Finding 1240859 (2025-001)

Finding Number: 2025-001 Maintain Documentation Supporting Employee Pay Rates Federal Agency: U.S. Department of Education Pass-through Entity: Massachusetts Department of Elementary and Secondary Education Award Name: Title I Grants to Local Educational Agencies Assistance Listing Number: 84.010 Compliance Requirement: A/B – Activities Allowed or Unallowed, Allocable Costs/Cost Principles Type of Finding Compliance Internal Control over Compliance – Significant Deficiency Criteria: Under 2 CFR §200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed and be supported by appropriate documentation. Additionally, entities are required to maintain effective internal controls over Federal awards in accordance with 2 CFR §200.303 to provide reasonable assurance that transactions are properly authorized, supported, and in compliance with Federal requirements. Condition and Context: During testing of payroll expenditures charged to the Title I program, the City was unable to provide one signed Memorandum of Understanding (MOU) or other equivalent documentation supporting the hourly pay rate charged to the program. We were able to review an approved timesheet and further verify the costs were consistent with others charged to the program and allowable. For this one transaction, the City was unable to demonstrate that the compensation amount charged to the grant was properly authorized under a signed MOU. Cause: The City's controls did not ensure the supporting documentation used to establish this one employee’s compensation rate was maintained. Effect or Potential Effect: Without adequate supporting documentation for compensation rates, the City may not be able to demonstrate that payroll costs charged to the Title I program were properly authorized. This increases the risk that potentially unsupported payroll expenditures could be charged to the Federal award. Questioned Costs: None reported. We determined that the amount charged was allowable. Recommendation: The City should strengthen its internal controls over payroll by ensuring that documentation supporting all employee compensation rates are maintained and retained in accordance with Federal record retention requirements. Management should ensure part of the procedures are to periodically review personnel files to verify that compensation documentation is complete and readily available to support payroll charges to Federal awards.