Finding Text
Reference Number: 2023-006 – Salary Allocation
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, 170305366
Category of Finding: Allowable Costs and Cost Principles
Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.405 states a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.
This standard is met if the cost:
(1) Is incurred specifically for the federal award;
(2) Benefits both the federal award and other work of the non-federal entity and can be distributed in proportions that may be approximated using reasonable methods; and
(3) Is necessary to the overall operation of the non-federal entity and is assignable in part to the federal award in accordance with the principles in this subpart.
Condition
During our review of payroll costs, we noted seven (7) employees with payroll allocation that did not agree to payroll allocable to the grant per the time study.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
The Organization allocated more direct payroll costs than were specifically incurred for the award.
Questioned Costs
We identified questioned costs of $655. We are unable to estimate total likely questioned costs.
Context
For the forty (40) participants selected for testing, seven (7) employees had payroll costs that were not allocated to the grant correctly.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for reviewing payroll entries posted to QuickBooks against the monthly time survey and entry to ensure allocations posted to the general ledger agree to approved allocations. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: Internal controls for proper vetting and approval of spreadsheets are being implemented to safeguard the accuracy of payroll report totals that tie back to labor percentages allocated to individual employee labor totals, billed to the grant.
Anticipated Implementation Date: December 31, 2024