Finding Text
Finding 2003-005: Time Allocation and Personnel Documentation Retention
Information on the Federal Program: Assistance Listing Number 93.788
Criteria or Specific Requirement: Title 2 U.S. Code of Federal Regulations (CFR) Part 200,
paragraph 430 “Compensation – personal services” requires that charges to Federal awards for
salaries and wages must be based on records that accurately reflect the work performed, and that
these records must be supported by a system of internal control which provides reasonable assurance
that the charges are accurate, allowable, and properly allocated. Additionally, these records must
comply with established accounting policies and practices of the non-Federal entity.
Condition: As part of our audit procedures around payroll, we noted instances of payroll allocations to
programs which did not accurately represent the time worked and/or salary rate of the employee. While
misallocations were not significant in their amounts, the errors themselves suggest the need for more
detailed review of the payroll allocation approval and entry process.In addition, we noted that HIPS does not maintain documentation for cost of
living increases awarded to employees subsequent to their annual agreed upon rate of pay, which
resulted in multiple instances where the employees current rate of pay noted could not be
substantiated.
Cause: The review of the payroll allocation entry and process was not sufficient to catch errors or
differences from the timesheets completed by staff. HIPS does not maintain adequate documentation
of staff changes in salary rate from year to year.
Effect or Potential Effect: HIPS could inadvertently mischarge salaries and wages to its various
programs.
Questioned Costs: Undetermined
Context: The misallocations identified represent 12.5% of the sampled payroll transactions (5 out of
40). Although the majority of payroll allocations were supported by appropriate documentation, these
two exceptions suggest a need for improved controls over time and effort reporting to prevent isolated
errors from becoming more systemic issues. In addition, we noted the majority of the employees
reviewed during testwork did not have documentation to support the salary as of the pay period
selected for testing.
Identification as a Repeat Finding, if Applicable: Not applicable
Recommendation: We recommend that the finance department perform a more detailed review of
the monthly program allocations to ensure complete and accurate entry of payroll allocations. We also
recommend that documentation for changes in rate of pay for all staff be maintained internally over the
course of each employee's respective employment with HIPS.