Finding Text
Finding Number: 2022-007 Finding Type: Federal award finding and financial statement finding Federal Assistance Listing No.: 64.033 Program Name: VA Supportive Services for Veteran Families Program Federal Agency: U.S. Department of Veterans Affairs Pass-Through Entity: Transition Projects, Inc. Grant Number: SSVF 19-ZZ-127 Federal Award Year: 2022 through 2023 Control Deficiency Type: Material weakness over compliance and financial reporting Instance of Noncompliance: Yes Compliance Requirement: Allowable costs/cost principles Questioned Costs: None Repeat Finding: No Criteria: The organization should maintain a system of internal controls designed to reasonably ensure that expenses related to payroll are properly recorded, that errors are detected in a timely manner, and that the allocation of payroll expense is appropriate. Such controls should be designed to comply with the requirements of Title 2, U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for Federal Awards, Subpart E ? Cost Principles. Condition: We noted that there was a lack of segregation of duties over the payroll process due to a lack of independent review of changes in payroll rates of non-represented staff and over bi-weekly payroll processing. Cause: It is our understanding that, due in part to staffing transitions during the year, there is no independent review of bi-weekly payroll processing, nor are there documented approvals or reviews of payroll rate changes for non-represented staff. Effect: Erroneous payments made to employees, misappropriation of assets, and errors in the allocation of payroll expense could go undetected. In addition, during our testwork of payroll expense charged to the major program, we noted an instance where the employee rate charged to the federal award had not been updated to reflect that employee?s rate at the time services were performed, resulting in under-charging of costs to the federal award. Questioned Costs: No known or likely questioned costs greater than $25,000. Audit Recommendation: We recommend that the organization review its current processes and procedures to ensure that all changes in pay rates are properly approved and documented and that the organization implement appropriate segregation of duties over the payroll process. Segregation of duties over the payroll process should include an independent review of pay rates, payroll allocations, and amounts withheld. Management?s Response: As noted in our response to Finding Number 2022-001, MPD made a software transition to ADP Workforce Now in September 2022. With this new system in place, all new hires, pay rate adjustments, bonuses, benefits withdrawals, and terminations are initiated by the Human Resources department and approved by the Director of Human Resources. These changes are automatically transferred to the payroll side of the software, where the Payroll Specialist can incorporate them into the next payroll. These fields cannot be adjusted by the Payroll Specialist; changes must be initiated by Human Resources. After timesheets are entered and approved for the bi-weekly pay cycle, the Payroll Specialist generates a draft payroll register and sends the register and a list of all payroll changes for the period to the Controller for review. The Controller confirms that any pay rate changes are processing correctly, reviews any bonus payments, checks entries for new hires and terminated employees, and reviews the pay detail for a regular sample of employees, comparing those entries to the prior pay cycle. If corrections are required, they are made, and a new draft register is generated. Payroll is submitted following the Controller?s approval, and a register of the transmitted payroll file is added to the electronic Payroll folder on the network. The Controller also reviews this file to ensure that no changes were made between the initial approval and final transmission.