Finding Text
FINDING 2025-004 – Payroll Allocations Federal Program: Continuum of Care Program Federal Identifying Number: Direct funding grants - IL0395L5T102214, IL0395L5T102315, IL0184L5T102316, IL0184L5T102417, IL1790H5T102200, IL1791H5T102200, IL1792H5T102200; Passed- through grants -IL1759D5T102201, IL1878D5T102300, IL1759D5T102202, and 8567-D Federal Assistance Listing Number: 14.267 Passed Through: All Chicago Making Homeless History and Aids Foundation of Chicago Federal Agency: U.S. Department of Housing and Urban Development Criteria/Specific Requirement: A. The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) require Inner Voice, Inc. to ensure federal expenditures to be consistent with the standards set forth in the Uniform Guidance at 2 CFR part 200, subpart E. B. The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.430(g)(1)(i) Standards for Documentation of Personnel Expenses states the following, “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. C. The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 Internal Controls states the following, “The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Condition: Our audit procedures over expenditures revealed the following: 1) For one (1) of forty (40) expenditure transactions tested, The Inner Voice, Inc. did not adequately track or review time and effort documentation for accuracy. For this selection, the time study applied to allocate salary and actual hours reported and paid did not agree. Questioned Costs: None. Context: The Inner Voice, Inc. expended a total of $5,207,762 of federal awards in fiscal year 2025. The Inner Voice, Inc. expended a total of $3,992,341 of federal awards in fiscal year 2025 under the Continuum of Care program. Effect: The Inner Voice, Inc. is not in compliance with Title 2 of the Code of Federal Regulations (CFR) Part 200.426 as it relates to activities allowed or unallowed and allowable costs/cost principles requirements. Additionally, the effect of noncompliance can result in questioned costs. Cause: The Inner Voice, Inc.’s implementation of internal controls is inconsistent in the 1) review of time study against payment and 2) review and approval of payroll salaries transactions. Recommendation: We recommend that The Inner Voice, Inc. establish and maintain effective internal control over federal awards to ensure expenditures are supported as required by 2 CFR 200.430(g)(1)(i). This includes: a. Conducting a formal time and effort study to support payroll allocations; b. Enhancing policies and procedures surrounding time and effort documentation and review and approval of payroll expenditures. Management’s Response: See Corrective Action Plan.