Finding Text
2023 – 009: Cost Allocation of Compensation to Coronavirus State and Local Fiscal Recovery Grants
Federal Agency: Department of Treasury
Federal Program Name: COVID-19: Coronavirus State and Local Fiscal Recovery, Various – See SEFA
Assistance Listing Number: 21.027
Federal Award Identification Number and Year: Various – See SEFA
Pass-Through Agency: Various – See SEFA
Pass-Through Numbers: Various – See SEFA
Award Period: Various – see SEFA
Type of Finding:
Material Weakness in Internal Control over Compliance
Other Matters
Criteria or specific requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted that:
We were unable to view evidence for one allocation of $23 of medical insurance expenses for one employee related to one month.
Three allocations of medical and dental insurance expenses totaling $1,903 were allocated using the percentage of total grant hours of the period instead of the percentage of total grant salary expense, which was the base used for other similar benefit expense allocations. We were unable to view support of the allocation based on total grant hours for the period. These amounts appeared to be under allocated by $549.
One salary allocation of $848 appeared to be under allocated by $1,689 when compared to time and effort records and compensation information. We were unable to see evidence that supported the allocation.
As such, the salary costs and fringe mentioned above were allocated in an inconsistent manner to other grant payroll costs were not fully representative of the employees’ time and effort and benefit obtained by grant from the allocated cost.
Questioned costs: $23 of allocated medical insurance expense described above, which is related to Assistance Listing Number 21.027 and the Eviction Clinic grant passed through from Arapahoe County.
Context: These six instances were noting during testing of 47 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Management also sometimes allocates employee benefit expense using a base of total grant salary expense for a period when compared to total salary expense for the same period. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations.
Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It would also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: There is no disagreement with the audit finding