Finding Text
Finding 2023-003 – Allowable Costs/Cost Principles (Allocation of Payroll)
Federal Agency: Department of Health and Human Services
Federal program title: Block Grants for Community Mental Health Services
Assistance Listing Number: 93.958
Pass-Through Agency: Illinois Department of Human Services
Pass-Through Number: 45CBB04278; 45CBB03514; 45CBB00648
Award Period: 07/01/2022 – 06/30/2023
Criteria or specific requirement: Uniform Guidance section 200.430(h)(8)(i) indicates that the standards for documentation of personnel expenses are such that (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must:(i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;(ii) Be incorporated into the official records of the non-Federal entity and (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities. Furthermore, subsection (viii) indicates: Budget estimates alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that:(A) The system for establishing the estimates produces reasonable approximations of the activity actually performed;(B) Significant changes in the corresponding work activity are identified and entered into the records in a timely manner and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates.
Condition: The Organization is allocating payroll costs to grants based upon budgeted amounts/percentages submitted to the funding agency and does not currently have a system for ensuring that the estimates used produce reasonable approximations of the activity actually performed.
Questioned Costs: Unknown
Context: This condition affected nineteen (19) of thirty (30) payroll transactions selected for testing, representing fourteen different employees.
Cause: The Organization has a tracking system in place to monitor the wages by employee charged to federal grants to avoid over-allocation of individual employee wages, but this tracking system does not contain a process for allocating wages based on actual time and effort.
Effect: Inaccurate payroll costs may be charged to federal programs if the Organization does not have procedures in place to monitor and record employee time devoted to federal programs.
Repeat Finding: Yes, prior year finding number was 2022-001.
Recommendation: Management should review and refine its process of tracking payroll costs by federal grants to ensure that these costs are supported by a system of internal controls which provides reasonable assurance that the charges are accurate, are allowable and properly allocated, reasonably reflect the total activity for which the employee is compensated, and support the distribution of the employee’s wages among specific activities or cost objectives if the employee woks on more than one federal award.
Views of responsible officials: There is no disagreement with the audit finding.