Finding Text
Department of the Treasury, Passed through North Dakota Office of Management and Budget
Federal Financial Assistance Listing 21.027
COVID-19 – Coronavirus State and Local Fiscal Recovery Funds
Activities Allowed or Unallowed
Material Weakness in Internal Control over Compliance
Criteria – A good system of internal accounting control contemplates an adequate system for review of the allocation of payroll expenditures to federal awards.
Condition – During the course of our engagement, we noted that the City has no formal review process for the allocation of payroll costs to federal awards, which could result in a material misstatement of the City’s schedule
of expenditures of federal awards.
Cause – The City does not have an internal control system designed to review the allocation of payroll costs to federal awards.
Effect – This deficiency could result in a misstatement to the financial statements and noncompliance with federal awards that would not be prevented or detected.
Questioned Costs – None reported.
Context/Sampling – A non-statistical sample of 60 transactions out of a population over 250 total transactions
were selected for testing, which accounted for $973,584 of $1,232,007 of federal program expenditures. Of these transactions tested, seven of the seven payroll selections did not have approval, and that accounted for $333,540 of the total being tested.
Repeat Finding from Prior Year(s) – Yes, prior year finding 2022-006.
Recommendation – A thorough review and reconciliation of the allocation of payroll costs to federal awards should take place prior to the beginning of the audit. This review should be done at both the accounting staff and accounting supervisor levels.
Views of Responsible Officials – There is no disagreement with the audit finding.