Finding Text
Criteria: Uniform Guidance section 200.430(h)(8)(i) indicates that the standards for documentation of personnel expenses are such that (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 nonfederal entity and(iii) Reasonably reflect the total activity for which the employee is compensated by the nonfederal entity, not exceeding 100% of compensated activities. Furthermore, subsection (viii) indicates: Budget estimates 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 are identified and entered into the records in a timely manner and (C) The nonfederal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a federal awards based on budget estimates.
Condition: The Organization allocated payroll costs to grants based on budgeted percentages without implementing a system to ensure that these estimates reasonably approximated the actual work performed. Although employee time was tracked throughout the year using timesheets, the Organization did not reconcile or adjust the budgeted allocations to reflect the actual time worked at year-end. As a result, the time and effort reports did not accurately represent the payroll costs charged to the grant during the year.
Context: Out of 60 payroll transactions charged to the grant, we noted 29 did not match the employee payroll timesheet. The sample resulted in $85,646 of payroll charges out of total payroll charged to the grant of $838,352.
Questioned Costs:
• Known Questioned Costs: $21,015
Effect: Inaccurate payroll costs may be charged to federal programs if the Organization does not have procedures in place to monitor and record employee time devoted to federal programs.
Cause: The Organization experienced significant turnover in the accounting department during 2024. As a result, well-defined accounting policies and procedures have not been established and many review and approval policies and procedures have not been consistently or continuously maintained.
Recommendation: We recommend that the Organization enhance its internal controls over payroll allocation by establishing a formalized process for the accurate completion and review of employee timesheets. All employees whose time is charged to federal awards should complete timesheets accurately and consistently, ensuring they reflect actual time worked. These timesheets should be reviewed and approved by appropriate supervisory personnel to confirm alignment with grant requirements and compliance with federal regulations. Additionally, the Organization should consider integrating the timesheet functionality within its payroll system with its accounting system to facilitate accurate and efficient allocation of payroll costs to grants