Finding Text
Department of Veteran Affairs FFAL #64.033, 20-SD-136-25, 10/1/2024 – 12/31/2025 FFAL #64.033, 20-SD-136-26, 10/1/2025 – 9/30/2026 VA Supportive Services for Veteran Families Program Activities Allowed or Unallowed and Allowable Costs/Cost Principles Significant Deficiency in Internal Control over Compliance Criteria: The Center is required to have procedures in place to ensure that federal awards are expended only for allowable costs in accordance with Subpart E – Cost Principles of the Uniform Guidance. Allowable costs are supported by appropriate documentation and correctly charged as to account, amount, and period. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. 2 CFR 200.430(g) establishes the standards for documentation of personnel expenses including charges to Federal awards for salaries and wages. Charges must be based on records that accurately reflect the work performed with the records meeting the following standards: a. Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. b. Be incorporated into the office records of the non-Federal entity. c. Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities. d. Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity’s written policy. e. Comply with the established accounting policies and practices of the non-Federal entity. f. Support the distribution of the employee’s salary or wages among specific activities or cost objectives. g. Budget estimates alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes. Condition: In our sample of expenditures selected for testing, we noted the following items: a) Calculation errors for payroll expenses allocated to the grant based upon review of supporting timesheets, payroll documentation and management’s true-up calculations to allocate actual costs rather than budgeted costs (5 instances). b) Identification of benefits not being allocated in a similar manner as salaries and wages (1 employee impacted). c) Grant was overcharged as it relates to a travel reimbursement (1 instance). Cause: Calculation errors were made during the year due to management’s true-up payroll calculation spreadsheet not being updated appropriately for employee payrate increases and including incorrect inputs based upon supporting payroll documentation. Additionally, management was unaware of the requirement of allocating payroll benefits in a similar manner to the allocation salaries and wages. In addition, individuals with key roles over financial and compliance reporting were not involved in the Organization’s financial and compliance reporting activities for the full year. Effect: The Organization’s controls did not detect or correct the errors identified, which results in a reasonable possibility that the Organization could submit disallowed costs under the federal awards and would not be able to detect and correct noncompliance in a timely manner. Questioned Costs: No questioned costs greater than $25,000. Context: A total non-statistical sample of 60 payroll and nonpayroll transactions out of more than 250 payroll and nonpayroll transactions were selected for testing, which accounted for approximately $73,700 of approximately $1,702,000 of direct payroll and nonpayroll program expenditures. Repeat Finding from Prior Year: No Recommendation: We recommend management review the procedures and control processes involving allocating payroll related expenses and ensuring expenses allocated to the grant are supported by documentation to ensure compliance with the federal grant. Views of Responsible Officials: Management is in agreement.