Finding Text
Program: Emergency Solutions Grant Assistance Listing No.: 14.231 Federal Agency: Department of Housing and Urban Development Pass-Through Agency: State of California and City of Salinas Federal Award Year: FY21-22 Compliance Requirement: Activities Allowed or Unallowed; Allowable Costs/Cost Principles Questioned Cost: $485 Repeat Finding: Yes Condition: We noted that the Agency did not have a formal process to ensure that payroll costs charged to federal programs are based on actual time worked. Payroll charges were allocated using estimates or predetermined percentages, without periodic certifications or time and effort documentation to support the allocations. Criteria: Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and must support the distribution of the employee’s activity among federal awards and other activities. Documentation should include after-the-fact records and reasonable assurance that charges are accurate, allowable, and properly allocated. Cause: The Agency had not implemented adequate internal controls or documentation procedures to ensure compliance with federal payroll allocation requirements. This may have been due to lack of training, oversight, or formal written policies. Effect: Inaccurate or unsupported payroll allocations may result in unallowable costs being charged to federal programs. This increases the risk of questioned costs and noncompliance with federal grant requirements. Recommendation: We recommend that the Agency implement a formal payroll allocation process that includes time and effort reporting or certifications for employees working on federal programs. Management should ensure payroll charges are supported by documentation that accurately reflects actual work performed and periodically review allocations for accuracy. Management’s Response: See Corrective Action Plan.