Finding Text
Finding 2024-003 U.S. Department of Housing and Urban Development (HUD) Assistance Listing Number 14.218 – CDBG - Entitlement Grants Cluster Significant Deficiency and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) Repeat Finding: No Criteria: In accordance with 2 CFR §200.303, The non-federal entity must: (a) Establish and maintain effective internal controls 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 In accordance with 2 CFR 200.430: (i) 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; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (vi) 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 and Context: For the 3 out of 3 employees selected for testing, the timesheet does not support the allocation of work performed to be funded by the federal program. Cause: Timesheets do not report hours by program, so payroll expenses are not allocated to the federal programs based off actual time spent on the grant program. Effect or Potential Effect: Failure to allocate employee pay in accordance with federal requirements could result in a loss of funding. Unallowed costs could be charged to the grant. Questioned Costs: Unknown. Recommendation: The department should maintain support and rationale for all allocations of payroll costs for employees charged to federal awards. Additionally, employees should earmark their timesheets with the number of hours worked on each program. Views of Responsible Officials: Management agrees with the finding. Refer to the Corrective Action Plan Section of this report