Finding 1240576 (2023-003)

Finding 2023-003 Lack of Internal Control Over Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: U.S. Department of Transportation (direct) Federal Program: National Infrastructure Investments Assistance Listing Number: 20.933 Award Numbers: 693JJ32040006 and 693JJ32340013 Award Year: 2020 and 2023 Type of Finding: Material weakness in internal control over compliance and material noncompliance. Criteria: Internal control procedures should be in place to ensure the payroll accounting system is maintained to be able to accurately record payroll transactions. Payroll transactions should be supported by approved pay rates. 2 CFR 200.430 Requires charges for services and wages coded to federal awards to be based on records that accurately reflect the work performed. Internal controls over the payroll system should provide reasonable assurance that transactions are properly approved, accurate, and properly allocated. Condition and Context: Auditors reviewed a random sample of 25 transactions from the program’s payroll population. During our testing of internal controls over payroll we noted that a majority transactions tested lacked the necessary payroll documentation, approved timesheet with supervisor’s approval, approval of the rate of pay for employees. Cause: Lack of internal controls over the payroll internal control system and employee personnel file. Effect: Lack of internal controls over payroll could result in incorrect amounts being paid to employees and the improper allocation of payroll expenses charged to grants, increasing the risk of unallowable activities. Questioned Costs: Actual and likely questioned costs amounted to $444,242 in payroll expenditures related to the federal award. Repeat Finding: This is a repeat of finding 2022-003, and determined to be a systemic issue. Recommendation: The Council should strengthen internal controls over the payroll accounting system. Transactions should be reviewed and approved by supervisors for amount and coding. Timesheets should be totaled and signed by both employee and supervisor. Personnel files should be periodically reviewed to ensure that all employees have adequate payroll documentation with their current approved pay rates and deductions. Management’s Response: Management concurs with this finding. See corrective action plan.