Finding Text
Finding 2025-003: Allowable Costs/Cost Principles (Material Weakness and Noncompliance) Federal Agency: U.S. Department of Housing and Urban Development Assistance Listing Number and Title: 14.218 – CDBG Entitlement Grants Cluster Funding Year: 2024 Criteria: Per the Uniform Guidance 200.430(i) – Compensation – personal services, Standards for Documentation of Personnel Expenses, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Among other requirements, these records must: • Be supported by a system of internal controls which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; • Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; • Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis; and • 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. Budget estimates (i.e. estimates determined before the services are performed) alone do not qualify as support for charges to federal awards, but may be used for interim accounting purposes, provided that the award recipient’s system of internal controls includes processes to review after-the-fact interim charges made to a federal awards based on budget estimates, and that all necessary adjustments be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Condition: For individuals charged to this program who also have time charged to other programs there were no timesheets or other evidence to support the allocation to the program was based on actual time incurred to the program but was instead based on the budgeted amounts for those individuals. Questioned Costs: $5,770 which includes employee salaries of $4,743 and benefits of $1,027. Context: Of the 40 payroll selections tested, five were related to individuals who were allocated to different programs and the allocation was based on the budgeted allocation rather than time records supporting that level of effort related to the federal award charged. The total payroll costs associated with these five individuals was $4,743, which represented 9.12% of the total sample tested of $52,000. Total payroll and fringe benefit costs associated with ALN 14.218 was $1,568,674. Cause: Current policies and procedures do not require documented timekeeping by employees working on the grant program, which is appropriately reviewed, approved and used as a basis for charges to the grant program. Effect: Personnel costs charged to federal awards without appropriate documentation may be subject to disallowance. Repeat Finding: Yes, 2024-002. Recommendation: Policies and procedures should be implemented to ensure that employee timekeeping and the salary and wage allocations to the federal award are appropriately documented and accurately reflect the level of effort of work performed. Views of Responsible Officials: Management agrees with the details of this finding and will implement the procedures outlined in our Corrective Action Plan.