Finding Text
Internal control deficiency over activities allowed or unallowed and allowable costs/cost principles related to review of contract labor expenditures.
Identification of the federal program:
Assistance Listing Number 97.036:
• COVID-19 – Disaster Grants – Public Assistance (Presidentially Declared Disasters)
• U.S. Department of Homeland Security
• Federal award identification number:
o Project number 690197 – Emergency Contract Labor Costs
o Project number 696280 – Emergency Contract Labor Costs
o Project Number 696319 – Emergency Contract Labor Costs
o Project Number 696366 – Emergency Contract Labor Invoice Costs
o Project Number 696392 – Emergency Contract Labor Invoice Costs
o Project Number 696409 – Emergency Contract Labor Invoice Costs
o Project Number 696847 – Emergency Contract Labor Invoice Costs
o Project Number 698491 – Contract Labor Services
• Federal award year – January 20, 2020 to May 11, 2023
• Pass-through entity – Arizona Department of Homeland Security
Criteria or specific requirement (including statutory, regulatory or other citation):
Title 2, Subtitle A, Chapter II, Part 200, Subpart D, Section 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Condition:
During our testing over contract labor expenditures, we observed management did not have effective internal controls in place to ensure certain contract labor expenditures were reviewed. There were 16 out of 40 selections where the contract labor expenditures were not reviewed.
Cause:
Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above.
Effect or potential effect:
Contract labor expenditures were not supported by effective internal controls. Without sufficient internal controls, compliance matters could occur in the future.
Questioned costs:
None.
Context:
During our internal control testing over activities allowed or unallowed and allowable costs/cost principles, we obtained a listing of 1,523,838 contract labor expenditures and selected a sample of 40 to test for the review of the expenditure. The total value of the 40 contract labor expenditures selected was $13,266 out of the total contract labor expenditures of $505,370,491.
There were 16 ($7,591) out of 40 ($13,266) selections where the contract labor expenditures were not reviewed. The 16 selections were for allowable activities under this program and therefore, no noncompliance was noted in our testing. The sampling was a statistically valid sample.
Identification as a repeat finding, if applicable:
No.
Recommendation:
Management should develop and implement effective internal controls to ensure contract labor expenditures are reviewed.
Views of responsible officials:
Banner requires control labor resources to utilize the same time keeping system used by Banner employees to track worked time. Banner creates ‘reverse invoices’ using the time tracked in Banner’s timekeeping system by contract labor resources and presents those hours/dollars to contract labor agencies for approval prior to remitting payment to those agencies. These invoices are reviewed by Banner’s staffing services team for reasonableness prior to being presented to the agencies for approval. There is an expectation that managers review and formally approve the timecards of contract labor resources in the timekeeping system, however, the reverse invoicing process moves forward even in the absence of a documented formal approval. Banner will implement a periodic monitoring process that provides a report of ‘forced sign offs’ (timecards without documented manager approval) to senior leadership in an effort to increase compliance with the timecard approval policy.