Finding Text
Finding 2023-004, Material Weakness, Allowable Costs
Identification of federal program : U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 93.224 and 93.527 Health Center Program Cluster
Criteria: 2 CFR 200.430(i) requires the auditee to establish and maintain effective internal control over the allocation of personnel expenses whereby charges to Federal awards for personnel-related expenditures are supported by official records of 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. Budget estimates alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: 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: Payroll expenses were charged to the award based on budget estimates.
Cause: The Organization uses a spreadsheet, prepared annually, to document the allocation of personnel costs charged across federal and other awards and indirect cost centers. Time and effort reports were not maintained or reviewed to support the allocation of personnel costs.
Effect: The Organization was unable to provide documentation of time and effort for personnel who were not 100% charged to the federal award.
Questioned costs: None.
Context: Total compensation charged to federal awards was tested for 9 out of 88 total employees charged to federal awards. 7 of the 9 employees tested were charged to more than one federal award, non-federal awards or other indirect cost centers. Total personnel costs allocated to the Health Center Cluster were $3,800,769.
Recommendation: We recommend that the Organization implement periodic time and effort reports to track employee allocations among federal awards, non-federal awards and indirect cost centers. We recommend that time and effort reports be reviewed by employee supervisors to ensure employee allocations are reflective of actual work performed and payroll allocation changes are made timely to reflect changes in employee duties. All necessary adjustments should be made to financial records to reflect the final amount charged to the Federal award reflects actual work performed.
Views of responsible officials and planned corrective actions: See attached corrective action plan.