FAC Explorer

Finding 33458 (2022-004)

Significant Deficiency
Requirement
B
Questioned Costs
$1
Year
2022
Accepted
2023-09-28
Audit: 29220
Organization: Choice Regional Health Network (WA)
Auditor: Clark Nuber P S

AI Summary

  • Core Issue: There is a significant deficiency in internal controls over compliance, leading to incorrect allocation of payroll costs for federal awards.
  • Impacted Requirements: Compliance with 2 CFR 200.405, which mandates that direct costs must reflect the true calculated percentage based on benefits received.
  • Recommended Follow-Up: Implement stronger internal controls for payroll cost calculations to ensure accurate allocations in line with federal guidelines.

Finding Text

Significant deficiency in internal controls over compliance and instances of noncompliance related to allowable costs. Federal Agency: Department of Health and Human Services Program Title: National Organizations of State and Local Officials CFDA Number: 93.011 Award Numbers: 1 G32HS42592-01-00 Award Period: July 31, 2021 - July 31, 2023 Criteria 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Subpart E section 2 CFR 200.405 (as codified by the Department of Health and Human Services [DHHS] in 45 CFR 75) requires direct costs be allocated based on the proportional benefit received by each award. Condition/Context for Evaluation In a population of 25 payroll costs, we noted four instances in which the amount allocated to the award was a rounded percentage instead of the true calculated percentage. This resulted in three instances of overcharge to the award and one instance of undercharge to the award. Questioned Costs $76.58. Cause Due to turnover in staff, there was no standard procedure followed for how the payroll costs should be calculated and applied to the federal award. This resulted in an overall overcharge to the award compared to what the actual allocation percentage would have charged. Effect or Potential Effect The Organization did not have sufficient internal controls in place to review allocated costs for accuracy. Repeat Finding Not applicable. Recommendation We recommend that the Organization implement internal controls over payroll costs charged to awards to ensure they are calculated and allocated in accordance with 2 CFR 200.405. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.

Corrective Action Plan

Significant deficiency in internal controls over compliance and instances of noncompliance related to allowable costs. Contact Person(s): Beth Mizushima, Chief Operating Officer, mizushimab@crhn.org; and Connie Sowa, Compliance, Governance and Contracts Officer, sowac@crhn.org. Explanation and specific reasons for disagreement with the audit finding or that corrective action is not required (if applicable): Not applicable. Corrective action planned: Paylocity, third party payroll processor, was implemented in October FY23. In FY23 we have reviewed payroll for each month to ensure the charge to the awards are the same as the actual allocation percentage to each grant, and have strengthened the internal controls over the complete, timely and accurate recording of payroll expenses for each payroll. The new internal controls include reconciling the Paylocity system reports to the bank reconciliations and the final journal entries to record the payroll expenses. Anticipated completion date: Completed September 2023.

Categories

Questioned Costs Allowable Costs / Cost Principles

Other Findings in this Audit

  • 33456 2022-002
    Material Weakness
  • 33457 2022-003
    Significant Deficiency
  • 609898 2022-002
    Material Weakness
  • 609899 2022-003
    Significant Deficiency
  • 609900 2022-004
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
93.011 National Organizations of State and Local Officials $416,881
93.912 Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement $246,182
93.185 Immunization Research, Demonstration, Public Information and Education_training and Clinical Skills Improvement Projects $68,245
93.322 Csels Partnership: Strengthening Public Health Laboratories $42,100