Finding Text
2023 – 003: Cost Allocation of Salaries and Wages to LSC Grants Federal Agency: Legal Services Corporation (LSC)
Federal Program Name: LSC Grants
Assistance Listing Number: 09.706060
Federal Award Identification Number and Year: 09-706060 - 2023 Award Period: January 1, 2023 – December 31, 2023
Type of Finding:
Material Weakness in Internal Control over Compliance
Other Matters
Criteria or specific requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed.
Condition: During our testing we noted:
Two instances of employees’ pay period salaries totaling $1,742 being allocated to a grant using a flat percentage of 10%, and
One instance of an employee’s pay period salary of $147 being allocated to two grants using a combination of their time an effort on those grants while the remaining portion of the employee’s salary was allocated to LSC and two other private grants using a base of total grant hours for the period divided by total hours coded to the Organization’s general fund.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees’ time and effort.
Questioned costs: $1,742 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060.
Context: These three instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salaries and wages cost allocation methodology is primarily based on time and effort records, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations.
Effect: The inclusion of frequent manual adjustments in the Organization’s salaries and wages cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries and wages cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records.
Views of responsible officials: There is no disagreement with the audit finding