Finding Text
2023-012– Support for Payroll Allocations
Finding Type. Immaterial Noncompliance/Significant Deficiency in Internal Controls over Compliance (Allowable Costs/Cost Principles).
Program. Community Block Grants/Entitlement Grants; U.S. Department of Housing and Urban Development; Assistance Listing Number 14.218; All awards.
Criteria. Per 2 CFR § 200.430(g)(1)(vi), Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must 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 allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity."
Condition. During testing it was noted that the actual amounts charged to the grant were initially charged using the allocation rates from the previous pay period, and subsequently adjusted to the proper amount through a manual journal entry. When factoring in the amounts of the journal entries, the amount charged to the grant still differed from the support provided for 3 items of the 29 tested.
Cause. The City does not have the proper internal controls in place to ensure that all allocations of personnel cost are allocated according to the support retained.
Effect. The City is exposed to an increased risk that future noncompliance could occur and not be prevented or detected by the City's internal controls.
Questioned Costs. No costs were required to be questioned as a result of this finding inasmuch as the amount of likely questioned cost did not exceed the required threshold.
Recommendation. We recommend that the City implement necessary internal controls to ensure that all allocations of personnel cost are allocated according to the support retained.
View of Responsible Officials. The City will implement the necessary internal controls to ensure the policy for compliance is followed and documented.