Finding Text
Finding 2025-005 – U.S. Department of Education (ED) – Title III Program-Inadequate Control Over Payroll Cost Allocation and Time and Effort Reporting Requirements, (Material Weakness): Information on the federal program – Strengthening Historically Black Colleges and Universities (HBCU), ALN 84.031B, June 30,2025. Criteria – Compensation – Personnel Services Documentation Requirements: Under 2 CFR § 200.430(i), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, and such records must: • Be supported by a system of internal controls providing reasonable assurance that the charges are accurate, allowable, and properly allocated; • Reflect 100% of the employee’s compensated activities, both Federal and non-Federal; • Be incorporated into the official records of the non-Federal entity; and • Be completed and documented in a timely and consistent manner. For Title III programs, personnel costs must be supported by complete and accurate documentation demonstrating the portion of time dedicated to allowable Title III activities. Condition – During our testing of payroll expenditures charged to the Title III program, we noted exceptions in eight (8) of nine (9) payroll transactions selected for testing, which is an 89% error rate. Specifically: • For two (2) of nine (9) transactions tested, salary expenses charged to the Title III grant did not agree with the grant allocation percentages authorized in employee contracts, personnel action forms, or other approved Human Resources documentation. • For six (6) of nine (9) transactions tested, salary expenses charged to the Title III grant did not agree with the employees' documented distribution of actual time and effort as reflected on certified time and effort reports. As a result, payroll costs charged to the Title III programs were not consistently supported by approved personnel documentation or by records reflecting actual work performed on the program. Cause – Management did not establish or effectively implement procedures to ensure salary costs charged to the Title III program were consistently supported by approved personnel allocation documentation and reconciled to certified time and effort reports reflecting actual work performed. In addition, supervisory review controls designed to verify the accuracy of payroll allocations before reimbursement requests and financial reporting were not operating effectively. Effect – Without procedures to ensure payroll allocations are supported by approved personnel records and reconciled to certified time and effort documentation; there is an increased risk that payroll costs charged to the Title III program may be unallowable, inaccurately allocated, or not supported in accordance with Federal requirements. Questioned Costs – $4,522 Repeat Finding – No Auditor’s Perspective – The testing results disclosed a systemic breakdown in controls over payroll allocations charged to the Title III program, as exceptions were identified in 89% of the transactions tested. The pervasive nature of the exceptions indicates that management's controls were not sufficient to provide reasonable assurance that payroll costs charged to the Federal award were accurate, allowable, and properly supported. Consequently, there is a reasonable possibility that material noncompliance with Federal requirements could occur and not be detected in a timely manner. Auditor’s Recommendation – We recommend that management strengthen internal controls over payroll allocations charged to federal awards by: 1. Ensuring employee contracts, personnel action forms, and approved grant allocation schedules accurately reflect the intended distribution of salary costs among funding sources. 2. Requiring periodic reconciliations between payroll charges recorded in the general ledger, approved salary allocation documentation, and certified time and effort reports. 3. Implementing a documented supervisory review process to verify that payroll expenditures charged to the Title III program are supported by records that accurately reflect actual work performed before costs are charged to the grant. 4. Providing training to personnel responsible for grant accounting and payroll administration regarding the requirements of 2 CFR §200.430 related to compensation and time and effort reporting. Views of Responsible Officials - Management agrees with the finding. See the accompanying Corrective Action Plan for the University's planned corrective actions, responsible officials, and implementation dates.