Finding Text
Finding 2019-009 Lack of Internal Controls Over Activities Allowed or Unallowed and Allowable Costs/Costs Principles
Federal Agencies: U.S. Department of the Interior and U.S. Department of Health and Human Services
Federal Programs: Consolidated Tribal Government (CTG) and Indian Self-Determination (ISD), respectively
CFDA Numbers: 15.021 and 93.441, respectively
Award Numbers: A16AV00375 and A19AV00503 (CTG), and 243-12-0006 (ISD), respectively
Award Years: 2016 and 2019 (CTG), and 2019 and 2020 (ISD)
Type of Finding: Material weakness in internal control over compliance and material noncompliance.
Criteria: Per 2 CFR part 200.430, personnel expenses recorded into a federal program must be based on records that accurately reflect the work performed. Hourly employees should be paid for hours worked and documented through a system of internal controls which provides reasonable assurance that the charges are accurate, allowable and properly allocated. Internal controls procedures should be in place to ensure that all cash disbursements and payroll transactions are adequately supported by documentation, approved with accurate account coding on the approval form, retained for support either in the vendor, employee, or program file.
Condition and Context: During our payroll allowable costs testing we noted that the Community is incorrectly calculating the gross pay from the timesheets. The Community is taking the employee’s hourly rate multiplied by the hours worked with minutes calculated using 100 minutes per hour instead of 60 minutes. This results in an underpayment on any partial hour worked. We tested 13 payroll transactions charged to CTG program and 25 payroll transactions charged to the ISD program and noted that all transactions tested did not have approved pay rates in the employee personnel files.
Cause: Lack of internal controls over payroll transactions.
Effect: Lack of internal control over payroll transactions poses the risk that the Community will expend federal funds for non-grant purposes.
Questioned costs: None noted. In cases where an employee worked a partial hour, the employees were under paid. In reviewing the pay rates for each of the employees, they appeared reasonable and consistent with similar entities across the State.
Repeat finding: This is a repeat of Finding 2018-008, therefore, we believe this to be a systemic issue.
Recommendation: We recommend that management implement policies and procedures to ensure that all paychecks are supported by an approved pay rate, hours worked agree to the hours paid and are accurately calculated.
Management Response: Management agrees with this finding, see Corrective Action Plan