Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Name of pass-through entity: Multiple Repeat finding: No Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on relative benefits received and be supported by appropriate documentation. For personnel costs, 2 CFR §200.430(i) requires that compensation for employees whose time is charged to federal awards be based on records that accurately reflect the work performed, such as time and effort reporting or equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires that cost allocations be based on documented methodologies that are reasonable and supported by underlying calculations. Condition: The Organization does not have formalized internal controls to support the rationale for allocation of shared costs and employee time across federal programs. Specifically: Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs. Often, employees charge hours to specific programs in excess of amounts allocated to the program as expenditures. The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in the time and effort records, are determined by members of the finance staff. The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in the time and effort records, is not documented. Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained. Cause: The deficiency exists because the Organization has not implemented a structured process for documenting the extent to which allowable compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: The absence of documented allocation methodologies in instances where allowable compensation costs exceed the amount allocated for reimbursement increases the risk that: Costs may be improperly allocated between federal programs, resulting in potential noncompliance with federal cost principles. Federal expenditures may be misstated, impacting financial and grant reporting. Although questioned costs were not identified, the lack of specific supporting documentation and controls represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization implement the following corrective actions: 1. Develop and Implement a Written Cost Allocation Policy – Establish a formal policy outlining the methodology for allocating shared costs and personnel time across programs, especially in instances where allowable costs exceed amounts allocated for reimbursement, ensuring compliance with 2 CFR Part 200 cost principles. 2. Document Allocation Methodologies for Shared Costs – Ensure that allocations for shared costs (e.g., rent, utilities, and administrative expenses) are based on a reasonable and documented methodology that can be reviewed and reperformed. 3. Retain Evidence of Implementation of Internal Controls - Implement review and approval controls over all requests for reimbursement, including review and approval of allocation of personnel and shared costs to specific funding sources. In circumstances where costs can be appropriately allocated to multiple funding sources, document the rationale for allocating the specific amount to each funding source. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management respectfully disagrees with this Finding. Under Condition, the finding states, “Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs.…” This is not accurate. Employees report their time worked each day, including the amount of time they worked on different projects if applicable. Employees report this in our commercial HRIS/Payroll system, where it is maintained and where it is reviewed and approved by the employee’s manager. The employees report the time they worked and which project(s) they worked on, their managers review and approve the time and the distribution, and the data is tracked and maintained in our HRIS/Payroll system (ExponentHR). Also under Condition, the finding states, “The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in time and effort records, are determined by members of the finance staff.” It is correct that we would have to invoice sponsors for less than the total cost of an employee’s allocated time and effort if a sponsor’s budget is not sufficient to cover that full amount. This is the correct procedure to follow. Employees correctly continue documenting their hours worked on a specific project even if the budget is expended and the accounting staff can no longer bill the sponsor. If a particular grant does not have sufficient sponsor funds, then the Grants Accounting staff reduce the bill accordingly. Also under Condition, the finding states, “The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in time and effort records, is not documented”. This is incorrect. Our monthly invoices to each sponsor accumulate, with each invoice clearly showing not only that month’s expense but also the year-to-date expense and remaining balance, which forces the sponsor invoice to stop at an amount less than the total cost of employees’ time and effort when the budget is exhausted. Also under Condition, the finding states, “Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained.” Each employee records their hours worked, and the project(s) on which they worked those hours, in our HRIS/Payroll system. The employee’s manager reviews and approves both the hours worked and the projects on which the hours were worked. This review and approval is maintained in our HRIS/Payroll system. Financial staff calculate the amount to allocate to specific federal programs based on these HRIS/Payroll system records (or other records such as clinical units produced, based on the terms of each grant). Separate accounting staff review the sponsor invoice and post the Receivable once they deem the invoice correct. Under Cause, the finding states, “…..the Organization has not implemented a structured process for documenting the extent to which allowable [emphasis added] compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement.” This means that we do not have a AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) process for documenting how much of a payroll expense already deemed allowable on a particular grant will actually be invoiced there. We disagree and believe that the presence and documentation of a limited sponsor budget, along with cumulative tracking and documentation of compensation expenses against that budget, proves and documents why sometimes full compensation costs are not charged to a grant. Under Possible Effect, the finding addresses possible effects of “the absence of documented allocation methodologies.” We don’t agree that our process could lead to improper allocation between federal programs (as the finding states) nor to misstating federal expenditures (as the finding states). When a sponsor’s budget is insufficient to cover its appropriately allocated compensation costs, those costs are paid from unrestricted, non-federal funds. As also noted in the finding, no questioned costs were identified.
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Name of pass-through entity: Multiple Repeat finding: No Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on relative benefits received and be supported by appropriate documentation. For personnel costs, 2 CFR §200.430(i) requires that compensation for employees whose time is charged to federal awards be based on records that accurately reflect the work performed, such as time and effort reporting or equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires that cost allocations be based on documented methodologies that are reasonable and supported by underlying calculations. Condition: The Organization does not have formalized internal controls to support the rationale for allocation of shared costs and employee time across federal programs. Specifically: Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs. Often, employees charge hours to specific programs in excess of amounts allocated to the program as expenditures. The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in the time and effort records, are determined by members of the finance staff. The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in the time and effort records, is not documented. Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained. Cause: The deficiency exists because the Organization has not implemented a structured process for documenting the extent to which allowable compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: The absence of documented allocation methodologies in instances where allowable compensation costs exceed the amount allocated for reimbursement increases the risk that: Costs may be improperly allocated between federal programs, resulting in potential noncompliance with federal cost principles. Federal expenditures may be misstated, impacting financial and grant reporting. Although questioned costs were not identified, the lack of specific supporting documentation and controls represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization implement the following corrective actions: 1. Develop and Implement a Written Cost Allocation Policy – Establish a formal policy outlining the methodology for allocating shared costs and personnel time across programs, especially in instances where allowable costs exceed amounts allocated for reimbursement, ensuring compliance with 2 CFR Part 200 cost principles. 2. Document Allocation Methodologies for Shared Costs – Ensure that allocations for shared costs (e.g., rent, utilities, and administrative expenses) are based on a reasonable and documented methodology that can be reviewed and reperformed. 3. Retain Evidence of Implementation of Internal Controls - Implement review and approval controls over all requests for reimbursement, including review and approval of allocation of personnel and shared costs to specific funding sources. In circumstances where costs can be appropriately allocated to multiple funding sources, document the rationale for allocating the specific amount to each funding source. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management respectfully disagrees with this Finding. Under Condition, the finding states, “Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs.…” This is not accurate. Employees report their time worked each day, including the amount of time they worked on different projects if applicable. Employees report this in our commercial HRIS/Payroll system, where it is maintained and where it is reviewed and approved by the employee’s manager. The employees report the time they worked and which project(s) they worked on, their managers review and approve the time and the distribution, and the data is tracked and maintained in our HRIS/Payroll system (ExponentHR). Also under Condition, the finding states, “The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in time and effort records, are determined by members of the finance staff.” It is correct that we would have to invoice sponsors for less than the total cost of an employee’s allocated time and effort if a sponsor’s budget is not sufficient to cover that full amount. This is the correct procedure to follow. Employees correctly continue documenting their hours worked on a specific project even if the budget is expended and the accounting staff can no longer bill the sponsor. If a particular grant does not have sufficient sponsor funds, then the Grants Accounting staff reduce the bill accordingly. Also under Condition, the finding states, “The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in time and effort records, is not documented”. This is incorrect. Our monthly invoices to each sponsor accumulate, with each invoice clearly showing not only that month’s expense but also the year-to-date expense and remaining balance, which forces the sponsor invoice to stop at an amount less than the total cost of employees’ time and effort when the budget is exhausted. Also under Condition, the finding states, “Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained.” Each employee records their hours worked, and the project(s) on which they worked those hours, in our HRIS/Payroll system. The employee’s manager reviews and approves both the hours worked and the projects on which the hours were worked. This review and approval is maintained in our HRIS/Payroll system. Financial staff calculate the amount to allocate to specific federal programs based on these HRIS/Payroll system records (or other records such as clinical units produced, based on the terms of each grant). Separate accounting staff review the sponsor invoice and post the Receivable once they deem the invoice correct. Under Cause, the finding states, “…..the Organization has not implemented a structured process for documenting the extent to which allowable [emphasis added] compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement.” This means that we do not have a AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) process for documenting how much of a payroll expense already deemed allowable on a particular grant will actually be invoiced there. We disagree and believe that the presence and documentation of a limited sponsor budget, along with cumulative tracking and documentation of compensation expenses against that budget, proves and documents why sometimes full compensation costs are not charged to a grant. Under Possible Effect, the finding addresses possible effects of “the absence of documented allocation methodologies.” We don’t agree that our process could lead to improper allocation between federal programs (as the finding states) nor to misstating federal expenditures (as the finding states). When a sponsor’s budget is insufficient to cover its appropriately allocated compensation costs, those costs are paid from unrestricted, non-federal funds. As also noted in the finding, no questioned costs were identified.
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Name of pass-through entity: Multiple Repeat finding: No Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on relative benefits received and be supported by appropriate documentation. For personnel costs, 2 CFR §200.430(i) requires that compensation for employees whose time is charged to federal awards be based on records that accurately reflect the work performed, such as time and effort reporting or equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires that cost allocations be based on documented methodologies that are reasonable and supported by underlying calculations. Condition: The Organization does not have formalized internal controls to support the rationale for allocation of shared costs and employee time across federal programs. Specifically: Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs. Often, employees charge hours to specific programs in excess of amounts allocated to the program as expenditures. The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in the time and effort records, are determined by members of the finance staff. The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in the time and effort records, is not documented. Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained. Cause: The deficiency exists because the Organization has not implemented a structured process for documenting the extent to which allowable compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: The absence of documented allocation methodologies in instances where allowable compensation costs exceed the amount allocated for reimbursement increases the risk that: Costs may be improperly allocated between federal programs, resulting in potential noncompliance with federal cost principles. Federal expenditures may be misstated, impacting financial and grant reporting. Although questioned costs were not identified, the lack of specific supporting documentation and controls represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization implement the following corrective actions: 1. Develop and Implement a Written Cost Allocation Policy – Establish a formal policy outlining the methodology for allocating shared costs and personnel time across programs, especially in instances where allowable costs exceed amounts allocated for reimbursement, ensuring compliance with 2 CFR Part 200 cost principles. 2. Document Allocation Methodologies for Shared Costs – Ensure that allocations for shared costs (e.g., rent, utilities, and administrative expenses) are based on a reasonable and documented methodology that can be reviewed and reperformed. 3. Retain Evidence of Implementation of Internal Controls - Implement review and approval controls over all requests for reimbursement, including review and approval of allocation of personnel and shared costs to specific funding sources. In circumstances where costs can be appropriately allocated to multiple funding sources, document the rationale for allocating the specific amount to each funding source. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management respectfully disagrees with this Finding. Under Condition, the finding states, “Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs.…” This is not accurate. Employees report their time worked each day, including the amount of time they worked on different projects if applicable. Employees report this in our commercial HRIS/Payroll system, where it is maintained and where it is reviewed and approved by the employee’s manager. The employees report the time they worked and which project(s) they worked on, their managers review and approve the time and the distribution, and the data is tracked and maintained in our HRIS/Payroll system (ExponentHR). Also under Condition, the finding states, “The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in time and effort records, are determined by members of the finance staff.” It is correct that we would have to invoice sponsors for less than the total cost of an employee’s allocated time and effort if a sponsor’s budget is not sufficient to cover that full amount. This is the correct procedure to follow. Employees correctly continue documenting their hours worked on a specific project even if the budget is expended and the accounting staff can no longer bill the sponsor. If a particular grant does not have sufficient sponsor funds, then the Grants Accounting staff reduce the bill accordingly. Also under Condition, the finding states, “The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in time and effort records, is not documented”. This is incorrect. Our monthly invoices to each sponsor accumulate, with each invoice clearly showing not only that month’s expense but also the year-to-date expense and remaining balance, which forces the sponsor invoice to stop at an amount less than the total cost of employees’ time and effort when the budget is exhausted. Also under Condition, the finding states, “Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained.” Each employee records their hours worked, and the project(s) on which they worked those hours, in our HRIS/Payroll system. The employee’s manager reviews and approves both the hours worked and the projects on which the hours were worked. This review and approval is maintained in our HRIS/Payroll system. Financial staff calculate the amount to allocate to specific federal programs based on these HRIS/Payroll system records (or other records such as clinical units produced, based on the terms of each grant). Separate accounting staff review the sponsor invoice and post the Receivable once they deem the invoice correct. Under Cause, the finding states, “…..the Organization has not implemented a structured process for documenting the extent to which allowable [emphasis added] compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement.” This means that we do not have a AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) process for documenting how much of a payroll expense already deemed allowable on a particular grant will actually be invoiced there. We disagree and believe that the presence and documentation of a limited sponsor budget, along with cumulative tracking and documentation of compensation expenses against that budget, proves and documents why sometimes full compensation costs are not charged to a grant. Under Possible Effect, the finding addresses possible effects of “the absence of documented allocation methodologies.” We don’t agree that our process could lead to improper allocation between federal programs (as the finding states) nor to misstating federal expenditures (as the finding states). When a sponsor’s budget is insufficient to cover its appropriately allocated compensation costs, those costs are paid from unrestricted, non-federal funds. As also noted in the finding, no questioned costs were identified.
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Name of pass-through entity: Multiple Repeat finding: No Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on relative benefits received and be supported by appropriate documentation. For personnel costs, 2 CFR §200.430(i) requires that compensation for employees whose time is charged to federal awards be based on records that accurately reflect the work performed, such as time and effort reporting or equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires that cost allocations be based on documented methodologies that are reasonable and supported by underlying calculations. Condition: The Organization does not have formalized internal controls to support the rationale for allocation of shared costs and employee time across federal programs. Specifically: Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs. Often, employees charge hours to specific programs in excess of amounts allocated to the program as expenditures. The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in the time and effort records, are determined by members of the finance staff. The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in the time and effort records, is not documented. Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained. Cause: The deficiency exists because the Organization has not implemented a structured process for documenting the extent to which allowable compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: The absence of documented allocation methodologies in instances where allowable compensation costs exceed the amount allocated for reimbursement increases the risk that: Costs may be improperly allocated between federal programs, resulting in potential noncompliance with federal cost principles. Federal expenditures may be misstated, impacting financial and grant reporting. Although questioned costs were not identified, the lack of specific supporting documentation and controls represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization implement the following corrective actions: 1. Develop and Implement a Written Cost Allocation Policy – Establish a formal policy outlining the methodology for allocating shared costs and personnel time across programs, especially in instances where allowable costs exceed amounts allocated for reimbursement, ensuring compliance with 2 CFR Part 200 cost principles. 2. Document Allocation Methodologies for Shared Costs – Ensure that allocations for shared costs (e.g., rent, utilities, and administrative expenses) are based on a reasonable and documented methodology that can be reviewed and reperformed. 3. Retain Evidence of Implementation of Internal Controls - Implement review and approval controls over all requests for reimbursement, including review and approval of allocation of personnel and shared costs to specific funding sources. In circumstances where costs can be appropriately allocated to multiple funding sources, document the rationale for allocating the specific amount to each funding source. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management respectfully disagrees with this Finding. Under Condition, the finding states, “Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs.…” This is not accurate. Employees report their time worked each day, including the amount of time they worked on different projects if applicable. Employees report this in our commercial HRIS/Payroll system, where it is maintained and where it is reviewed and approved by the employee’s manager. The employees report the time they worked and which project(s) they worked on, their managers review and approve the time and the distribution, and the data is tracked and maintained in our HRIS/Payroll system (ExponentHR). Also under Condition, the finding states, “The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in time and effort records, are determined by members of the finance staff.” It is correct that we would have to invoice sponsors for less than the total cost of an employee’s allocated time and effort if a sponsor’s budget is not sufficient to cover that full amount. This is the correct procedure to follow. Employees correctly continue documenting their hours worked on a specific project even if the budget is expended and the accounting staff can no longer bill the sponsor. If a particular grant does not have sufficient sponsor funds, then the Grants Accounting staff reduce the bill accordingly. Also under Condition, the finding states, “The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in time and effort records, is not documented”. This is incorrect. Our monthly invoices to each sponsor accumulate, with each invoice clearly showing not only that month’s expense but also the year-to-date expense and remaining balance, which forces the sponsor invoice to stop at an amount less than the total cost of employees’ time and effort when the budget is exhausted. Also under Condition, the finding states, “Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained.” Each employee records their hours worked, and the project(s) on which they worked those hours, in our HRIS/Payroll system. The employee’s manager reviews and approves both the hours worked and the projects on which the hours were worked. This review and approval is maintained in our HRIS/Payroll system. Financial staff calculate the amount to allocate to specific federal programs based on these HRIS/Payroll system records (or other records such as clinical units produced, based on the terms of each grant). Separate accounting staff review the sponsor invoice and post the Receivable once they deem the invoice correct. Under Cause, the finding states, “…..the Organization has not implemented a structured process for documenting the extent to which allowable [emphasis added] compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement.” This means that we do not have a AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) process for documenting how much of a payroll expense already deemed allowable on a particular grant will actually be invoiced there. We disagree and believe that the presence and documentation of a limited sponsor budget, along with cumulative tracking and documentation of compensation expenses against that budget, proves and documents why sometimes full compensation costs are not charged to a grant. Under Possible Effect, the finding addresses possible effects of “the absence of documented allocation methodologies.” We don’t agree that our process could lead to improper allocation between federal programs (as the finding states) nor to misstating federal expenditures (as the finding states). When a sponsor’s budget is insufficient to cover its appropriately allocated compensation costs, those costs are paid from unrestricted, non-federal funds. As also noted in the finding, no questioned costs were identified.
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Name of pass-through entity: Multiple Repeat finding: No Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on relative benefits received and be supported by appropriate documentation. For personnel costs, 2 CFR §200.430(i) requires that compensation for employees whose time is charged to federal awards be based on records that accurately reflect the work performed, such as time and effort reporting or equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires that cost allocations be based on documented methodologies that are reasonable and supported by underlying calculations. Condition: The Organization does not have formalized internal controls to support the rationale for allocation of shared costs and employee time across federal programs. Specifically: Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs. Often, employees charge hours to specific programs in excess of amounts allocated to the program as expenditures. The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in the time and effort records, are determined by members of the finance staff. The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in the time and effort records, is not documented. Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained. Cause: The deficiency exists because the Organization has not implemented a structured process for documenting the extent to which allowable compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: The absence of documented allocation methodologies in instances where allowable compensation costs exceed the amount allocated for reimbursement increases the risk that: Costs may be improperly allocated between federal programs, resulting in potential noncompliance with federal cost principles. Federal expenditures may be misstated, impacting financial and grant reporting. Although questioned costs were not identified, the lack of specific supporting documentation and controls represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization implement the following corrective actions: 1. Develop and Implement a Written Cost Allocation Policy – Establish a formal policy outlining the methodology for allocating shared costs and personnel time across programs, especially in instances where allowable costs exceed amounts allocated for reimbursement, ensuring compliance with 2 CFR Part 200 cost principles. 2. Document Allocation Methodologies for Shared Costs – Ensure that allocations for shared costs (e.g., rent, utilities, and administrative expenses) are based on a reasonable and documented methodology that can be reviewed and reperformed. 3. Retain Evidence of Implementation of Internal Controls - Implement review and approval controls over all requests for reimbursement, including review and approval of allocation of personnel and shared costs to specific funding sources. In circumstances where costs can be appropriately allocated to multiple funding sources, document the rationale for allocating the specific amount to each funding source. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management respectfully disagrees with this Finding. Under Condition, the finding states, “Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs.…” This is not accurate. Employees report their time worked each day, including the amount of time they worked on different projects if applicable. Employees report this in our commercial HRIS/Payroll system, where it is maintained and where it is reviewed and approved by the employee’s manager. The employees report the time they worked and which project(s) they worked on, their managers review and approve the time and the distribution, and the data is tracked and maintained in our HRIS/Payroll system (ExponentHR). Also under Condition, the finding states, “The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in time and effort records, are determined by members of the finance staff.” It is correct that we would have to invoice sponsors for less than the total cost of an employee’s allocated time and effort if a sponsor’s budget is not sufficient to cover that full amount. This is the correct procedure to follow. Employees correctly continue documenting their hours worked on a specific project even if the budget is expended and the accounting staff can no longer bill the sponsor. If a particular grant does not have sufficient sponsor funds, then the Grants Accounting staff reduce the bill accordingly. Also under Condition, the finding states, “The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in time and effort records, is not documented”. This is incorrect. Our monthly invoices to each sponsor accumulate, with each invoice clearly showing not only that month’s expense but also the year-to-date expense and remaining balance, which forces the sponsor invoice to stop at an amount less than the total cost of employees’ time and effort when the budget is exhausted. Also under Condition, the finding states, “Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained.” Each employee records their hours worked, and the project(s) on which they worked those hours, in our HRIS/Payroll system. The employee’s manager reviews and approves both the hours worked and the projects on which the hours were worked. This review and approval is maintained in our HRIS/Payroll system. Financial staff calculate the amount to allocate to specific federal programs based on these HRIS/Payroll system records (or other records such as clinical units produced, based on the terms of each grant). Separate accounting staff review the sponsor invoice and post the Receivable once they deem the invoice correct. Under Cause, the finding states, “…..the Organization has not implemented a structured process for documenting the extent to which allowable [emphasis added] compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement.” This means that we do not have a AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) process for documenting how much of a payroll expense already deemed allowable on a particular grant will actually be invoiced there. We disagree and believe that the presence and documentation of a limited sponsor budget, along with cumulative tracking and documentation of compensation expenses against that budget, proves and documents why sometimes full compensation costs are not charged to a grant. Under Possible Effect, the finding addresses possible effects of “the absence of documented allocation methodologies.” We don’t agree that our process could lead to improper allocation between federal programs (as the finding states) nor to misstating federal expenditures (as the finding states). When a sponsor’s budget is insufficient to cover its appropriately allocated compensation costs, those costs are paid from unrestricted, non-federal funds. As also noted in the finding, no questioned costs were identified.
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Name of pass-through entity: Multiple Repeat finding: No Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on relative benefits received and be supported by appropriate documentation. For personnel costs, 2 CFR §200.430(i) requires that compensation for employees whose time is charged to federal awards be based on records that accurately reflect the work performed, such as time and effort reporting or equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires that cost allocations be based on documented methodologies that are reasonable and supported by underlying calculations. Condition: The Organization does not have formalized internal controls to support the rationale for allocation of shared costs and employee time across federal programs. Specifically: Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs. Often, employees charge hours to specific programs in excess of amounts allocated to the program as expenditures. The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in the time and effort records, are determined by members of the finance staff. The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in the time and effort records, is not documented. Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained. Cause: The deficiency exists because the Organization has not implemented a structured process for documenting the extent to which allowable compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: The absence of documented allocation methodologies in instances where allowable compensation costs exceed the amount allocated for reimbursement increases the risk that: Costs may be improperly allocated between federal programs, resulting in potential noncompliance with federal cost principles. Federal expenditures may be misstated, impacting financial and grant reporting. Although questioned costs were not identified, the lack of specific supporting documentation and controls represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization implement the following corrective actions: 1. Develop and Implement a Written Cost Allocation Policy – Establish a formal policy outlining the methodology for allocating shared costs and personnel time across programs, especially in instances where allowable costs exceed amounts allocated for reimbursement, ensuring compliance with 2 CFR Part 200 cost principles. 2. Document Allocation Methodologies for Shared Costs – Ensure that allocations for shared costs (e.g., rent, utilities, and administrative expenses) are based on a reasonable and documented methodology that can be reviewed and reperformed. 3. Retain Evidence of Implementation of Internal Controls - Implement review and approval controls over all requests for reimbursement, including review and approval of allocation of personnel and shared costs to specific funding sources. In circumstances where costs can be appropriately allocated to multiple funding sources, document the rationale for allocating the specific amount to each funding source. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management respectfully disagrees with this Finding. Under Condition, the finding states, “Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs.…” This is not accurate. Employees report their time worked each day, including the amount of time they worked on different projects if applicable. Employees report this in our commercial HRIS/Payroll system, where it is maintained and where it is reviewed and approved by the employee’s manager. The employees report the time they worked and which project(s) they worked on, their managers review and approve the time and the distribution, and the data is tracked and maintained in our HRIS/Payroll system (ExponentHR). Also under Condition, the finding states, “The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in time and effort records, are determined by members of the finance staff.” It is correct that we would have to invoice sponsors for less than the total cost of an employee’s allocated time and effort if a sponsor’s budget is not sufficient to cover that full amount. This is the correct procedure to follow. Employees correctly continue documenting their hours worked on a specific project even if the budget is expended and the accounting staff can no longer bill the sponsor. If a particular grant does not have sufficient sponsor funds, then the Grants Accounting staff reduce the bill accordingly. Also under Condition, the finding states, “The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in time and effort records, is not documented”. This is incorrect. Our monthly invoices to each sponsor accumulate, with each invoice clearly showing not only that month’s expense but also the year-to-date expense and remaining balance, which forces the sponsor invoice to stop at an amount less than the total cost of employees’ time and effort when the budget is exhausted. Also under Condition, the finding states, “Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained.” Each employee records their hours worked, and the project(s) on which they worked those hours, in our HRIS/Payroll system. The employee’s manager reviews and approves both the hours worked and the projects on which the hours were worked. This review and approval is maintained in our HRIS/Payroll system. Financial staff calculate the amount to allocate to specific federal programs based on these HRIS/Payroll system records (or other records such as clinical units produced, based on the terms of each grant). Separate accounting staff review the sponsor invoice and post the Receivable once they deem the invoice correct. Under Cause, the finding states, “…..the Organization has not implemented a structured process for documenting the extent to which allowable [emphasis added] compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement.” This means that we do not have a AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) process for documenting how much of a payroll expense already deemed allowable on a particular grant will actually be invoiced there. We disagree and believe that the presence and documentation of a limited sponsor budget, along with cumulative tracking and documentation of compensation expenses against that budget, proves and documents why sometimes full compensation costs are not charged to a grant. Under Possible Effect, the finding addresses possible effects of “the absence of documented allocation methodologies.” We don’t agree that our process could lead to improper allocation between federal programs (as the finding states) nor to misstating federal expenditures (as the finding states). When a sponsor’s budget is insufficient to cover its appropriately allocated compensation costs, those costs are paid from unrestricted, non-federal funds. As also noted in the finding, no questioned costs were identified.
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Name of pass-through entity: Multiple Repeat finding: No Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on relative benefits received and be supported by appropriate documentation. For personnel costs, 2 CFR §200.430(i) requires that compensation for employees whose time is charged to federal awards be based on records that accurately reflect the work performed, such as time and effort reporting or equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires that cost allocations be based on documented methodologies that are reasonable and supported by underlying calculations. Condition: The Organization does not have formalized internal controls to support the rationale for allocation of shared costs and employee time across federal programs. Specifically: Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs. Often, employees charge hours to specific programs in excess of amounts allocated to the program as expenditures. The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in the time and effort records, are determined by members of the finance staff. The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in the time and effort records, is not documented. Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained. Cause: The deficiency exists because the Organization has not implemented a structured process for documenting the extent to which allowable compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: The absence of documented allocation methodologies in instances where allowable compensation costs exceed the amount allocated for reimbursement increases the risk that: Costs may be improperly allocated between federal programs, resulting in potential noncompliance with federal cost principles. Federal expenditures may be misstated, impacting financial and grant reporting. Although questioned costs were not identified, the lack of specific supporting documentation and controls represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization implement the following corrective actions: 1. Develop and Implement a Written Cost Allocation Policy – Establish a formal policy outlining the methodology for allocating shared costs and personnel time across programs, especially in instances where allowable costs exceed amounts allocated for reimbursement, ensuring compliance with 2 CFR Part 200 cost principles. 2. Document Allocation Methodologies for Shared Costs – Ensure that allocations for shared costs (e.g., rent, utilities, and administrative expenses) are based on a reasonable and documented methodology that can be reviewed and reperformed. 3. Retain Evidence of Implementation of Internal Controls - Implement review and approval controls over all requests for reimbursement, including review and approval of allocation of personnel and shared costs to specific funding sources. In circumstances where costs can be appropriately allocated to multiple funding sources, document the rationale for allocating the specific amount to each funding source. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management respectfully disagrees with this Finding. Under Condition, the finding states, “Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs.…” This is not accurate. Employees report their time worked each day, including the amount of time they worked on different projects if applicable. Employees report this in our commercial HRIS/Payroll system, where it is maintained and where it is reviewed and approved by the employee’s manager. The employees report the time they worked and which project(s) they worked on, their managers review and approve the time and the distribution, and the data is tracked and maintained in our HRIS/Payroll system (ExponentHR). Also under Condition, the finding states, “The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in time and effort records, are determined by members of the finance staff.” It is correct that we would have to invoice sponsors for less than the total cost of an employee’s allocated time and effort if a sponsor’s budget is not sufficient to cover that full amount. This is the correct procedure to follow. Employees correctly continue documenting their hours worked on a specific project even if the budget is expended and the accounting staff can no longer bill the sponsor. If a particular grant does not have sufficient sponsor funds, then the Grants Accounting staff reduce the bill accordingly. Also under Condition, the finding states, “The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in time and effort records, is not documented”. This is incorrect. Our monthly invoices to each sponsor accumulate, with each invoice clearly showing not only that month’s expense but also the year-to-date expense and remaining balance, which forces the sponsor invoice to stop at an amount less than the total cost of employees’ time and effort when the budget is exhausted. Also under Condition, the finding states, “Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained.” Each employee records their hours worked, and the project(s) on which they worked those hours, in our HRIS/Payroll system. The employee’s manager reviews and approves both the hours worked and the projects on which the hours were worked. This review and approval is maintained in our HRIS/Payroll system. Financial staff calculate the amount to allocate to specific federal programs based on these HRIS/Payroll system records (or other records such as clinical units produced, based on the terms of each grant). Separate accounting staff review the sponsor invoice and post the Receivable once they deem the invoice correct. Under Cause, the finding states, “…..the Organization has not implemented a structured process for documenting the extent to which allowable [emphasis added] compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement.” This means that we do not have a AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) process for documenting how much of a payroll expense already deemed allowable on a particular grant will actually be invoiced there. We disagree and believe that the presence and documentation of a limited sponsor budget, along with cumulative tracking and documentation of compensation expenses against that budget, proves and documents why sometimes full compensation costs are not charged to a grant. Under Possible Effect, the finding addresses possible effects of “the absence of documented allocation methodologies.” We don’t agree that our process could lead to improper allocation between federal programs (as the finding states) nor to misstating federal expenditures (as the finding states). When a sponsor’s budget is insufficient to cover its appropriately allocated compensation costs, those costs are paid from unrestricted, non-federal funds. As also noted in the finding, no questioned costs were identified.
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Name of pass-through entity: Multiple Repeat finding: No Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on relative benefits received and be supported by appropriate documentation. For personnel costs, 2 CFR §200.430(i) requires that compensation for employees whose time is charged to federal awards be based on records that accurately reflect the work performed, such as time and effort reporting or equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires that cost allocations be based on documented methodologies that are reasonable and supported by underlying calculations. Condition: The Organization does not have formalized internal controls to support the rationale for allocation of shared costs and employee time across federal programs. Specifically: Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs. Often, employees charge hours to specific programs in excess of amounts allocated to the program as expenditures. The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in the time and effort records, are determined by members of the finance staff. The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in the time and effort records, is not documented. Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained. Cause: The deficiency exists because the Organization has not implemented a structured process for documenting the extent to which allowable compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: The absence of documented allocation methodologies in instances where allowable compensation costs exceed the amount allocated for reimbursement increases the risk that: Costs may be improperly allocated between federal programs, resulting in potential noncompliance with federal cost principles. Federal expenditures may be misstated, impacting financial and grant reporting. Although questioned costs were not identified, the lack of specific supporting documentation and controls represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization implement the following corrective actions: 1. Develop and Implement a Written Cost Allocation Policy – Establish a formal policy outlining the methodology for allocating shared costs and personnel time across programs, especially in instances where allowable costs exceed amounts allocated for reimbursement, ensuring compliance with 2 CFR Part 200 cost principles. 2. Document Allocation Methodologies for Shared Costs – Ensure that allocations for shared costs (e.g., rent, utilities, and administrative expenses) are based on a reasonable and documented methodology that can be reviewed and reperformed. 3. Retain Evidence of Implementation of Internal Controls - Implement review and approval controls over all requests for reimbursement, including review and approval of allocation of personnel and shared costs to specific funding sources. In circumstances where costs can be appropriately allocated to multiple funding sources, document the rationale for allocating the specific amount to each funding source. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management respectfully disagrees with this Finding. Under Condition, the finding states, “Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs.…” This is not accurate. Employees report their time worked each day, including the amount of time they worked on different projects if applicable. Employees report this in our commercial HRIS/Payroll system, where it is maintained and where it is reviewed and approved by the employee’s manager. The employees report the time they worked and which project(s) they worked on, their managers review and approve the time and the distribution, and the data is tracked and maintained in our HRIS/Payroll system (ExponentHR). Also under Condition, the finding states, “The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in time and effort records, are determined by members of the finance staff.” It is correct that we would have to invoice sponsors for less than the total cost of an employee’s allocated time and effort if a sponsor’s budget is not sufficient to cover that full amount. This is the correct procedure to follow. Employees correctly continue documenting their hours worked on a specific project even if the budget is expended and the accounting staff can no longer bill the sponsor. If a particular grant does not have sufficient sponsor funds, then the Grants Accounting staff reduce the bill accordingly. Also under Condition, the finding states, “The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in time and effort records, is not documented”. This is incorrect. Our monthly invoices to each sponsor accumulate, with each invoice clearly showing not only that month’s expense but also the year-to-date expense and remaining balance, which forces the sponsor invoice to stop at an amount less than the total cost of employees’ time and effort when the budget is exhausted. Also under Condition, the finding states, “Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained.” Each employee records their hours worked, and the project(s) on which they worked those hours, in our HRIS/Payroll system. The employee’s manager reviews and approves both the hours worked and the projects on which the hours were worked. This review and approval is maintained in our HRIS/Payroll system. Financial staff calculate the amount to allocate to specific federal programs based on these HRIS/Payroll system records (or other records such as clinical units produced, based on the terms of each grant). Separate accounting staff review the sponsor invoice and post the Receivable once they deem the invoice correct. Under Cause, the finding states, “…..the Organization has not implemented a structured process for documenting the extent to which allowable [emphasis added] compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement.” This means that we do not have a AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) process for documenting how much of a payroll expense already deemed allowable on a particular grant will actually be invoiced there. We disagree and believe that the presence and documentation of a limited sponsor budget, along with cumulative tracking and documentation of compensation expenses against that budget, proves and documents why sometimes full compensation costs are not charged to a grant. Under Possible Effect, the finding addresses possible effects of “the absence of documented allocation methodologies.” We don’t agree that our process could lead to improper allocation between federal programs (as the finding states) nor to misstating federal expenditures (as the finding states). When a sponsor’s budget is insufficient to cover its appropriately allocated compensation costs, those costs are paid from unrestricted, non-federal funds. As also noted in the finding, no questioned costs were identified.
Finding number: 2023-006 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #2 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Name of pass-through entity: Multiple Repeat finding: No Criteria: 2 CFR §200.405 requires that costs be allocable to the federal program based on relative benefits received and be supported by appropriate documentation. For personnel costs, 2 CFR §200.430(i) requires that compensation for employees whose time is charged to federal awards be based on records that accurately reflect the work performed, such as time and effort reporting or equivalent documentation. For shared costs, 2 CFR §200.412-200.414 requires that cost allocations be based on documented methodologies that are reasonable and supported by underlying calculations. Condition: The Organization does not have formalized internal controls to support the rationale for allocation of shared costs and employee time across federal programs. Specifically: Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs. Often, employees charge hours to specific programs in excess of amounts allocated to the program as expenditures. The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in the time and effort records, are determined by members of the finance staff. The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in the time and effort records, is not documented. Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained. Cause: The deficiency exists because the Organization has not implemented a structured process for documenting the extent to which allowable compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: The absence of documented allocation methodologies in instances where allowable compensation costs exceed the amount allocated for reimbursement increases the risk that: Costs may be improperly allocated between federal programs, resulting in potential noncompliance with federal cost principles. Federal expenditures may be misstated, impacting financial and grant reporting. Although questioned costs were not identified, the lack of specific supporting documentation and controls represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization implement the following corrective actions: 1. Develop and Implement a Written Cost Allocation Policy – Establish a formal policy outlining the methodology for allocating shared costs and personnel time across programs, especially in instances where allowable costs exceed amounts allocated for reimbursement, ensuring compliance with 2 CFR Part 200 cost principles. 2. Document Allocation Methodologies for Shared Costs – Ensure that allocations for shared costs (e.g., rent, utilities, and administrative expenses) are based on a reasonable and documented methodology that can be reviewed and reperformed. 3. Retain Evidence of Implementation of Internal Controls - Implement review and approval controls over all requests for reimbursement, including review and approval of allocation of personnel and shared costs to specific funding sources. In circumstances where costs can be appropriately allocated to multiple funding sources, document the rationale for allocating the specific amount to each funding source. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management respectfully disagrees with this Finding. Under Condition, the finding states, “Time and effort is being tracked and maintained by employees, including hours charged to the specific efforts for the programs.…” This is not accurate. Employees report their time worked each day, including the amount of time they worked on different projects if applicable. Employees report this in our commercial HRIS/Payroll system, where it is maintained and where it is reviewed and approved by the employee’s manager. The employees report the time they worked and which project(s) they worked on, their managers review and approve the time and the distribution, and the data is tracked and maintained in our HRIS/Payroll system (ExponentHR). Also under Condition, the finding states, “The specific amount of employee salaries and wages that are allocated to specific federal programs for reimbursement, and which are less than the amounts reflected in time and effort records, are determined by members of the finance staff.” It is correct that we would have to invoice sponsors for less than the total cost of an employee’s allocated time and effort if a sponsor’s budget is not sufficient to cover that full amount. This is the correct procedure to follow. Employees correctly continue documenting their hours worked on a specific project even if the budget is expended and the accounting staff can no longer bill the sponsor. If a particular grant does not have sufficient sponsor funds, then the Grants Accounting staff reduce the bill accordingly. Also under Condition, the finding states, “The rationale for the amount actually allocated for reimbursement, if less than the amount reflected in time and effort records, is not documented”. This is incorrect. Our monthly invoices to each sponsor accumulate, with each invoice clearly showing not only that month’s expense but also the year-to-date expense and remaining balance, which forces the sponsor invoice to stop at an amount less than the total cost of employees’ time and effort when the budget is exhausted. Also under Condition, the finding states, “Review and approval of the allocation of employee compensation to specific federal programs reimbursement requests is not maintained.” Each employee records their hours worked, and the project(s) on which they worked those hours, in our HRIS/Payroll system. The employee’s manager reviews and approves both the hours worked and the projects on which the hours were worked. This review and approval is maintained in our HRIS/Payroll system. Financial staff calculate the amount to allocate to specific federal programs based on these HRIS/Payroll system records (or other records such as clinical units produced, based on the terms of each grant). Separate accounting staff review the sponsor invoice and post the Receivable once they deem the invoice correct. Under Cause, the finding states, “…..the Organization has not implemented a structured process for documenting the extent to which allowable [emphasis added] compensation costs will be allocated for reimbursement to specific federal programs in instances where the allowable compensation cost exceeds the amount allocated for reimbursement.” This means that we do not have a AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) process for documenting how much of a payroll expense already deemed allowable on a particular grant will actually be invoiced there. We disagree and believe that the presence and documentation of a limited sponsor budget, along with cumulative tracking and documentation of compensation expenses against that budget, proves and documents why sometimes full compensation costs are not charged to a grant. Under Possible Effect, the finding addresses possible effects of “the absence of documented allocation methodologies.” We don’t agree that our process could lead to improper allocation between federal programs (as the finding states) nor to misstating federal expenditures (as the finding states). When a sponsor’s budget is insufficient to cover its appropriately allocated compensation costs, those costs are paid from unrestricted, non-federal funds. As also noted in the finding, no questioned costs were identified.
Finding 2023-002: Internal Controls over Allowable Costs Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (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…; (v) Comply with the established accounting policies and practices of the non-federal entity…; (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 adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Condition/Context During the current audit period, CDF did not maintain adequate control over allowable costs related to its federally funded program. Exceptions were noted in 21 of 60 tested payroll expenditures: For 16 payroll expenditures, we were not provided with any evidence of approval of allocations. We noted these allocations were based on budget estimates, instead of actual time and effort reporting. For five payroll expenditures tested, we were not provided with any supporting documentation to determine if the expenditures were allowable. Exceptions were noted in nine of 60 non-payroll expenditures tested: For six non-payroll expenditures tested, we were not provided with any evidence of approval of the overhead allocations. We reviewed the supporting documentation, and the expenditures are deemed allowable. For three non-payroll expenditures tested, we were not provided with any supporting documentation to determine if the expenditure was allowable. Cause Based on our discussions with management, this finding occurred due to staff turnover. As a result, consistent documentation was not maintained to support the approval of expenditure allocations. Effect The failure to maintain adequate documentation to verify that expenditures are properly reviewed and approved and to maintain adequate supporting documentation to ensure all payroll and non-payroll expenditures are reasonable and properly reviewed is a violation of federal regulations, which could result in unallowed costs being charged to the federally funded program. Questioned Costs $42,119 Identification of Repeat Findings Repeated (Prior Finding No. 2022-001). Recommendation We recommend that CDF implement procedures to ensure all expenditure allocations are properly reviewed and approved and supporting documentation is maintained in accordance with federal regulations. Views of Responsible Officials and Corrective Action Plan CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 18-20.
Finding 2023-002: Internal Controls over Allowable Costs Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (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…; (v) Comply with the established accounting policies and practices of the non-federal entity…; (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 adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Condition/Context During the current audit period, CDF did not maintain adequate control over allowable costs related to its federally funded program. Exceptions were noted in 21 of 60 tested payroll expenditures: For 16 payroll expenditures, we were not provided with any evidence of approval of allocations. We noted these allocations were based on budget estimates, instead of actual time and effort reporting. For five payroll expenditures tested, we were not provided with any supporting documentation to determine if the expenditures were allowable. Exceptions were noted in nine of 60 non-payroll expenditures tested: For six non-payroll expenditures tested, we were not provided with any evidence of approval of the overhead allocations. We reviewed the supporting documentation, and the expenditures are deemed allowable. For three non-payroll expenditures tested, we were not provided with any supporting documentation to determine if the expenditure was allowable. Cause Based on our discussions with management, this finding occurred due to staff turnover. As a result, consistent documentation was not maintained to support the approval of expenditure allocations. Effect The failure to maintain adequate documentation to verify that expenditures are properly reviewed and approved and to maintain adequate supporting documentation to ensure all payroll and non-payroll expenditures are reasonable and properly reviewed is a violation of federal regulations, which could result in unallowed costs being charged to the federally funded program. Questioned Costs $42,119 Identification of Repeat Findings Repeated (Prior Finding No. 2022-001). Recommendation We recommend that CDF implement procedures to ensure all expenditure allocations are properly reviewed and approved and supporting documentation is maintained in accordance with federal regulations. Views of Responsible Officials and Corrective Action Plan CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 18-20.
Finding 2023-002: Internal Controls over Allowable Costs Federal Department: U.S. Department of Education Pass-through Agencies: State of South Carolina Department of Education, Minnesota Department of Education, and DC Office of the State Superintendent of Education Federal Program Name: Twenty-First Century Community Learning Centers Assistance Listing Number: 84.287 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (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…; (v) Comply with the established accounting policies and practices of the non-federal entity…; (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 adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Condition/Context During the current audit period, CDF did not maintain adequate control over allowable costs related to its federally funded program. Exceptions were noted in 21 of 60 tested payroll expenditures: For 16 payroll expenditures, we were not provided with any evidence of approval of allocations. We noted these allocations were based on budget estimates, instead of actual time and effort reporting. For five payroll expenditures tested, we were not provided with any supporting documentation to determine if the expenditures were allowable. Exceptions were noted in nine of 60 non-payroll expenditures tested: For six non-payroll expenditures tested, we were not provided with any evidence of approval of the overhead allocations. We reviewed the supporting documentation, and the expenditures are deemed allowable. For three non-payroll expenditures tested, we were not provided with any supporting documentation to determine if the expenditure was allowable. Cause Based on our discussions with management, this finding occurred due to staff turnover. As a result, consistent documentation was not maintained to support the approval of expenditure allocations. Effect The failure to maintain adequate documentation to verify that expenditures are properly reviewed and approved and to maintain adequate supporting documentation to ensure all payroll and non-payroll expenditures are reasonable and properly reviewed is a violation of federal regulations, which could result in unallowed costs being charged to the federally funded program. Questioned Costs $42,119 Identification of Repeat Findings Repeated (Prior Finding No. 2022-001). Recommendation We recommend that CDF implement procedures to ensure all expenditure allocations are properly reviewed and approved and supporting documentation is maintained in accordance with federal regulations. Views of Responsible Officials and Corrective Action Plan CDF agrees with the finding and recommendation. See CDF’s Corrective Action Plan on pages 18-20.
Payroll Allocations and Contract Allocations Finding Number: 2023-005 Assistance Listing Number and Title: AL # 14.871 - Section 8 Housing Choice Vouchers/Housing Voucher Cluster Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Housing and Urban Development Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: N/A Repeat Finding from Prior Audit? Yes Prior Audit Finding Number: 2022-007 Noncompliance and Material Weakness 2 CFR § 2400.101 gives regulatory effect to the Department of Housing and Urban Development for 2 CFR Part 200 Subpart E § 200.403 which provides that, except where otherwise authorized by statute, costs must meet certain general criteria in order to be allowable under Federal awards including being necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and being adequately documented. 2 C.F.R. § 200.430 provides, in part, that costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities. The Authority utilizes a standard allocation of 85% to serve as a cost allocation plan for consultant contracts to the Housing Choice Voucher (HCV) Program. However, the percentages in the plan are not updated annually and the plan does not specify which expenses are subject to the allocation percentage. Further, the Authority was unable to provide supporting documentation for the allocation percentages in the plan. As such, during 2023, the Authority charged $9,068 to the Housing Voucher Cluster in excess of supported amounts. In addition, the Authority approved a standard allocation of 59% for employee benefits charged to the Housing Choice Voucher (HCV) Program. However, the Authority charged 85% of certain benefits for employees during 2023 resulting in $2,080 charged to the Housing Voucher Cluster in excess of supported amounts. The failure to update and support percentages used to allocate federal expenditures to ensure they are reasonable based on current activity could result in findings for adjustment or questioned costs in the federal programs. During 2023, the total unsupported charges totaled $11,148. The Authority should update the percentages used in its cost allocation plan. Further, the Authority should update its plan to identify which expenses are subject to allocation by this plan. In addition, the Authority should utilize only approved and supported percentages for allocation of federal expenditures.
Payroll Allocations and Contract Allocations Finding Number: 2023-005 Assistance Listing Number and Title: AL # 14.871 - Section 8 Housing Choice Vouchers/Housing Voucher Cluster Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Housing and Urban Development Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: N/A Repeat Finding from Prior Audit? Yes Prior Audit Finding Number: 2022-007 Noncompliance and Material Weakness 2 CFR § 2400.101 gives regulatory effect to the Department of Housing and Urban Development for 2 CFR Part 200 Subpart E § 200.403 which provides that, except where otherwise authorized by statute, costs must meet certain general criteria in order to be allowable under Federal awards including being necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and being adequately documented. 2 C.F.R. § 200.430 provides, in part, that costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities. The Authority utilizes a standard allocation of 85% to serve as a cost allocation plan for consultant contracts to the Housing Choice Voucher (HCV) Program. However, the percentages in the plan are not updated annually and the plan does not specify which expenses are subject to the allocation percentage. Further, the Authority was unable to provide supporting documentation for the allocation percentages in the plan. As such, during 2023, the Authority charged $9,068 to the Housing Voucher Cluster in excess of supported amounts. In addition, the Authority approved a standard allocation of 59% for employee benefits charged to the Housing Choice Voucher (HCV) Program. However, the Authority charged 85% of certain benefits for employees during 2023 resulting in $2,080 charged to the Housing Voucher Cluster in excess of supported amounts. The failure to update and support percentages used to allocate federal expenditures to ensure they are reasonable based on current activity could result in findings for adjustment or questioned costs in the federal programs. During 2023, the total unsupported charges totaled $11,148. The Authority should update the percentages used in its cost allocation plan. Further, the Authority should update its plan to identify which expenses are subject to allocation by this plan. In addition, the Authority should utilize only approved and supported percentages for allocation of federal expenditures.
U. S. Department of Health and Human Services 2023-002 Allowable Costs Program(s) Name of Federal Program (Assistance Listing Number) Urban Indian Health Services (93.193) Special Diabetes Program for Indians - Diabetes Prevention and Treatment Projects (93.237) Criteria - Recipients of federal awards must follow the costs principles set out at 2 CFR section 200.430 to substantiate compensation and other purchases charged to a federal program. “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: …(iii) reasonable reflect the total activity for which the employee is compensated by the non-Federal entity” 2 CFR section 200.430(i). The Organization’s processes did not maintain sufficient documentation of the approval of the activity of each employee or the purchase of goods/services for the programs identified above. Context and Condition - We selected 29 paychecks from several pay periods to test for compliance with standards in these two programs. Records for five of the paychecks tested lacked documentation of approval of the employee’s supervisor. Cause - The Organization replaced its payroll processing servicer subsequent to 2023. Access to certain records from the prior servicer were no longer available. Personnel turnover resulting in inconsistencies in maintaining required documentation. Effect - A federal program could be charged compensation for employees who did not provide services directly attributable to the program or charged for goods/services not related to the program. Questioned Costs - No costs were questioned. Repeat finding - Yes Statistically valid - Yes Recommendation - We recommend the Organization ensure it 1) maintains records of each employee’s activity and 2) monitors compliance with the job-costing system implemented. Views of responsible officials - The Organization believes the paychecks identified were approved prior to payment. We will ensure that documentation is downloaded each pay period to ensure such documentation is not lost when a change in servicer is made.
U. S. Department of Health and Human Services 2023-002 Allowable Costs Program(s) Name of Federal Program (Assistance Listing Number) Urban Indian Health Services (93.193) Special Diabetes Program for Indians - Diabetes Prevention and Treatment Projects (93.237) Criteria - Recipients of federal awards must follow the costs principles set out at 2 CFR section 200.430 to substantiate compensation and other purchases charged to a federal program. “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: …(iii) reasonable reflect the total activity for which the employee is compensated by the non-Federal entity” 2 CFR section 200.430(i). The Organization’s processes did not maintain sufficient documentation of the approval of the activity of each employee or the purchase of goods/services for the programs identified above. Context and Condition - We selected 29 paychecks from several pay periods to test for compliance with standards in these two programs. Records for five of the paychecks tested lacked documentation of approval of the employee’s supervisor. Cause - The Organization replaced its payroll processing servicer subsequent to 2023. Access to certain records from the prior servicer were no longer available. Personnel turnover resulting in inconsistencies in maintaining required documentation. Effect - A federal program could be charged compensation for employees who did not provide services directly attributable to the program or charged for goods/services not related to the program. Questioned Costs - No costs were questioned. Repeat finding - Yes Statistically valid - Yes Recommendation - We recommend the Organization ensure it 1) maintains records of each employee’s activity and 2) monitors compliance with the job-costing system implemented. Views of responsible officials - The Organization believes the paychecks identified were approved prior to payment. We will ensure that documentation is downloaded each pay period to ensure such documentation is not lost when a change in servicer is made.
Finding No.2023-003: Improve Controls Over Expense Reporting and Payroll Charges Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entity: 1. San Diego Refugee Communities Coalition/United Women of East Africa Support Team 2. California Department of Social Services (CDSS) Federal Award Number: 1. Not available in the contract 2. ACS22-05-CAIR-A1 Federal Award Year: 1. February 1, 2023 – March 31, 2024 2. November 1, 2022 – March 31, 2025 Compliance Requirement: Allowable Costs/Cost Principles Criteria or Specific Requirements: In accordance with 2 CFR 200.403 and 200.405, costs charged to a federal award must be necessary, reasonable, and allocable. In addition, 2 CFR 200.430 Compensation-personal services, provides that compensation for personal services must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of 21 non-payroll expenses, we identified one instance wherein translation services amounting to $795, provided by a staff member, were charged under professional fees, even though the individual's salary was recorded and billed under salary expenses. Additionally, in our testing of 25 payroll expenses, we identified one instance of overbilling in the amount $622. This occurred because the payroll charge was based on budgeted Full Time Equivalents (FTEs) rather than the actual time worked. Cause: CAIR-CA's current internal controls for reviewing billings under the federal program were not sufficient to consistently prevent or detect duplicate or inaccurate charges. Furthermore, CAIR-CA lacked adequate internal controls to ensure that payroll allocations were based on actual time worked on the federal program. Effect: These control deficiencies resulted in the overbilling of federal funds. Questioned Cost: $1,417 Recommendation: To ensure compliance with the Uniform Guidance, we recommend that CAIR-CA strengthen its internal controls over expense reporting by implementing enhanced review procedures to verify the allowability of costs charged to federal awards. Additionally, CAIR-CA should establish formal procedures to ensure that payroll charges to federal programs are based on actual time and effort records. Management should conduct regular reviews and make necessary adjustments to payroll allocations to accurately reflect the work performed on federally funded activities. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and has already initiated enhancements to its review process to ensure that expense reports are consistently reviewed and approved by both supervisors and finance personnel prior to being charged to federal awards. These steps are designed to further strengthen internal controls and support compliance with federal requirements. In addition, Finance staff are formalizing procedures to reconcile payroll charges on a regular basis to ensure compliance with federal requirements and to confirm that all charges to federal programs are supported by actual time and effort records. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: October 31, 2025
Finding No.2023-003: Improve Controls Over Expense Reporting and Payroll Charges Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entity: 1. San Diego Refugee Communities Coalition/United Women of East Africa Support Team 2. California Department of Social Services (CDSS) Federal Award Number: 1. Not available in the contract 2. ACS22-05-CAIR-A1 Federal Award Year: 1. February 1, 2023 – March 31, 2024 2. November 1, 2022 – March 31, 2025 Compliance Requirement: Allowable Costs/Cost Principles Criteria or Specific Requirements: In accordance with 2 CFR 200.403 and 200.405, costs charged to a federal award must be necessary, reasonable, and allocable. In addition, 2 CFR 200.430 Compensation-personal services, provides that compensation for personal services must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of 21 non-payroll expenses, we identified one instance wherein translation services amounting to $795, provided by a staff member, were charged under professional fees, even though the individual's salary was recorded and billed under salary expenses. Additionally, in our testing of 25 payroll expenses, we identified one instance of overbilling in the amount $622. This occurred because the payroll charge was based on budgeted Full Time Equivalents (FTEs) rather than the actual time worked. Cause: CAIR-CA's current internal controls for reviewing billings under the federal program were not sufficient to consistently prevent or detect duplicate or inaccurate charges. Furthermore, CAIR-CA lacked adequate internal controls to ensure that payroll allocations were based on actual time worked on the federal program. Effect: These control deficiencies resulted in the overbilling of federal funds. Questioned Cost: $1,417 Recommendation: To ensure compliance with the Uniform Guidance, we recommend that CAIR-CA strengthen its internal controls over expense reporting by implementing enhanced review procedures to verify the allowability of costs charged to federal awards. Additionally, CAIR-CA should establish formal procedures to ensure that payroll charges to federal programs are based on actual time and effort records. Management should conduct regular reviews and make necessary adjustments to payroll allocations to accurately reflect the work performed on federally funded activities. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and has already initiated enhancements to its review process to ensure that expense reports are consistently reviewed and approved by both supervisors and finance personnel prior to being charged to federal awards. These steps are designed to further strengthen internal controls and support compliance with federal requirements. In addition, Finance staff are formalizing procedures to reconcile payroll charges on a regular basis to ensure compliance with federal requirements and to confirm that all charges to federal programs are supported by actual time and effort records. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: October 31, 2025
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