Material Noncompliance - Allowable Costs/Cost Principles - Compensation Questioned Costs: $ 43,500 New or Repeat: New. Criteria: Uniform Guidance, 2 CFR § 200.430, requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed and that such records be supported by a system of internal control providing reasonable assurance that the charges are accurate, allowable, and properly allocated. Records must reasonably reflect the total activity for which the employee is compensated and support distribution of salary and wages among specific activities or cost objectives when the employee works on more than one federal award, non-federal award, or other activity. In addition, 2 CFR § 200.403 requires that costs charged to federal awards be necessary and reasonable for the performance of the federal award and be adequately documented, among other allowability factors. Condition: During our testing of payroll/personnel costs charged to the Community Development Financial Institutions Program award, Assistance Listing No. 21.020, we noted that the Organization approved employee wages and maintained payroll records (for example, payroll registers, pay rates, and evidence of payment); however, the Organization did not maintain timesheets, time-and-effort records, personnel activity reports, periodic certifications, or other equivalent records sufficient to accurately reflect the work performed and support the allocation of wages and related fringe benefits to the CDFI Program award. The Organization was unable to provide documentation evidencing the employees’ actual work performed that supported the allocation of compensation costs to the Community Development Financial Institutions Program award and, where applicable, between Community Development Financial Institutions Program-eligible activities and other activities/cost objectives. Cause: The condition appears to have occurred because the Organization did not have a sufficiently designed or consistently implemented process to ensure personnel activity documentation (or other equivalent recorded evidence) was prepared, reviewed, and retained to support allocations of payroll and related fringe benefits charged to the federal award. Context and Effect: We selected 10 employees and/or payroll transactions charged to the federal award, for the year ended December 31, 2025. The sample included compensation charges (wages and fringes) totaling $43,500 which was the total population allocated to this federal award. Of the items tested, 10 employees and/or payroll transactions totaling $43,500 did not include sufficient documentation (such as timesheets, periodic certifications, or other equivalent records) to support that the charges accurately reflected work performed and were properly allocated to the Community Development Financial Institutions Program -eligible activities/cost objectives. As a result of the condition, the Organization did not demonstrate that salary, wage, and related fringe benefit charges to the federal award were supported by records that accurately reflect the work performed and that the amounts charged were properly allocated among cost objectives. This increases the risk that compensation costs charged to the federal award may be unsupported, unallowable, or not properly allocated and could result in repayment, disallowances, or additional monitoring by the federal agency or pass-through entity. Questioned Costs: Questioned costs are $43,500 (wages and fringe benefits). This amount represents the portion of costs determined to be unsupported. Recommendation: We recommend that the Organization strengthen its policies, procedures, and internal controls over compensation costs charged to the federal award to ensure compliance with 2 CFR § 200.430 and 2 CFR § 200.403. Specifically, management should: 1. Establish written procedures requiring recorded evidence to support salary, wage, and fringe benefit charges to the federal award and to support allocation among cost objectives. 2. Implement a documented process for personnel activity reporting and/or periodic certifications (or other equivalent documentation) that reasonably reflects actual work performed and supports the allocation of compensation costs to eligible activities. 3. Require supervisory review and approval of personnel activity documentation/certifications on a periodic basis and retain documentation in the grant file and/or payroll file. 4. Perform periodic reconciliation and after-the-fact review of payroll and fringe benefit allocations, including timely adjustments when actual activity differs from budget estimates or planned allocations. 5. Provide training to program and finance personnel on the documentation standards in 2 CFR § 200.430 and allowability factors in 2 CFR § 200.403. 6. Enhance management review controls to ensure compensation costs are supported prior to posting to the general ledger and/or requesting reimbursement. Views of Responsible Officials: Management concurs with this finding. During the audit period, the Organization maintained payroll records, compensation documentation, and payroll allocation schedules; however, it did not maintain personnel activity reports, periodic certifications, or other after-the-fact documentation sufficient to support compensation costs charged to the Community Development Financial Institutions Program in accordance with 2 CFR § 200.430. The Organization's methodology relied on management-established allocation percentages based on employee responsibilities and anticipated level of effort supporting CDFI Fund activities. While management believes the costs charged to the award were incurred in support of eligible program activities, the Organization recognizes that documentation supporting the allocation methodology did not meet the standards required under Uniform Guidance. By December 31, 2026: 1. The CFO will establish a cost allocation plan which includes a methodology to support salary, wage, and fringe benefit charges, and other applicable costs, to the federal award and to support allocation among cost objectives. 2. The CFO will implement a documented process for personnel activity reporting and/or periodic certifications (or other equivalent documentation) that reasonably reflects actual work performed and supports the allocation of compensation costs to eligible activities. 3. The CFO will reconfigure the current workforce management system to ensure projects, departments, and contextual details are logged at the source. 4. The COO will review the existing timesheet submission and review policy to ensure compliance with federal requirements. The policy will require supervisory review and approval of personnel activity documentation/certifications consistent with the payroll cadence and retain documentation in the grant file and/or payroll file. The CFO will review and enforce compliance with timesheet submission requirements. 5. The CFO will implement a dynamic allocations module within Sage Intacct to facilitate automated allocation of time and fringe benefits to federal and other programs. 6. The CFO will ensure that the systems established perform periodic reconciliations and after-the-fact review of payroll and fringe benefit allocations. The CFO will make timely adjustments when actual activity differs from budget estimates or planned allocations. 7. The CFO, COO, and other personnel working on federal programs will receive training on the documentation standards in 2 CFR § 200.430 and allowability factors in 2 CFR § 200.403. 8. The CFO and COO will provide training to program and finance personnel on the documentation standards in 2 CFR § 200.430 and allowability factors in 2 CFR § 200.403. 9. The CFO will, as part of the monthly close process, review compensation charged to federal awards to ensure all costs are appropriate and supported prior to requesting reimbursement.