Finding Text
U.S. Department of Treasury
Assistance Listing Numbers 21.027 – Coronavirus State and Local Fiscal Recovery Funds
Compliance and Significant Deficiency over Activities Allowed or Unallowed and Allowable
Costs/Cost Principle (Payroll)
Repeat Finding: No
Condition:
During our testing of payroll transactions for the program, we noted 24 out of 40 exceptions. For
16 selections, we did not receive the timesheets to substantiate the amount charged to the grant.
We were unable to determine whether the salaries that were charged to the program accurately
reflect the actual effort on the program. For 8 selections, the employees and tutors were assigned
to a single cost objective for the grant, thus, not showing the effort by funding source, which is
needed to calculate the actual effort for this Federal grant.
Criteria:
The Uniform Guidance requires that non-Federal entities receiving Federal awards establish and
maintain internal controls designed to reasonably ensure compliance with Federal statutes,
regulations, and terms and conditions of the Federal award.
The characteristics of internal controls are presented in the context of the components of internal
controls discussed in Internal Control-Integrated Framework (COSO Report), published by the
Committee of Sponsoring Organizations of the Treadway Commission. The COSO Report
provides a framework for organizations to design, implement, and evaluate control that will
facilitate compliance with the requirements of Federal laws, regulations, and program
compliance requirements.
Per 2 CFR section 200.430(a)(3)(i):
(a) General. Compensation for personal services includes all remuneration, paid currently
or accrued, for services of employees rendered during the period of performance under the
Federal award, including but not necessarily limited to wages and salaries. Compensation
for personal services may also include fringe benefits which are addressed in §200.431
Compensation—fringe benefits. Costs of compensation are allowable to the extent that they
satisfy the specific requirements of this part, and that the total compensation for individual
employees:
(1) Is reasonable for the services rendered and conforms to the established written policy of
the non-Federal entity consistently applied to both Federal and non-Federal activities.
(2) Follows an appointment made in accordance with a non-Federal entity's laws and/or rules
or written policies and meets the requirements of Federal statute, where applicable; and
(3) Standards for Documentation of Personnel Expenses (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 controls which provides reasonable assurance that
the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the
official records of the non-Federal entity; (iii) Reasonably reflect the total activity for
which the employee is compensated by the non-Federal entity, not exceeding 100% of
compensated activities; (iv) Encompass both federally assisted and all other activities
compensated by the non-Federal entity on an integrated basis, but may include the use of
subsidiary records as defined in the non-Federal entity’s written policy; (v) Comply with
the established accounting policies and practices of the non-Federal entity; and (vi)
Support the distribution of the employee’s salary or wages among specific activities or
cost objectives if the employee works on more than one Federal award; a Federal award
and non-Federal award; an indirect cost activity and a direct cost activity; two or more
indirect activities which are allocated using different allocation bases; or an unallowable
activity and a direct or indirect cost activity.
Cause:
The Organization did not have adequate controls over the time and effort process, therefore
recording and retention of supporting documentation was not properly adhered to in accordance
with Uniform Guidance.
Effect or Potential Effect:
Salaries and wages were not properly supported by a system of internal controls which provides
reasonable assurance that the charges are accurate, allowable, and properly allocated. Salary and
wage charges were not able to be reconciled to the time distribution records.
Questioned Costs:
Unknown.
Recommendation:
We recommend that the Organization implement policies and procedures to track, calculate and
document adjustments from budget salary charges to actual after-the-fact charges that should be
charged to the Federal award based on the employee time distribution records. This needs to be
performed at least on an annual basis.