Finding Text
Criteria or specific requirement: According to 2 CFR §200.303, the recipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. According to 2 CFR §200.405(d), if a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit However, when those proportions cannot be determined because of the interrelationship of the work involved, then the costs may be allocated or transferred to benefitted projects on any reasonable documented basis. According to 2 CFR §200.431(b), the cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: (1) They are provided under established written leave policies; (2) The costs are equitably allocated to all related activities, including Federal awards; and, (3) The accounting basis (cash or accrual) selected for costing each type of leave is consistently followed by the recipient or subrecipient or a specified grouping of employees. Condition: During our testing, we noted that the Department did not allocate leave to grants in accordance with the time and effort employees spent on the grants. Questioned costs: $887 Context: During our testing of twenty payroll disbursements, we noted that the Department had a net undercharge of $887 to eight grants. Cause: The Department was unaware of the federal regulations pertaining to leave allocations. Effect: The auditor noted instances of noncompliance. Noncompliance results in possible under or over charges to the grant. Repeat Finding: No. Recommendation: We recommend that the Department develop and implement a written policy for leave allocation consistent with federal regulations. Also, we recommend that the Department provides training to ensure employees understand and comply with the written policy. Views of responsible officials and planned corrective actions: The Department recognizes the audit finding and its responsibility to comply with 2 CFR §200.405(d). Corrective action was taken. The Department revised the procedures and will no longer charge any type of leave activity to a grant, effective July 1, 2025, and for the foreseeable future. An email was sent out by the CFO on June 26, 2025 advising all Department employees about this change. The Federal Aid Cost Tracking System (FACTS) has also been changed to block access to all grants for any leave time reporting code entries. If a system is developed in the future to enable the allocation of leave consistent will the federal regulations, training will be provided for all employees. Responsible Employee Position: CFO Timeline: July 31, 2026