Finding Text
Federal Agencies: Department of the Treasury
Federal Assistance Listing Numbers: COVID-19 Coronavirus State and Local Fiscal Recovery Funds
Programs: 21.027
Award/Pass-Through Entity Identifying Numbers: HCS-23-AR-2111-018, ARPA - HCS-22-AR-2104-018, COVID-19 - EL-22-AR-27-018, ARPA - EL-22-AR-35-018(1), ARPA - EL-21-AR-03-018(4), ARPA - EL-21-AR-04-018(5), ARPA - EL-22-AR-29-018(2), ARPA - HS-21-AR-01-018(2), BH-22-AR-02-018(1), HCS-23-67-2301-018, HCS-23-AR-2107-018, ARP – 19911, CRF-2024-01, Agreement, 3733, COVID-19 – Agreement, K501, K4893, K4786, K4560, K4862
Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award.
Per 2 CFR §200.430 Compensation – Personal Services:
“Standards for Documentation of Personnel Expenses
(1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control, which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities;
(iv) Encompass federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non Federal entity’s written policy;
(v) Comply with the established accounting policies and practices of the non Federal entity; and
(vi) [Reserved]
(vii) 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.
(viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that:
(A) The system for establishing the estimates produces reasonable approximations of the activity actually performed;
(B) Significant changes in the corresponding work activity (as defined by the non-Federal entity’s written policies) are identified and entered into the records in a timely manner. Short-term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and
(C) 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: We noted that the Organization allocated payroll expenditures using timecards that were not fully reviewed and approved. Two out of 43 selections for the Coronavirus State and Local Fiscal Recovery Funds program did not have employee and/or supervisor approvals.
Cause: The Organization did not have adequate policies/procedures in place to ensure timesheet allocations are obtained for all employees charging time to federal grants and that they are appropriately reviewed.
Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are supported, the Organization could incorrectly charge expenditures to the federal program.
Questioned Costs: None above the $25,000 reporting threshold.
Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Payroll costs charged to the Coronavirus State and Local Fiscal Recovery Funds program were $1,320,137 in fiscal year 2024. Any costs not adequately supported by approved timesheet or subsequent attestation are considered questioned costs.
Identification as a Repeat Finding: No similar finding noted in the prior year.
Recommendation: The Organization should consistently obtain and retain timesheet approvals from both employees and supervisors for each pay period requested for reimbursement. Subsequent attestations of time worked should be timely obtained if detective controls identify missing timesheet approvals.
Views of Responsible Officials: Management agrees with the finding. Management is updating and implementing mitigating controls to ensure approvals are sufficiently documented.