Finding Text
Finding 2022-002: Salary and Benefits Reconciliation and Controls Federal Programs: All Programs Criteria: Title 2 U.S. Code of Federal Regulations (CFR) Part 200, paragraph 430 ?Compensation ? personal services? requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed and that these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Additionally, these records must comply with established accounting policies and practices of the non-Federal entity. Condition: During our audit, we reviewed the Consolidated Entity's controls over salary, benefits and payroll activities across a multitude of varying approaches. We selected samples of payroll transactions of U.S employment contract holders; we engaged with an in-country payroll specialist in Prague to select a significant number of transactions to test compliance with local rules and regulations; we reviewed material benefits accrual balances as of fiscal year end; and we observed changes across the financial information analytically over several years. Each year we often run into challenges obtaining the necessary third party corroborating evidence to substantiate balances or identify errors in testing. For the 2022 audit we observed the following: ? Prague testing identified a number of variances in attendance sheets versus payroll provided such as (1) an instance of incorrect hours paid, (2) an instance of incorrect taxes paid, (3) an instance of mislabeled leave codes, and (4) two instances of allowances included in average hourly earnings calculations ? Our testing of Bureau employment contract holders noted variances in salaries paid against employment contracts for 3 out of 40 instances tested. ? U.S. taxpayers salaries are not reconciled against tax reporting documents (i.e. 941 reports) Cause: The Consolidated Entity may not have appropriate policies and procedures in place regarding salary and benefits reconciliation to ensure all balances are properly stated throughout the year. Effect or Potential Effect: The Consolidated Entity was unable to provide key elements in a system of internal controls exist over salary and benefits reconciliations that provides assurance that the related expenditures charged to the federal grants are accurate allowable and properly allocated. Questioned Costs: None noted. Context: These are conditions identified per review of the Consolidated Entity's controls over salary, benefits and payroll activities across a multitude of varying approaches using a statistically valid sample. Identification as a Repeat Finding: Not applicable Recommendation: The audit is (and has always been) a risk-based approach engagement. Salaries, benefits and payroll are one of the largest and most complex transaction cycles for the organization. Our samples represent an extremely small percentage of a much larger population. Our audit procedures require us to extrapolate errors found, across the larger population. The likelihood of additional errors and larger misstatements is high based on the general results of testing. We feel that, in identifying risks for the organization, RFE/RL should look to enhance controls and reconciliations around payroll and benefits at both a high and granular level.