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Finding 2025-002: Allowable Costs/Cost Principles – Compensation for Personal Services (Significant Deficiency) Federal Agency(ies): United States Agency for International Development (USAID) Federal Program(s): Adv HIV & AIDS Epidemic Control (AHEC) Activity Assistance Listing Number(s): N/A – Federal Contract Pass-through Entity (if applicable): N/A Award Identification Number and Year: 72066821C00001 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to 2 CFR §200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed and be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Effective internal controls over payroll include documented supervisory review and approval of employee timesheets to ensure that time charged to Federal programs is complete, accurate, and properly authorized. Condition: During our testing of payroll expenditures at the headquarters level, we identified two instances in which employee timesheets lacked documented evidence of supervisory review and approval. Cause: The condition appears to be a result of termination of responsible employees, due to cost reduction measures in response to the stop-work orders issued by the Federal Government. Effect or Potential Effect: Without documented supervisory review and approval of timesheets, IntraHealth lacks sufficient evidence that payroll costs charged to Federal awards are accurate, properly allocated, and allowable. This increases the risk that unallowable or inaccurately allocated payroll costs could be charged to Federal programs and may result in noncompliance with Federal cost principles. Questioned Costs: N/A, as no misallocations were noted according to the timesheet. Context: The exceptions were identified through our testing of payroll transactions charged to Federal awards across multiple locations and were not isolated to a single location or individual. Identification as a Repeat Finding, if Applicable: N/A Recommendation: We recommend that management strengthen controls over payroll processing by requiring timely documented supervisory review and approval of all employee timesheets prior to processing payroll charges to Federal awards. Management should implement procedures to ensure approvals are retained and periodically monitored for compliance. Reinforcing this control will provide reasonable assurance that payroll costs charged to Federal programs are accurate, properly supported, and compliant with 2 CFR §200.430.