Finding 1151821 (2021-003)

2021-003 – ALLOWABLE COSTS/COST PRINCIPLES-PAYROLL DOCUMENTATION (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 (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. (3) In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA) (29 CFR part 516), charges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day. 2 CFR 200.313 stipulates the identification with the Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. Typical costs charged directly to a Federal award are the compensation of employees who work on that award, their related fringe benefit costs, the costs of materials and other items of expense incurred for the Federal award. If directly related to a specific award, certain costs that otherwise would be treated as indirect costs may also be considered direct costs. 2 CFR 200.414 stipulates that because of the diverse characteristics and accounting practices of nonprofit organizations, it is not possible to specify the types of cost which may be classified as indirect (F&A) cost in all situations. Identification with a Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards. However, typical examples of indirect (F&A) cost for many nonprofit organizations may include depreciation on buildings and equipment, the costs of operating and maintaining facilities, and general administration and general expenses, such as the salaries and expenses of executive officers, personnel administration, and accounting. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (Continued) 2021-003 – ALLOWABLE COSTS/COST PRINCIPLES-PAYROLL DOCUMENTATION (Continued) Federal Program Information: Federal Agency Federal Program Name Assistance Listing Number Grant Award(s) Unique Identifier(s) Department of Defense Basic Scientific Research 12.431 W15QKN-14-1-0001 W15QKN-20-1-1000 Condition: All employees paid with federal funds are paid a fixed salary pursuant to an employment contract established prior to the calendar year. Estimates for salaries were made prior to the services being performed. However, there was a lack of documentation, which substantiates that the payroll charged was accurate, allowable and properly allocated. Furthermore, there was no documentation of days or hours worked per day in accordance with federal guidelines. Officials recorded all personnel costs as indirect (which is consistent with the treatment of these expenses in prior years) expenses. However, the budget award document indicates a large portion of personnel costs to be classified as direct charges. Questioned Costs: Unknown. Context: Salaries and related fringe benefits of $576,127 were expended under the federal award. Total federal expenditures listed on the Schedule of Federal Awards was $6,267,848. Cause: Internal controls and procedures related to the payroll documentation were not effectively designed or performed. Effect: National Center for the Advancement of STEM Education, Inc. is not in compliance with the documentation requirements related to salaries and wages. Recommendation: We recommend that management implement policies and procedures to ensure that documentation of salaries and wages are maintained in a manner consistent with federal requirements. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.