Finding Text
Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Information on the Major Federal Program: Federal agency: National Science Foundation (NSF) and Department of Health and Human Services – National Institute of Health (HHS-NIH) Assistance listing number: 47.076 and 93.859 Assistance listing name and award number: NSF Indigenous Climate Journalism - #42-10059-24006 and Biomedical Research and Research Training - #45-14000-24002 Award year: NSF: 09/01/2023 - 04/25/2025 HHS-NIH: 07/20/2023 - 06/30/2028 Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Control requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.430 Compensation – Personal Services: “Costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees: (1)Is reasonable for the services rendered and conforms to the establish written policy of thenon-Federal entity consistently applied to both Federal and non-Federal activities; (2)Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules orwritten policies and meets the requirements of Federal statute, where applicable; and (3)Is determined and supported as provided in paragraph (i) of this section, Standards forDocumentation of Personnel Expenses, when applicable.” 2 CFR Section 200.430 (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 that provides reasonable assurance that thecharges are accurate, allowable, and properly allocated; (ii)Be incorporated into the official records of the recipient or subrecipient; (iii)Reasonably reflect the total activity for which the employee is compensated by the recipientor subrecipient, not exceeding 100 percent of compensated activities; (iv)Encompass federally-assisted and all other activities compensated by the recipient orsubrecipient on an integrated basis but may include the use of subsidiary records as definedin the recipient's or subrecipient's written policy; (v)Comply with the established accounting policies and procedures of the recipient orsubrecipient; (vi)Support the distribution of the employee's salary or wages among specific activities or costobjectives 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 indirectactivities allocated using different allocation bases; or an unallowable activity and a direct orindirect cost activity. (vii)Budget estimates (i.e., estimates determined before the services are performed) alone donot qualify as support for charges to Federal awards.” Condition – During the fiscal year ended June 30, 2025, the Organization allocated payroll expenditures charged to the Research and Development Program (major program) based on estimated percentages of personnel time dedicated to the grant. Management did not maintain documentation evidencing that the allocation methodology and resulting payroll distributions were reviewed and approved on a timely basis during the fiscal year. Compensating controls and audit results noted include: (i) payroll costs were budgeted by program and program budgets were approved, (ii) payroll charges were reconciled to the general ledger and reviewed, and (iii) substantive testing of payroll costs charged to the major program identified no exceptions in a sample of 10 payroll transactions tested. Cause – Although the Organization has established policies and procedures intended to support and evidence review and approval of payroll allocations charged to the major program, these procedures were not performed and/or retained in a timely manner during the fiscal year. As a result, management did not maintain contemporaneous documentation supporting that payroll allocation percentages and resulting payroll distributions were reviewed and approved in accordance with the Organization’s established guidelines and applicable regulations. Effect – The lack of timely documented review and approval of payroll allocation support increases the risk that payroll costs could be inaccurately allocated to the federal award and therefore not comply with 2 CFR 200.430 requirements for documentation of personnel expenses. However, based on compensating controls and our substantive testing (no exceptions noted in a sample of 10 transactions), there are no known or likely questioned costs and no misallocations were identified in the items tested. Questioned Costs – There are no known or likely questioned costs. Context – This is a condition identified per review of the Organization’s compliance with specified requirements of the Uniform Guidance. The prevalence of this finding is detailed in the condition section above. Repeat Finding – This is not a repeat finding. Recommendation – We recommend that management ensure established policies and procedures for the timely review and approval of payroll allocation methodologies and payroll expenditures charged to the major program are consistently performed. Management should also retain documentation evidencing the review and approval (including reviewer, date, and scope of review) to demonstrate compliance with 2 CFR 200.430. Views of Responsible Officials – Management agrees with the finding. Please see appendix A for Management’s Corrective Action Plan.