Finding 1144067 (2024-003)

Finding 2024-003 Lack of Internal Control over Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agencies: U.S. Department of the Interior and U.S. Department of Health and Human Services Federal Programs: BIA Compact of Self-Governance (BIA) and Tribal Self-Governance and Determination Cluster (IHS) ALN: 15.022 and 93.210, respectively Award Numbers: GT-OSGT199, A17AV00414, A19AV00379, A20AV00451, A21AV00106, A22AV00088, A23AV00051, and A24AV00302 (BIA) and 58G970043 (IHS), respectively. Award Years: 2014 through 2024 (BIA), 2020 through 2024 (IHS), respectively. Type of Finding: Significant deficiency in internal control over compliance and 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, pay rates, coding, and deductions should be documented in the personnel files. Condition and Context: The payroll system of the Community lacks internal controls necessary to ensure accurate financial reporting. During our testing of payroll transactions, for any paycheck where deductions were withheld, there was a lack of documentation of approval of the deductions. These errors occurred in 1 out of 18 transactions for the BIA program and 9 out of 46 transactions for the IHS program. We also noted that deductions were being incorrectly calculated. These errors occurred in 1 transaction for the BIA program and 2 transactions for the IHS program. We also noted two additional errors in payroll transactions charged to the BIA program which included an employee’s paycheck not agreeing to the timesheet, which resulted in an overpayment to the employee and a payroll transaction where an employee was underpaid when cashing out accrued leave. We also noted three additional errors in payroll transactions charged to the IHS program, which included an employee being underpaid by $10 per hour for regular hours, an employee being overpaid by $3.34 per hour for regular hours, and an employee missing a documented pay rate for council stipends. Cause: Lack of internal control over payroll transactions. Effect: The lack of internal controls over payroll transactions allows for the potential for misstatement of expenditures due to employees being paid incorrectly. Lack of approval for deductions allows for the potential for employees to have incorrect deductions withheld from their paychecks.   Questioned Costs: Actual and estimated questioned costs were determined to be less than the $25,000 reporting threshold. Repeat Finding: This is a repeat of Finding 2023-005, and since it is a repeat finding we believe this to be a systemic issue. Recommendation: We recommend the Community adhere to their internal control policies to ensure accurate reporting of payroll transactions. Managements Response: Management agrees with this finding. See Corrective Action Plan.