Finding 401075 (2023-002)

Finding 2023-002 Material weakness 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; Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement Assistance Listing Number: 93.011; 93.912 Award Numbers: 1 G32HS42592-01-00; 4 GA1RH39546-01-07 Award Period: July 31, 2021 - July 31, 2023; September 1, 2020 - August 31, 2024 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 200.430(i)(1)(iii) (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 17 instances in which the amount allocated to the award was adjusted up or down based on a standard 86.67-hour period instead of the true calculated percentage. The adjustment was not applied equitably to all hours during the period, but only to the program with the largest total hours for the period. This resulted in five instances of overcharge to the award and 12 instances of undercharge to the award. Questioned Costs $265 Cause Due to a systematic error in the payroll system, the adjustments to employee hours were not adjusted equitably to all payroll hours, but instead applied to the program with the largest amount of hours. This resulted in systematic errors in the allocation of payroll compared the true proportional benefit received by each award with an undercharge in some instances and an overcharge in other instances 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 ensure proper payroll system design and to review allocated costs for accuracy. Repeat Finding Yes. 2022-04 Recommendation We recommend that the Organization implement internal controls over payroll costs charged to awards to ensure they are properly calculated and allocated in accordance with 2 CFR 200.430(i)(1)(iii). Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.