Finding Text
Finding 2025-002: Fringe Benefit Cost Objectives Internal Controls Identification of the Federal Program - US Department of Health and Human Services, 93.224/93.527 Health Center Program Cluster, 93.778 Grants to States for Medicaid Criteria - In accordance with 2 CFR 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 recipient or subrecipient demonstrates that costs in relationship to salaries and wages do not differ significantly for different groups of employees. Condition - Fringe benefit charges to federal awards were based on budgeted amounts rather than actual costs incurred. Specifically, for three grants, the entity did not maintain separate calculations supporting the allocation of fringe benefits to the relevant employee groupings, did not track the actual fringe benefits incurred by the individuals charged to each grant, and was unable to demonstrate that the relationship of fringe benefit costs to salaries and wages did not differ significantly among different groups of employees. Cause - The Organization’s current processes and controls do not allow for fringe benefit costs to be tracked by individual grant. In addition, the Organization did not implement controls to perform and document a review of budgeted-to-actual fringe benefit costs or to maintain separate calculations supporting the allocation of fringe benefits to the relevant employee groupings. Effect - Charges to federal awards for fringe benefits may not reflect specific amounts allocated to specific programs, however allowable fringe benefit costs incurred by the Organization exceeded the budgeted amounts charged the grant, and therefore there are no questioned costs to report. Questioned Costs – None Context - Fringe benefits were charged to each grant by applying a fringe benefit allocation rate to the actual salaries and wages of the applicable employee group. We tested the fringe benefit allocation rate calculation at the grant level for each of the in-scope grants. We noted that the rate used to allocate fringe benefit costs was based on entity-wide budgeted amounts rather than actual costs and was not supported by an analysis of the actual fringe benefit costs attributable to the relevant employee groups. Additionally, for three of the four in-scope grants, the Organization could not demonstrate that fringe benefits costs in relationship to salaries and wages at an entity-wide level did not differ significantly for different groups of employees assigned to each individual grant. Repeat Finding – No Recommendation - We recommend the Organization implement internal controls to ensure fringe benefit costs charged to each grant or federal program are supported and appropriate. This may include tracking actual fringe benefit costs by grant or program, reconciling actual fringe benefits incurred to amounts charged, and/or preparing and documenting fringe benefit allocation calculations by grant or program to support the rate used. Management should review and verify the reconciliation or allocation rate calculation for accuracy and appropriateness on a timely basis. View of Responsible Officials - Management will establish a formal process to support fringe benefit costs charged to federal awards using actual fringe benefits costs and documented allocation methodologies rather than relying on budgeted amounts. Supporting calculations will demonstrate the relationship between salaries, wages, and fringe benefit expenses associated with the applicable grant or employee grouping.