Finding Text
Finding 2025-002: Time/Salary Allocations (Significant Deficiency) Federal Agency: United States Department of Health and Human Services. Federal Program: Unaccompanied Children Program. Assistance Listing Number: 93.676 Pass-through Entity, if applicable: Not applicable. Award Identification Number and Year: All awards and all of 2025 fiscal year. Criteria or Specific Requirement (including Statutory, Regulatory, or Other Citation): CFR §200.430 Compensation—personal services. States; (g) Standards for Documentation of Personnel Expenses (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; (vii) Support the distribution of the employee’s Salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: During our audit of Everstand’s compensation practices, we noted that certain salaries and benefits charged to Federal programs were allocated using predetermined estimates rather than contemporaneous records reflecting actual time spent. These allocations were not supported by detailed documentation, such as timekeeping records or personnel activity reports. Cause: Everstand has not implemented a system for documenting time and effort in a manner that complies with Federal requirements. The current process relies on estimates rather than actual, verifiable work performed. Effect or Potential Effect: Without accurate and documented time and effort reporting, there is a risk that Federal awards are either overcharged or undercharged for salaries and benefits. This creates the potential for noncompliance with Federal cost principles, and could lead to disallowed costs in the event of a monitoring or program audit. Questioned Costs: Without a system to track actual time and effort, the determination of questioned costs is not available. Context: We tested a statistically valid sample of employee salaries charged to Federal awards. The deficiencies noted were isolated to those employees working on multiple programs at a time. Identification as a Repeat Finding, if applicable: Not a repeat finding. Recommendation: We recommend improvements to the controls around time and effort reporting that identifies and allocates time based on actual level of effort. Additionally, we recommend periodic trainings for key personnel that discusses the requirements and importance of compliance with the Federal regulation.