroll transactions. Repeat Finding from Prior Year: No Recommendation: We recommend management continue to review the process over tracking payroll related to federal programs and consider incorporating a secondary review of any manual spreadsheets or consider if the payroll can be allocated directly within the payroll system. Views of Responsible Officials: Management is in agreement.
Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to §200.430(i) Standards for Documentation of Personnel Expenses of 2 CFR Part 200, (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 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. According to the Authority’s policies and procedures, for employees working in a single indirect cost function, such as overhead, a Budget Analyst compares the salary budgets with actual salary allocations and investigates unusual variances. This review is performed on the first pay run of the fiscal year and at the end of every quarter. If the investigation determines that the salary allocation is no longer valid, the Department can request a change in allocation rates. Allocation changes can only be changed in the Enterprise One (E1) system by the payroll manager, or the budget analyst assigned to the overhead account. Employees engaged in multiple direct cost business units and projects, and indirect overhead activity, may have their labor distribution entered in E1 as a predetermined (budgeted) allocation of their wages. A monthly certification (Federal Hours Certification Report) is sent to exempt and non-exempt staff working on federal projects to ensure their time is charged out appropriately. All employees who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. All exempt employees (who do not punch in on Kronos) who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. Condition: During our testing of 40 MTW employee pays selected for payroll disbursement testing, we noted 4 of the 40 pay did not have adequate time and effort documentation. Questioned costs: $9,187 Context: We noted that 4 of the 40 pays did not have adequate time and effort documentation. The Authority was unable to provide the Federal Hours Certification Report for these 4 employees. Cause: Procedures in place regarding quarterly reviews of allocations were not followed. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Recommendation: We recommend the Authority implements an adequate review process to ensure costs charged to the grant are reasonable, accurate, and properly allocated. We recommend the Authority perform and document this review quarterly at minimum. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to §200.430(i) Standards for Documentation of Personnel Expenses of 2 CFR Part 200, (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 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. According to the Authority’s policies and procedures, for employees working in a single indirect cost function, such as overhead, a Budget Analyst compares the salary budgets with actual salary allocations and investigates unusual variances. This review is performed on the first pay run of the fiscal year and at the end of every quarter. If the investigation determines that the salary allocation is no longer valid, the Department can request a change in allocation rates. Allocation changes can only be changed in the Enterprise One (E1) system by the payroll manager, or the budget analyst assigned to the overhead account. Employees engaged in multiple direct cost business units and projects, and indirect overhead activity, may have their labor distribution entered in E1 as a predetermined (budgeted) allocation of their wages. A monthly certification (Federal Hours Certification Report) is sent to exempt and non-exempt staff working on federal projects to ensure their time is charged out appropriately. All employees who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. All exempt employees (who do not punch in on Kronos) who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. Condition: During our testing of 40 MTW employee pays selected for payroll disbursement testing, we noted 4 of the 40 pay did not have adequate time and effort documentation. Questioned costs: $9,187 Context: We noted that 4 of the 40 pays did not have adequate time and effort documentation. The Authority was unable to provide the Federal Hours Certification Report for these 4 employees. Cause: Procedures in place regarding quarterly reviews of allocations were not followed. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Recommendation: We recommend the Authority implements an adequate review process to ensure costs charged to the grant are reasonable, accurate, and properly allocated. We recommend the Authority perform and document this review quarterly at minimum. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to §200.430(i) Standards for Documentation of Personnel Expenses of 2 CFR Part 200, (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 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. According to the Authority’s policies and procedures, for employees working in a single indirect cost function, such as overhead, a Budget Analyst compares the salary budgets with actual salary allocations and investigates unusual variances. This review is performed on the first pay run of the fiscal year and at the end of every quarter. If the investigation determines that the salary allocation is no longer valid, the Department can request a change in allocation rates. Allocation changes can only be changed in the Enterprise One (E1) system by the payroll manager, or the budget analyst assigned to the overhead account. Employees engaged in multiple direct cost business units and projects, and indirect overhead activity, may have their labor distribution entered in E1 as a predetermined (budgeted) allocation of their wages. A monthly certification (Federal Hours Certification Report) is sent to exempt and non-exempt staff working on federal projects to ensure their time is charged out appropriately. All employees who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. All exempt employees (who do not punch in on Kronos) who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. Condition: During our testing of 40 MTW employee pays selected for payroll disbursement testing, we noted 4 of the 40 pay did not have adequate time and effort documentation. Questioned costs: $9,187 Context: We noted that 4 of the 40 pays did not have adequate time and effort documentation. The Authority was unable to provide the Federal Hours Certification Report for these 4 employees. Cause: Procedures in place regarding quarterly reviews of allocations were not followed. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Recommendation: We recommend the Authority implements an adequate review process to ensure costs charged to the grant are reasonable, accurate, and properly allocated. We recommend the Authority perform and document this review quarterly at minimum. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to §200.430(i) Standards for Documentation of Personnel Expenses of 2 CFR Part 200, (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 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. According to the Authority’s policies and procedures, for employees working in a single indirect cost function, such as overhead, a Budget Analyst compares the salary budgets with actual salary allocations and investigates unusual variances. This review is performed on the first pay run of the fiscal year and at the end of every quarter. If the investigation determines that the salary allocation is no longer valid, the Department can request a change in allocation rates. Allocation changes can only be changed in the Enterprise One (E1) system by the payroll manager, or the budget analyst assigned to the overhead account. Employees engaged in multiple direct cost business units and projects, and indirect overhead activity, may have their labor distribution entered in E1 as a predetermined (budgeted) allocation of their wages. A monthly certification (Federal Hours Certification Report) is sent to exempt and non-exempt staff working on federal projects to ensure their time is charged out appropriately. All employees who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. All exempt employees (who do not punch in on Kronos) who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. Condition: During our testing of 40 MTW employee pays selected for payroll disbursement testing, we noted 4 of the 40 pay did not have adequate time and effort documentation. Questioned costs: $9,187 Context: We noted that 4 of the 40 pays did not have adequate time and effort documentation. The Authority was unable to provide the Federal Hours Certification Report for these 4 employees. Cause: Procedures in place regarding quarterly reviews of allocations were not followed. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Recommendation: We recommend the Authority implements an adequate review process to ensure costs charged to the grant are reasonable, accurate, and properly allocated. We recommend the Authority perform and document this review quarterly at minimum. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to §200.430(i) Standards for Documentation of Personnel Expenses of 2 CFR Part 200, (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 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. According to the Authority’s policies and procedures, for employees working in a single indirect cost function, such as overhead, a Budget Analyst compares the salary budgets with actual salary allocations and investigates unusual variances. This review is performed on the first pay run of the fiscal year and at the end of every quarter. If the investigation determines that the salary allocation is no longer valid, the Department can request a change in allocation rates. Allocation changes can only be changed in the Enterprise One (E1) system by the payroll manager, or the budget analyst assigned to the overhead account. Employees engaged in multiple direct cost business units and projects, and indirect overhead activity, may have their labor distribution entered in E1 as a predetermined (budgeted) allocation of their wages. A monthly certification (Federal Hours Certification Report) is sent to exempt and non-exempt staff working on federal projects to ensure their time is charged out appropriately. All employees who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. All exempt employees (who do not punch in on Kronos) who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. Condition: During our testing of 40 MTW employee pays selected for payroll disbursement testing, we noted 4 of the 40 pay did not have adequate time and effort documentation. Questioned costs: $9,187 Context: We noted that 4 of the 40 pays did not have adequate time and effort documentation. The Authority was unable to provide the Federal Hours Certification Report for these 4 employees. Cause: Procedures in place regarding quarterly reviews of allocations were not followed. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Recommendation: We recommend the Authority implements an adequate review process to ensure costs charged to the grant are reasonable, accurate, and properly allocated. We recommend the Authority perform and document this review quarterly at minimum. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to §200.430(i) Standards for Documentation of Personnel Expenses of 2 CFR Part 200, (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 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. According to the Authority’s policies and procedures, for employees working in a single indirect cost function, such as overhead, a Budget Analyst compares the salary budgets with actual salary allocations and investigates unusual variances. This review is performed on the first pay run of the fiscal year and at the end of every quarter. If the investigation determines that the salary allocation is no longer valid, the Department can request a change in allocation rates. Allocation changes can only be changed in the Enterprise One (E1) system by the payroll manager, or the budget analyst assigned to the overhead account. Employees engaged in multiple direct cost business units and projects, and indirect overhead activity, may have their labor distribution entered in E1 as a predetermined (budgeted) allocation of their wages. A monthly certification (Federal Hours Certification Report) is sent to exempt and non-exempt staff working on federal projects to ensure their time is charged out appropriately. All employees who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. All exempt employees (who do not punch in on Kronos) who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. Condition: During our testing of 40 MTW employee pays selected for payroll disbursement testing, we noted 4 of the 40 pay did not have adequate time and effort documentation. Questioned costs: $9,187 Context: We noted that 4 of the 40 pays did not have adequate time and effort documentation. The Authority was unable to provide the Federal Hours Certification Report for these 4 employees. Cause: Procedures in place regarding quarterly reviews of allocations were not followed. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Recommendation: We recommend the Authority implements an adequate review process to ensure costs charged to the grant are reasonable, accurate, and properly allocated. We recommend the Authority perform and document this review quarterly at minimum. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to §200.430(i) Standards for Documentation of Personnel Expenses of 2 CFR Part 200, (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 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. According to the Authority’s policies and procedures, for employees working in a single indirect cost function, such as overhead, a Budget Analyst compares the salary budgets with actual salary allocations and investigates unusual variances. This review is performed on the first pay run of the fiscal year and at the end of every quarter. If the investigation determines that the salary allocation is no longer valid, the Department can request a change in allocation rates. Allocation changes can only be changed in the Enterprise One (E1) system by the payroll manager, or the budget analyst assigned to the overhead account. Employees engaged in multiple direct cost business units and projects, and indirect overhead activity, may have their labor distribution entered in E1 as a predetermined (budgeted) allocation of their wages. A monthly certification (Federal Hours Certification Report) is sent to exempt and non-exempt staff working on federal projects to ensure their time is charged out appropriately. All employees who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. All exempt employees (who do not punch in on Kronos) who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. Condition: During our testing of 40 MTW employee pays selected for payroll disbursement testing, we noted 4 of the 40 pay did not have adequate time and effort documentation. Questioned costs: $9,187 Context: We noted that 4 of the 40 pays did not have adequate time and effort documentation. The Authority was unable to provide the Federal Hours Certification Report for these 4 employees. Cause: Procedures in place regarding quarterly reviews of allocations were not followed. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Recommendation: We recommend the Authority implements an adequate review process to ensure costs charged to the grant are reasonable, accurate, and properly allocated. We recommend the Authority perform and document this review quarterly at minimum. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to §200.430(i) Standards for Documentation of Personnel Expenses of 2 CFR Part 200, (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 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. According to the Authority’s policies and procedures, for employees working in a single indirect cost function, such as overhead, a Budget Analyst compares the salary budgets with actual salary allocations and investigates unusual variances. This review is performed on the first pay run of the fiscal year and at the end of every quarter. If the investigation determines that the salary allocation is no longer valid, the Department can request a change in allocation rates. Allocation changes can only be changed in the Enterprise One (E1) system by the payroll manager, or the budget analyst assigned to the overhead account. Employees engaged in multiple direct cost business units and projects, and indirect overhead activity, may have their labor distribution entered in E1 as a predetermined (budgeted) allocation of their wages. A monthly certification (Federal Hours Certification Report) is sent to exempt and non-exempt staff working on federal projects to ensure their time is charged out appropriately. All employees who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. All exempt employees (who do not punch in on Kronos) who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. Condition: During our testing of 40 MTW employee pays selected for payroll disbursement testing, we noted 4 of the 40 pay did not have adequate time and effort documentation. Questioned costs: $9,187 Context: We noted that 4 of the 40 pays did not have adequate time and effort documentation. The Authority was unable to provide the Federal Hours Certification Report for these 4 employees. Cause: Procedures in place regarding quarterly reviews of allocations were not followed. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Recommendation: We recommend the Authority implements an adequate review process to ensure costs charged to the grant are reasonable, accurate, and properly allocated. We recommend the Authority perform and document this review quarterly at minimum. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to §200.430(i) Standards for Documentation of Personnel Expenses of 2 CFR Part 200, (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 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. According to the Authority’s policies and procedures, for employees working in a single indirect cost function, such as overhead, a Budget Analyst compares the salary budgets with actual salary allocations and investigates unusual variances. This review is performed on the first pay run of the fiscal year and at the end of every quarter. If the investigation determines that the salary allocation is no longer valid, the Department can request a change in allocation rates. Allocation changes can only be changed in the Enterprise One (E1) system by the payroll manager, or the budget analyst assigned to the overhead account. Employees engaged in multiple direct cost business units and projects, and indirect overhead activity, may have their labor distribution entered in E1 as a predetermined (budgeted) allocation of their wages. A monthly certification (Federal Hours Certification Report) is sent to exempt and non-exempt staff working on federal projects to ensure their time is charged out appropriately. All employees who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. All exempt employees (who do not punch in on Kronos) who work on federal projects verify the allocations of their timesheets, thereby satisfying the effort reporting requirement. Condition: During our testing of 40 MTW employee pays selected for payroll disbursement testing, we noted 4 of the 40 pay did not have adequate time and effort documentation. Questioned costs: $9,187 Context: We noted that 4 of the 40 pays did not have adequate time and effort documentation. The Authority was unable to provide the Federal Hours Certification Report for these 4 employees. Cause: Procedures in place regarding quarterly reviews of allocations were not followed. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Recommendation: We recommend the Authority implements an adequate review process to ensure costs charged to the grant are reasonable, accurate, and properly allocated. We recommend the Authority perform and document this review quarterly at minimum. Views of responsible officials: There is no disagreement with the audit finding.
2023 – 003: Cost Allocation of Salaries and Wages to LSC Grants Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Grants Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09-706060 - 2023 Award Period: January 1, 2023 – December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance Other Matters Criteria or specific requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Condition: During our testing we noted: Two instances of employees’ pay period salaries totaling $1,742 being allocated to a grant using a flat percentage of 10%, and One instance of an employee’s pay period salary of $147 being allocated to two grants using a combination of their time an effort on those grants while the remaining portion of the employee’s salary was allocated to LSC and two other private grants using a base of total grant hours for the period divided by total hours coded to the Organization’s general fund. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees’ time and effort. Questioned costs: $1,742 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060. Context: These three instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salaries and wages cost allocation methodology is primarily based on time and effort records, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s salaries and wages cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries and wages cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records. Views of responsible officials: There is no disagreement with the audit finding
2023 – 003: Cost Allocation of Salaries and Wages to LSC Grants Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Grants Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09-706060 - 2023 Award Period: January 1, 2023 – December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance Other Matters Criteria or specific requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Condition: During our testing we noted: Two instances of employees’ pay period salaries totaling $1,742 being allocated to a grant using a flat percentage of 10%, and One instance of an employee’s pay period salary of $147 being allocated to two grants using a combination of their time an effort on those grants while the remaining portion of the employee’s salary was allocated to LSC and two other private grants using a base of total grant hours for the period divided by total hours coded to the Organization’s general fund. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees’ time and effort. Questioned costs: $1,742 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060. Context: These three instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salaries and wages cost allocation methodology is primarily based on time and effort records, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s salaries and wages cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries and wages cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records. Views of responsible officials: There is no disagreement with the audit finding
2023 – 003: Cost Allocation of Salaries and Wages to LSC Grants Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Grants Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09-706060 - 2023 Award Period: January 1, 2023 – December 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance Other Matters Criteria or specific requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Condition: During our testing we noted: Two instances of employees’ pay period salaries totaling $1,742 being allocated to a grant using a flat percentage of 10%, and One instance of an employee’s pay period salary of $147 being allocated to two grants using a combination of their time an effort on those grants while the remaining portion of the employee’s salary was allocated to LSC and two other private grants using a base of total grant hours for the period divided by total hours coded to the Organization’s general fund. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees’ time and effort. Questioned costs: $1,742 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060. Context: These three instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salaries and wages cost allocation methodology is primarily based on time and effort records, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s salaries and wages cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries and wages cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records. Views of responsible officials: There is no disagreement with the audit finding