Finding 21554 (2022-001)

Finding 2022-001 ? Allowable Costs/Cost Principles (Allocation of Payroll) Federal Agency: U.S. Department of the Treasury Federal program title: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Pass-Through Agency: Illinois Department of Human Services Pass-Through Number: 45CAB04278 & 45CAB04450 Award Period: 07/01/2021 ? 06/30/2022 Type of Finding: Compliance and significant deficiency in internal control over compliance Criteria or specific requirement: Uniform Guidance section 200.430(h)(8)(i) indicates that the standards for documentation of personnel expenses are such that (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must:(i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the nonfederal entity and (iii) Reasonably reflect the total activity for which the employee is compensated by the nonfederal entity, not exceeding 100% of compensated activities. Furthermore, subsection (viii) indicates: Budget estimates alone do not qualify as support for charges to federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity are identified and entered into the records in a timely manner and (C) The nonfederal entity?s system of internal controls includes processes to review after-the-fact interim charges made to a federal awards based on budget estimates. Condition: The Organization is allocating payroll costs based upon budgeted amounts/percentages submitted to the funding agency and does not currently have a system for ensuring that estimates used produce reasonable approximations of the activity actually performed or that employees are not overallocated between federal grants. Questioned Costs: Unknown Context: This condition occurred in eight (8) payroll transactions selected for testing, and represented four (4) different employees. Cause: The Organization's tracking system in place to monitor the payroll costs by employee charged to federal grants is manual in nature. Employees assigned to a certain department or departments may be reallocated to a different grant by manually adjusting the individual grant tracking spreadsheet increasing the risk that an incorrect adjustment resulting in an overallocation of payroll costs goes undetected as there is no comprehensive data file that provides a detailed breakout of payroll costs by employee by grant. This tracking system also does not contain a process for identifying and allocating wages based on submitted time records. Effect: Inaccurate payroll costs may be charged to federal programs if the Organization does not have procedures in place to monitor and record total payroll costs by employee allocated to grants based on actual time and effort. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2021-002. Recommendation: Management should develop a process whereby payroll costs allocated to federal grants are supported by a system of internal controls which provides reasonable assurance that the charges are accurate, allowable and properly allocated, reasonably reflect the total activity for which the employee is compensated, and support the distribution of the employee?s wages among specific activities or cost objectives if the employee works on more than one federal award. Views of responsible officials: There is no disagreement with the audit finding.