Finding Text
Finding 2023-003: Salaries and Wages (Allowable Costs)
Federal Programs: All programs
Criteria: According to 2 CFR Section 200.430(i), charges to Federal grants for salaries and wages must be based on records that accurately reflect the work performed and the 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;
iii. Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities;
iv. Encompass Federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity’s written policy;
v. Comply with the established accounting policies and practices of the non-Federal entity;
vi. [Reserved]
vii. Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.
viii. Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.”
Condition: The Center has a timekeeping system in place that provides for employees to record hours worked to specific cost objectives, including to US Government grants. However, we noted one instance the allocation amount as per the timekeeping system with the applicable compensation amount paid to the employee was different from the amounts ultimately recorded within the Center's general ledger. While the difference was not significant, this discrepancy indicate a deficiency in the internal controls around recording of salary expenditures to projects. We also noted the Center changed the payroll allocation methodology during the year under audit but this change was not documented in the policies and procedures. We also did not obtain evidence for review and approval of several payroll registers.
Cause: During 2023, the Center's finance department turned over significantly, resulting in oversight of some the salary and wages procedures.
Effect or Potential Effect: Salary expenditures that are not charged in accordance with the standards referenced above may be questioned or disallowed by the donor.
Questioned Costs: Undetermined
Context: This is a condition identified per review of the Center's compliance with the specified requirements using a statistically valid sample.
Identification as a Repeat Finding: Not applicable.
Recommendation: We recommend that management revisit its procedures for transferring data from the timekeeping system to the general ledger and implement proper internal controls to ensure that the amounts of salary expenditures charged to projects in the general ledger reconcile to the amounts calculated by the timekeeping system and current wages and salaries.We also recommend the payroll registers be reviewed and approved by management immediately upon receipt; any discrepancies or issues must be addressed with the accounting department within a timely period following the close of the payroll period. We also recommend that any change in the payroll allocation methodology be formalized in writing and incorporated into the accounting policies and procedures manual.