Finding Text
2025-004- Activities Allowed or Unallowed; Allowable Costs/Cost Principles. Federal Agency: U.S. Department of Labor Federal Program Title: WIOA Cluster (WIOA Adult Program; WIOA Youth Activities; WIOA Dislocated Worker Formula Grants) ALN: 17.258, 17.259, 17.278 Award Identification Number: 23A55AY000015; AA-38542-22-55-A-32; AA-36332-21-55-A-32, 23A55AT000046; 23A55AW000038; 23A55AY000015 Pass-Through Agency: State of Nevada, Department of Employment, Training and Rehabilitation (DETR) Pass-Through Award Number and Period: PY23-A-01-WIOA; PY24-A-01-WIOA; PY23-Y-01-WIOA; PY24-Y-01-WIOA; PY23-DY-01-GR; PY23-DW-01-WIOA; PY24-DW-01- WIOA (All for the period 4/1/2023 – 6/30/2026) Type of Finding: Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria or specific requirement: 2 CFR 200.430(i), Standards for Documentation of Personnel Expenses, requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed, be supported by a system of internal control that provides reasonable assurance the charges are accurate, allowable, and properly allocated, and be incorporated into official records. 2 CFR 200.430(a) requires compensation to be reasonable and allocable, 2 CFR 200.403 requires costs to be adequately documented, and 2 CFR 200.303 requires effective internal \ control over federal awards. (WIOA Cluster — Activities Allowed / Allowable Costs, 2025 Compliance Supplement Part 4, ALNs 17.258/17.259/17.278.) Condition: As part of testing compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles, audit procedures included reviewing payroll transactions charged to the WIOA Cluster and evaluating controls over payroll approval and labor cost allocation. Testing of payroll authorization identified that two of twenty-five employee timecards selected for testing lacked evidence of supervisory review and approval. In both instances, the timecards were approved only by the employee and no evidence of managerial review was maintained. Testing of payroll allocations further identified significant deficiencies in Nevadaworks’ labor distribution process. For eleven of twelve employees selected for detailed testing, management was unable to provide supporting documentation demonstrating how payroll costs were allocated among individual federal programs. Although payroll charges were recorded to specific grants in the accounting records, the amounts charged could not be reconciled to personnel activity records, allocation methodologies, or other supporting documentation sufficient to demonstrate that costs were properly assigned to benefiting programs. The condition was not isolated to a single employee or program and was determined to represent a breakdown in the Entity's payroll allocation and review processes affecting the WIOA Cluster as a whole. Questioned costs: $84,685 known; additional related questioned costs unknown. Context: Payroll represents pprox.. 16% of the total program expenditures and our sample represents pprox.. 10% of the payroll costs. Cause: Internal controls over payroll approval and labor distribution did not operate effectively during the fiscal year. Significant turnover within the finance and administrative functions contributed to the breakdown in established procedures. In addition, management had not implemented a formal process requiring periodic reconciliation of payroll allocations to supporting personnel activity information or documented supervisory review of allocation calculations. Effect: Nevadaworks was unable to demonstrate that payroll costs charged to the WIOA Cluster were properly authorized, supported, and allocated to benefiting federal programs. As a result, compliance with federal requirements governing allowable costs could not be verified. The lack of adequate supporting documentation resulted in known questioned costs exceeding the threshold for reporting and constitutes material noncompliance with federal program requirements. Repeat Finding: No. Recommendation: Management should implement formal payroll allocation procedures that clearly document the methodology used to allocate employee compensation among federal awards. Payroll allocations should be supported by contemporaneous records that accurately reflect work performed and should be reviewed periodically for reasonableness. In addition, all employee time records should be subject to documented supervisory review and approval prior to payroll processing. Views of responsible officials: There is no disagreement with the audit finding. Nevadaworks will strengthen payroll authorization and labor allocation procedures by requiring approved time records, documented grant allocations, supervisory review of payroll records, monthly reconciliation of payroll charges, and periodic reviews of allocation methodologies for compliance with federal requirements.