Finding Text
2023-003 Compliance and Internal Controls over Matching (Material Weakness) Internal Controls over Period of Performance and Earmarking (Material Weakness) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program 2023 Funding Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 24 CFR Section 578.73, the Organization must match all grant funds, except for leasing funds, with no less than 25 percent of funds or in-kind contributions from other sources. Furthermore, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Condition: Payroll costs that could be potentially chargeable to the grant but were not, were claimed as a matching contribution under the grant by the Organization. However, as noted in finding 2023-001 above, payroll cost allocated to the grants did not agree to the grant hours reported in the approved timesheets for certain samples selected for testing. Because of this finding, we cannot establish the accuracy of payroll claimed as a match for the grant. Review and approval of each payroll batch was conducted, but in 6 out of 6 instances tested, errors in grant allocation were not detected. Cause: While there is a process in place for upper management to review and approve each payroll batch based on hours incurred per timesheet, it appears that the control was not operating effectively as the payroll cost charged to the grant in several instances exceeded the corresponding hours charged to the grant per the timesheet. Effect: Unmatched funds may be required to be returned back to grantor and / or impact future funding. Questioned Costs: Undeterminable Perspective: Payroll charged to the grants exceeded time incurred in 7 out of the 60 samples tested, including 1 out of the 17 samples for contract TX0275L6E002112 where payroll was used as a match. Repeat Finding: Yes. Recommendation: We recommend that part of the review process for payroll include verification that the cost charged to the grant does not exceed the grant hours reported on employee timesheet. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.