Finding Text
Finding 2022-008 Lack of Internal Control over Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Federal Agency: U.S. Department of Housing and Urban Development and U.S. Department of the Interior
Federal Program: Indian Housing Block Grant (IHBG) and Aid to Tribal Governments (ATG), respectively
ALN: 14.867 (IHBG) and 15.020 (ATG), respectively
Award Numbers: 55IT0212790 and 21AH0212790 (IHBG) and A19AV00203 (ATG), respectively
Award Year: 2021 and 2022 (IHBG) and 2019 (ATG), respectively
Type of Finding: Material weakness in internal control over compliance and material noncompliance
Criteria: Internal control procedures should be in place to ensure that the payroll accounting system is maintained to be able to accurately record payroll transactions. Payroll transactions should be supported by approved timesheets, and documentation of pay rates, coding, and deductions should be included in the personnel files.
Condition and context: During our testing of payroll transactions charged to the Indian Housing Block Grant program, we noted that out of a sample of twelve (12) payroll transactions reviewed, we noted five (5) employees were missing documentation of an approved pay rate in their personnel file. During our testing of payroll transactions charged to the Aid to Tribal Governments program, we noted that out of sample of twenty-five (25) transactions reviewed, fifteen (15) lacked documentation of an approved pay rate in their personnel file or documentation verifying which funding source the payroll expense should be coded to.
Cause: Lack of internal control over payroll transactions.
Effect: The lack of internal controls over payroll transactions creates the potential for misstatement of expenditures due to employees being paid incorrectly or having paychecks coded to the incorrect fund.
Questioned Costs: Known or likely questioned costs are below the $25,000 reporting threshold.
Repeat finding: No, this is not a repeat finding. However, even though it is not a repeat finding, we believe it is a systemic issue due to the number of errors noted.
Recommendation: We recommend the Village adhere to their internal control policies to ensure that personnel action forms (PAF) are on hand for all employees. PAF’s should document the employee’s approved pay rate, fund(s) in which the employee should be coded to, and any other pertinent information related to the employee.
Management’s Response: Management concurs with the finding. See Corrective Action Plan.