Finding Text
2024-008 Significant Deficiency in Internal Control and Compliance over Major Programs Funding Agency: Department of Health and Human Services ALN: 93.600 Criteria Per 2 CFR 200.430(g)(1) and 2 CFR 200.430(g)(1)(i), “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated.” 2 CFR 200.430(g)(1)(v) also specifies that employee compensation charged to the Federal award must “comply with the established accounting policies and procedures of the recipient or subrecipient.” Condition All changes to employee compensation must be documented by a personnel action form ("PAF"), and signed by the executive director. During our payroll testing, we were unable to recalculate an employee’s gross wages (payable to the employee and chargeable to the award) based on the employee’s hours worked and approved rate of pay on their PAF. Based on our calculations, the employee was being compensated as a full-time employee while only working 60-70 hours each pay period. After a thorough discussion with management, a review of the employee’s personnel action forms and changes in MIP, it was determined the employee was transitioned to a part-time position in February 2024, however no PAF was completed, and no updates were made in the MIP payroll module. The employee was being compensated as a full-time employee despite the decrease in hours. Questioned Costs $37,718 Cause KCR’s internal controls over payroll were not adequately functioning to appropriately document employee compensation changes, and make updates in MIP prior to processing payroll. Effect KCR’s failure to properly document approval for employee wages billed to the federal program resulted in noncompliance with 2 CFR 200.430(g). An employee’s overcompensation was billed to the Federal award. Repeat Finding No. Recommendation We recommend KCR strengthen its internal controls over payroll to ensure PAFs are properly recorded, and updates are made in MIP after the employee’s wage change has been approved. Views of Responsible Officials Management concurs with the finding and recommendation. Please see the attached corrective action plan.