Finding Text
Finding 2024-004 – Inadequate Support for Payroll Cost Allocation to Federal Awards - Material Weakness Federal Program Information: Funding agency: U.S. Department of Health and Human Services Title: Health Center Program Cluster Federal Assistance listing number: 93.224 and 93.527 Compliance Requirement: Allowable Costs/Cost Principles Condition: During testing of payroll costs charged to the HRSA awards, the auditee did not provide employee-level payroll allocation records or equivalent documentation supporting how employee compensation was allocated to the federal programs. Certain employee compensation exceeded the applicable HHS Executive Level II salary limitation; however, due to the absence of adequate allocation support, we were unable to determine the portion of compensation charged to the HRSA awards or whether salary costs charged complied with applicable allowability, allocability, documentation, and salary limitation requirements. Criteria: Costs charged to HCP award funds must comply with 45 CFR Part 75, Subpart E – Cost Principles, including requirements that costs be allowable, reasonable, allocable, and adequately supported. In addition, HRSA/HHS award funds are subject to other requirements and restrictions on the use of federal funding, including the HHS salary rate limitation, which limits the amount of individual salary that may be charged to federal funds to the applicable Federal Executive Level II rate. Cause: The Organization did not maintain or provide sufficient payroll allocation documentation to support employee-level salary charges to federal awards. Effect: Payroll costs charged to the HRSA awards may not be adequately supported, allocable, or allowable. Additionally, compensation in excess of the applicable HHS salary limitation may have been charged to federal awards. As a result, questioned costs could not be determined. Auditor's Recommendation: We recommend that management maintain detailed payroll allocation records by employee and funding source, including support for the percentage of time or salary charged to each federal award. Management should also implement a review process to ensure salary charged to HRSA awards does not exceed the applicable HHS Executive Level II salary limitation.