Finding Text
Standards for Documentation of Personnel Expenses Charged to Federal Awards Significant Deficiency in Internal Control Over Compliance - Federal Program: Assistance Listing No. 10.719 - Infrastructure Investment and Jobs Act Firewood Bank Program Federal Agency: U.S. Department of Agriculture, Forest Service (direct award; no pass-through entity) Federal Award Identification: 22-DG-11132544-049 (federal award year 2022) and 25-DG-11132544- 082 (federal award year 2025); USDA Forest Service Firewood Bank Program grant agreements identified by the Organization as contract 049 and contract 082 Compliance Requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Type of Finding: Significant deficiency in internal control over compliance Known Questioned Costs: None in addition to the $64,969 reported in Finding 2025-003. The personnel costs claimed without supporting records are included in that amount and are not questioned a second time here. Criteria: 2 CFR 200.430(g) (2 CFR 200.430(i) for awards subject to the guidance in effect before October 1, 2024) requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed, be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable and properly allocated, be incorporated into the official records of the entity, and reasonably reflect the total activity for which the employee is compensated, encompassing both federally assisted and all other activities. Budget estimates alone do not qualify as support for charges to federal awards. 2 CFR 200.303 requires the entity to establish and maintain effective internal control over the federal award. Condition: The Organization does not maintain records reflecting the work performed by employees whose salaries and related benefits are charged to the federal award. Personnel costs are assigned to programs, and between federal and non-federal activities, on the basis of management’s estimates rather than records of actual activity. For the year ended December 31, 2025, salaries, payroll taxes and related benefits of $177,331 were allocated on that basis, of which $158,372 was assigned to program services. No after-the-fact activity records, certifications or equivalent documentation covering the total compensated time of those employees are prepared, reviewed or retained, and no reconciliation of amounts charged to the award against records of actual effort is performed. Cause: The Organization has not adopted a time and effort reporting process or written policies addressing the documentation required to support personnel costs charged to federal awards. Effect or Potential Effect: Personnel costs charged to the award are not supported by records that meet the standards in 2 CFR 200.430, and unallowable or misallocated personnel charges could occur and not be prevented, or detected and corrected, on a timely basis. The same condition affects the allocation of expenses among functions presented in the financial statements, as described in Note 11 to the financial statements. Should the award impose a cost-sharing or matching requirement satisfied in whole or in part by personnel effort, the amounts claimed toward that requirement would likewise not be verifiable from the Organization’s records as required by 2 CFR 200.306(b)(1). Context: The condition is systemic and applies to all personnel costs charged to the award for the year ended December 31, 2025. Salaries, payroll taxes and related benefits totaling $177,331 were recorded for the year, against total expenditures of the major federal program of $1,244,996. The absence of activity records was established by inquiry and by examination of the Organization’s payroll and allocation records in their entirety; no sampling was used. Recommendation: We recommend that the Organization implement a personnel activity reporting process under which each employee whose compensation is charged to a federal award prepares, not less frequently than monthly, an after-the-fact record accounting for the employee’s total compensated time across federal and non-federal activities. Each record should be reviewed and approved by a supervisor, reconciled to payroll at least quarterly, used as the basis for amounts charged to the award, and retained in accordance with 2 CFR 200.334. Other documentation methods that satisfy the standards in 2 CFR 200.430 are acceptable provided they are applied consistently and are supported by a system of internal control. Repeat Finding: No Views of Responsible Officials: Management agrees that the Organization should maintain specific records of time and activity worked on federal awards. The Organization will implement a monthly process for documenting and reviewing employee activity to support personnel costs charged to federal awards.