Finding Text
2024-003 Internal Controls and Compliance over Allowable Costs and Activities - Payroll (Material Weakness and Material Noncompliance) Legal Services Corporation 09.744060 Basic Field Grant Grant Period: 1/1/2024 – 12/31/2024 Contract Number: 744060 U.S Department of Justice 16.575 Victims of Crime Act Grant Periods: 10/1/23-9/30/24 and 10/1/24 – 9/30/25 Contract Number: 4055104; 4055105 Supreme Court of Texas Basic Civil Legal Services Program Grant Period: 9/1/2023 – 8/31/2025 Contract Number: 26030 Criteria: Under 2 CFR Section 200.303(a) a non-Federal entity is required to establish and maintain internal controls over compliance with Federal statutes, regulations, and the terms and conditions of the Federal grant. In addition, under 2 CFR Section 200.430 – Compensation – personal services, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Budget estimates may be used for interim accounting purposes, but budget estimates alone do not qualify as support for charges to Federal awards. The entity’s system of internal controls must include a process to review after-the-fact interim charges made to a Federal award to budget estimates and make any necessary adjustments such that the final amount charged to the Federal award is accurate, allowable and properly allocated. Texas Grant Management Standards also contains provisions for selected items of cost for Compensation – personal services which mirrors the requirements of 2 CFR Section 200.430. Condition: The Organization’s internal control process to compare actual time charged on the employee’s time sheet to the budget allocation charged to the grant to determine if budget estimates reflect reasonable approximations of the activities performed, did not consistently occur. For 16 of 75 payroll disbursements selected for testing, the allocation on the time sheet provided did not agree to the allocation of the employee’s wages to the program. In addition, of 9 of 75 payroll transactions selected for testing, the Organization was unable to provide a time sheet to substantiate the application of the employee’s time for that period. The finding appears to be a systemic issue. The sample was not statistically valid. Cause: Time sheets were not consistently compared against budget estimates by the Director of Finance. Time sheets could not be located for employees no longer employed by the Organization. Effect: Failure to review time sheets or maintain time sheets to support compensation allocations could result in an over/under statement of compensation charged to the Federal or State grants. Questioned Costs: (See chart) Perspective: There is not observable evidence of the Organization’s review and reconciliation of time sheets to budget estimates which affects both the allowable activities and allowable costs requirements. Repeat Finding: No Auditor’s Recommendation: We recommend the Organization review its timekeeping policies and procedures and provide additional training to employees to ensure time sheets are retained for all payroll transactions to support the allocation of compensation. We also recommend the Organization review and refine its policies to reconcile the percentage of hours charged on the time sheets to the budget estimates used to bill Federal and State grantors. This should be done in conjunction with monthly or quarterly billings (or other determined regular interval), at fiscal year end, and at the end of the grant year (if different from the Organization’s fiscal year). Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.