Finding Text
Finding 2022-006: Internal Controls over Compliance B. Allowable Costs/Cost Principles related to the Payroll Process U.S. DEPARTMENT OF JUSTICE Children Exposed to Violence ? Assistance Listing No. 16.818 Criteria: Controls over payroll processes should be in place to allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements in a timely manner. Per CFR Part 200.403, factors affecting allowability of costs, costs must be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity and be adequately documented in order to be allowable under federal awards. Condition: During 2022, there was a general lack of controls over payroll processes noted for direct payroll costs charged to the Children Exposed to Violence federal program: ? For one employee, the pay rate used to calculate payroll charged to the federal program for one pay period selected for testing did not match the authorized pay rate included in the employee?s human resources records. ? Timecards were not available for any employees for one pay period selected for testing. ? Payroll was not properly allocated to the federal program based on supporting employee timecards between July 10, 2022 and December 31, 2022. Cause: This condition was caused by a combination of a lack of staffs? physically present at the Youthprise office during the year, a lack of staff and oversight of finance department activities, and due to the turnover of finance staff during 2022, as discussed in finding 2022- 002 above. Additionally, during 2022 Youthprise switched payroll processing providers. The one pay period tested which lacked timecards occurred during the payroll provider transition. The improper allocation of time occurred after the new payroll processing provider transition was complete. Effect: By not having effective internal controls over payroll processes, there is a risk that misstatements and unallowable costs charged to federal programs could occur and not be detected in a timely manner. Context: A sample of four pay periods totaling $12,889 was selected for audit from a population of twenty six pay periods totaling $107,968. Although there was a lack of internal controls over the payroll process as noted above, Youthprise was able to substantiate that the total payroll costs charged to the program were allowable and that no overcharges to the federal program occurred. Our sample was a statistically valid sample. Questioned Costs: $0 Identification of Repeat Finding: Not a repeat finding. Recommendation: We recommend Youthprise develop and implement internal controls to ensure sufficient oversight is maintained over its payroll processes to prevent or detect and correct misstatements on a timely basis. Views of Responsible Officials and Corrective Action Plan: The discrepancies in payroll reporting were identified by Youthprise during 2023. Management discovered that reports downloaded from the third-party processor were not accurately coding salary based on timecard reports submitted by some of its employees. Youthprise is working with its Human Resources consultant, who is working with the 3rd party payroll processor, to correct the reporting issues going forward. Youthprise will review its internal controls going forward to ensure sufficient oversight is maintained over its payroll processes to prevent or detect and correct misstatements on a timely basis.