Finding Text
2023- 009 – Allocation and Documentation of Payroll Costs
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Name: Homeless Services and CARES
Assistance Listing Number: 14.231
Pass-Through Agencies: All Chicago and Chicago Department of Family and Support Services
Pass-Through Numbers: N/A
Award Periods: January 1, 2022 through December 31, 2023
Type of Finding:
Material Weakness in Internal Control over Compliance
Other Matters
Criteria or Specific Requirement:
Under allowable cost/cost principles, an organization in receipt of federal funding is required to have a system of controls in place to safeguard assets and ensure that only allowable costs are charged to federal programs. 2 CFR Part 200 states that changes to awards for salaries and wages are to be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.
Condition:
In testing a sample of 40 payroll items, we identified the following:
• 5 out of the 40 transactions tested did not have proper timesheet approval.
• 23 out of the 40 transactions tested did not have proper approved pay rates.
• 31 out of the 40 transactions tested did not have supporting documentation for the specific employee’s payroll allocation.
• Several payroll registers including these payroll transactions (noted above) were not reviewed and approved prior to final payroll processing and submission. Considered a finding for 24/40 employees.
• Time and effort was not documented for all employees tested.
Questioned Costs:
$-0-
Context:
Payroll transactions are not being properly documented, reviewed and approved throughout the payroll process.
Cause:
Employee time cards, approval of pay rates, time and effort studies (not performed), and payroll processing lacked supervisory review and approval.
Effect:
Inaccurate payroll costs may be charged to federal programs.
Repeat Finding:
This is a repeat finding.
Recommendation:
Policies and procedures over the processing of payroll transactions should include the following:
• Signatory evidence of review and approval by both the employee and supervisor on timecards and time and effort studies performed to support employee payroll allocations;
• Signatory evidence on employees approved pay rates by the appropriate level of upper management and/or human resources;
• Signatory evidence of management’s review and approval of payroll prior to processing and disbursement.
• Time and effort studies should be conducted on all employees to support allocations.
Views of Responsible Officials and Planned Corrective Actions:
There is no disagreement with the audit finding. All documentation substantiating a change/transaction will reflect the authorizing body approving such and confirmed against The Boulevard of Chicago’s policies.
Name of the Contact Person Responsible for Corrective Action:
Bo Gasic, CFO
Planned Completion Date for Corrective Action Plan: Immediately