Finding Text
Activities Allowed or Unallowed; Allowable Costs/Cost Principles (Material Weakness)
Information on Federal Program:
U.S. Department of Health and Human Services
ALN Number: 93.676
ALN Name: Unaccompanied Alien Children Program
Contract Period: 07/01/2021 - 6/30/2022
Criteria:
The Uniform Guidance Section §200.403(g) states that for costs to be allowable under federal awards, they must be adequately documented, and there must be sufficient documentation.
Condition:
During our testing of personnel costs, we noted that management’s method of allocating shared costs is performed after the fiscal year ended, instead of performing timely allocations throughout the fiscal year.
Questioned Costs:
Not determinable.
Context:
This is a condition identified per our compliance testing of personnel costs.
Repeat Finding:
This is a repeated finding from prior year. See Finding No. 2021-004 on the Summary Schedule of Prior Audit Findings.
Cause:
The primary cause of this issue is the way in which the Paychex payroll system was set up, where bi-weekly payroll runs are not being allocated by the system itself. In January 2022, Lincoln Hall switched from Paychex to ADP which allows for employee cost centers to be mapped. While this improved the monthly allocation process, the finance team still performs manual calculations of all allocations in Excel at the end of the fiscal year to update the allocations.
Effect or Potential Effect:
We were unable to confirm the allowability, validity, and completeness of the expenses.
Recommendation:
The inability to generate timely financial statements that incorporate the federal and state agency mandated cost allocations prevents Lincoln Hall from presenting functionally accurate interim financial statements. We recommend that these costs be properly allocated on a monthly basis and presented as recorded within Lincoln Hall’s general ledger system. Allocating these costs regularly will allow Lincoln Hall to submit accurate and substantiated interim financial data to its funding sources. Additionally, properly tracking and allocating costs on a monthly basis will prevent a material reallocation of costs by function at year-end.
Views of Responsible Official:
Lincoln Hall agrees with the finding. Lincoln Hall continues to take steps to improve this process. See Lincoln Hall’s further response to this finding as described in the accompanying management’s planned corrective actions, Appendix A.