Finding Text
Finding: 2022‐003
84.425 – Education Stabilization Fund
Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Material Weakness in Internal Control over Compliance
Criteria: The School is required to have procedures in place to ensure that federal awards are expended only for
allowable costs in accordance with Subpart E – Cost Principles of the Uniform Guidance. Allowable costs are
supported by appropriate documentation and correctly charged as to account, amount, and period. 2 CFR
200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal
award that provides assurance that the entity is managing the federal award in compliance with federal statutes,
regulations, and the terms and conditions of the federal award.
Condition: Various instances were identified through testing of direct expenditures and payroll transactions
where controls in place were not consistently applied or were not documented, designed, or implemented
properly to ensure compliance with requirements of each major program. A proper review of requests,
expenditures, and timesheets includes a review that assures that the summarized information is supported by
the underlying documentation, such as appropriate account coding, funding source, and/or pay rates.
1. The School utilized COVID‐19 funding to incentivize retention of staff for the Fall and Spring Semesters.
Additionally, the School paid 25% of the employees’ wages for actual hours worked as Hazard Pay, to
encourage participation and fulfill student needs during the Pandemic. In 49 out of 358 transactions
tested that were funded using COVID‐19 funds, Hazard Pay was incorrectly or inconsistently computed
due to inconsistent application of policy, resulting in a net underpayment of wages of $504.
Cause: Various instances were identified through testing of payroll transactions where controls in place were
not consistently applied (primarily manual controls) or were not documented, designed, or implemented
properly to ensure compliance with requirements of each major program.
Effect: Without a properly designed system of internal controls, including review and approval of all
disbursements and payroll, the School may not be able to remain compliant with laws and regulations or other
compliance requirements.
Questioned Costs: None reported.
Context: A non‐statistical sample of 358 payroll transactions were selected. There were 49 instances identified
where the Hazard Pay was inconsistently computed for non‐regular pay codes 21 of those were overpaid Hazard
pay totaling $1,448, and 28 instances totaling $1,952 were underpaid out of a total sample of $162,733.
Repeat Finding from Prior Year: No.
Recommendation: We recommend that management implement procedures and control processes to comply
with the federal requirements noted above.
Views of Responsible Officials: Management is in agreement.