Finding Text
Finding 2025-011 – Child Nutrition Cluster – Inadequate Payroll Support and Documentation Federal Agency: U.S. Department of Agriculture Federal Program: Child Nutrition Cluster Assistance Listing Numbers: 10.553, 10.555, 10.559 Compliance Requirement: Activities Allowed and Allowable Costs/Cost Principles Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria Pursuant to 2 CFR §200.430, compensation for personal services charged to Federal awards must be based on records that accurately reflect the work performed and must be supported by a system of internal controls that provides reasonable assurance that charges are accurate, allowable, and properly allocated. Additionally, 2 CFR §200.302 requires non-Federal entities to establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the entity is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should include procedures to ensure payroll costs charged to Federal awards are supported by approved timesheets, approved compensation rates, supervisory review, and adequate documentation retention practices. Condition During testing of payroll expenditures charged to the Child Nutrition Cluster, UHY identified instances where required payroll documentation was not available for review. Specifically, management was unable to provide approved timesheets for certain employees selected for testing and was unable to provide approved compensation documentation for other employees. In addition, UHY identified payroll instances where the approved hourly rate did not agree to the effective hourly rate calculated from payroll records, and management was unable to provide supporting documentation explaining the differences. Context The Child Nutrition Cluster reported approximately $788,550 in Federal expenditures during the fiscal year ended June 30, 2025. UHY tested payroll expenditures charged to the program as part of its procedures over Activities Allowed and Allowable Costs/Cost Principles. The exceptions identified were not isolated to a single payroll transaction and included multiple instances of missing support and unsupported payroll rate variances. Because required documentation was not maintained or available for review, UHY was unable to verify that all payroll costs tested were properly supported, approved, and allowable under the Child Nutrition Cluster. Cause Management did not maintain complete payroll documentation and did not have procedures in place to ensure approved timesheets, compensation authorizations, and payroll calculations were consistently retained and available for review. Existing review procedures were not sufficient to ensure that payroll charges to the Child Nutrition Cluster were adequately documented and supported in accordance with Federal requirements. Effect Because supporting documentation was not available, UHY was unable to verify that certain payroll costs charged to the Child Nutrition Cluster were properly supported, approved, and allowable. The lack of documentation increases the risk that payroll expenditures may be misstated, unauthorized, inaccurately calculated, or charged to Federal programs inappropriately. Furthermore, the inability to produce required payroll documentation impairs management's ability to demonstrate compliance with Uniform Guidance requirements and constitutes a material weakness in internal control over compliance because there is a reasonable possibility that material noncompliance could occur and not be prevented or detected on a timely basis. Identification as a Repeat Finding, if Applicable No. Questioned Costs None identified. UHY was unable to determine questioned costs for all items selected for testing because supporting documentation was not available. Recommendation Management should strengthen controls over payroll documentation and record retention to ensure that approved timesheets, compensation authorizations, and payroll support are maintained and readily available for audit and review. Management should also implement procedures requiring supervisory review of payroll calculations and verification that payroll charges agree to approved compensation rates prior to processing and charging costs to Federal awards. Documentation supporting payroll charges should be retained in accordance with established record retention policies and Uniform Guidance requirements. Responsible Official Superintendent of Schools and Finance Director Views of Responsible Official The County concurs with the recommendation. The personnel action process as described in Section II of this document was implemented to correct this finding for the proper pay rates. Internal controls should be enhanced to ensure that all payroll charges are supported by approved timesheets prior to processing. School Management should review procedures to be implemented to verify payroll calculations and compensation rates, and documentation retention practices will be strengthened to ensure all required support is maintained and readily available for audit purposes.