Finding Text
Criteria: In accordance with 2 CFR Section 200.431(d), fringe benefits may be assigned to cost objectives by identifying specific benefits to specific individuals or by allocating on the basis of entity-wide salaries and wages of the employees receiving the benefits. When the allocation method is used, separate allocations must be made to selective groupings of employees, unless the non-Federal entity demonstrates that costs in relationships to salaries and wages do not differ significantly for different groups of employees. Condition: During our testing of fringe benefit expenses, we noted that all 176 sampled transactions lacked documentation identifying the specific programs benefiting from the costs incurred. The Corporation charged fringe benefits to Federal awards based on anticipated fringe benefit costs; however, it did not maintain documentation supporting the assignment of fringe benefit costs to applicable cost objectives. Consequently, the Corporation could not demonstrate that fringe benefit costs charged to the Federal award were allowable and allocated to benefiting programs in accordance with Federal requirements. Cause: The Corporation did not have formal process and policies to demonstrate adherence to the fringe benefits cost objectives of 2 CFR Section 200.431(d). Effect or Potential Effect: We were unable to determine whether charges to Federal awards for fringe benefits reflect specific time worked or amounts allocated to specific Federal programs, although the charges were not in excess of amounts approved for the grant. Questioned costs: None Context: We selected 176 fringe benefit transactions charged to Federal programs to test compliance with allowable cost requirements. For each transaction tested, the Corporation calculated fringe benefit charges by applying a fringe benefit rate to employees' actual salaries and wages. The fringe benefit rate was based on anticipated fringe benefit costs and supported by an overall fringe benefit calculation. However, the Corporation did not maintain documentation identifying the benefiting programs or assigning fringe benefit costs to specific cost objectives underlying the charges to Federal awards. This is a condition identified per review of the Corporation’s compliance with specified requirements using a statistically valid sample. Repeat finding: This is a repeat finding from prior year. This was reported as finding 2024-002 in the 2024 report. Recommendation: We recommend the Corporation develop and incorporate internal controls and policies to demonstrate adherence to the fringe benefits cost objectives of 2 CFR Section 200.431(d). View of Responsible Officials: Due to the financial system and time keeping infrastructure, the Corporation did not maintain evidence of fringe benefit cost objectives calculations. Also, the current fringe cost rate and allocations is based on historical assumptions.