Finding Text
2023-005 – Delayed Approval of Compensation Rates (SD)
Federal Program Title: Section 8 Housing Choice Vouchers
Assistance Listing Number: 14.871
Federal Agency: U.S. Department of Housing and Urban Development
Category of Finding: Allowable Costs and Cost Principles
Criteria: Per 2 CFR §200.430 of the Uniform Guidance, compensation for personnel services, including any
adjustments, must be based on documented and approved procedures in accordance with the organization’s
established policies. All changes to compensation must be approved and documented in a timely manner to
ensure compliance with both federal and non-federal funding requirements. The City uses personnel action forms
(PAF) to document changes to compensation. The PAF must be approved by authorized personnel in advance.
Condition: During the review of personnel costs, it was observed that changes in the compensation rates for
employees charged to the federally funded project were not approved in a timely manner. Documentation
showed delays in the authorization of salary adjustments, with compensation changes becoming effective before
formal approval by the City.
Cause: The City’s internal control processes for reviewing and approving compensation changes were not
followed promptly. There was a lack of procedures ensuring that salary adjustments were approved prior to the
effective date.
Effect or Potential Effect: Untimely approval of compensation changes increases the risk of inaccurate or
unallowable personnel costs being charged to the federal award. This may result in questioned costs, noncompliance
with federal regulations, and potential audit findings.
Questioned Cost: None.
Context: We selected four employees who worked on the program and in all cases, the PAF were authorized
much later than the effective date of the compensation change.
Statistical Sampling Validity: More than 50% of employees who work on the program were selected.
Repeat of a Prior-Year Finding: 2022-005.
Recommendation: The City should reinforce internal controls to ensure that all compensation changes are
reviewed and approved promptly. This should include:
Establishing a timeline for the approval of compensation adjustments.
Implementing procedures that prevent compensation changes from being applied until formal approval
is obtained.
Ensuring proper documentation of all approved salary changes is maintained.
Management Response and Corrective Action Plan
City's Response: The City concurs with the recommendation and has implemented hiring for temporary
work assignments in order to facilitate update.
Corrective Action Plan: The HR and payroll software will be updated by the City by December 2025.
Planned Implementation Date: December 2025
Responsible Person(s): City Manager