Finding Text
2023 – 003 Allowable Costs / Cost Principles
Federal Agency: U.S. Department of Health and Human Services
Federal Program Name: Head Start
Assistance Listing Number: 93.600
Federal Award Identification Number and Year: N/A
Pass-Through Agency: City of Chicago Department of Family and Support Services & Start Early
Pass-Through Number(s): 1130806/181206/189365/190275; 05CH011953-ELH23-03
Award Period: Start Early: 1/1/22-12/31/22; 1/1/23-12/31/23; City of Chicago: 113806: 12/1/2019-11/30/22; 181206/189365/190275: 4/1/22-11/30/22
Type of Finding:
Material Noncompliance (Modified Opinion)
Material Weakness in Internal Control over Compliance
Criteria or Specific Requirement: Reports reflecting the distribution of activity of each employee must be maintained for all staff members whose compensation is charged, in whole or in part, directly to awards, in accordance with Cost Principles for Non-Profit Organizations (2 CFR Part 230.8). Charges to Federal awards must also be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. These records must also support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
Condition: The Organization provided time records that account for the number of hours worked by the selected employees and the departments employees are charged. The Organization is using projected salaries including vacant positions in order to calculate their full-time equivalent rate to be used for administrative allocations and not using actual time. We noted that the expenses are not being properly tracked by federal grant within the general ledger properly to show expenses are not being allocated to multiple grants.
Questioned Costs: None
Context: This condition occurred in all 49 payroll transactions selected for testing and represented 38 different employees.
Cause: Unknown
Effect: Inaccurate payroll costs may be charged to federal programs if the Agency does not have procedures in place to monitor and record employee time devoted to federal programs.
Repeat Finding: The finding is a repeat finding in the immediately prior year. Prior year finding number was 2022-002.
Section III – Findings and Questioned Costs – Major Federal Programs (Continued)
2023 – 003 Allowable Costs / Cost Principles (Continued)
Recommendation: Management should develop a process whereby payroll costs allocated to federal grants; are supported by a system of internal controls which provides reasonable assurance that the charges are accurate, allowable and properly allocated, reasonably reflect the total activity for which the employee is compensated, and support the distribution of the employee’s wages among specific activities or cost objectives if the employee woks on more than one federally funded program.
Views of Responsible Officials and Planned Corrective Actions: There is no disagreement with this finding.