Finding Text
Material noncompliance and material weakness in internal control over compliance with allowable costs/cost principles requirements. Federal Agency: Department of Health and Human Services Program Title: Social Services Research and Demonstration Program Assistance Listing Number: 93.647 Project Number: 90XP0459-01-00 Award Period: August 31, 2022 – August 30, 2023 Criteria Nonfederal entities must follow the standards for documentation of personnel expenses set out at 2 CFR section 200.430(i) (the Uniform Guidance). Under those standards, charges to Federal awards for compensation must be based on records that accurately reflect the work performed. Those standards require that the records 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 nonfederal 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. Budget estimates, alone, do not qualify as support for charges to Federal awards and must include after-the-fact reviews of interim charges to Federal awards based on actual activity. Condition The Organization utilized budget estimates for the allocation of compensation and fringe benefits to Federal awards and lacked the tracking of actual activity and related after-the-fact review of charges. Cause The Organization’s system of internal control was not designed appropriately to comply with the standards for documentation of personnel expenses as prescribed by the Uniform Guidance. Effect The allocation of personnel expenses and related fringe benefit were not properly supported. Questioned Costs The total payroll and fringe benefit costs of $618,611 were charged to the major program during the year ended December 31, 2023. Recommendation We recommend management update its payroll system to add procedures to capture and document an after-the fact determination of work effort for each employee to support the percentage of payroll cost allocated to federal programs.