Finding Text
Significant Deficiency: Payroll Allocation True Up Related to Construction Management Fees
Condition: During our testing of federal expenditures, we noted payroll expenses related to construction management fees were allocated and billed to the federal grant based on the Organization’s budgeted time allocations determined at the beginning of the year with no reconciliation to actual time allocations during 2023. We consider this instance to be a significant deficiency over compliance relating to allowable costs and the cost principles.
Criteria: Expenditures charged to the federal grant must follow the cost principles outlined in 2 CFR Part 200, Subpart E including “Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.”
Cause: Internal billings were not updated for actual 2023 payroll allocations and management did not perform reconciliation of budgeted allocations to actual time incurred.
Effect: As a result of the deficiency noted, the federal grant could be charged in excess of actual expenditures necessary and reasonable to run the programs.
Recommendation: We recommend management review their calculations of payroll allocations for the federal grant on a periodic basis to ensure the amounts being billed to the federal grant are reasonable and in line with actual costs incurred.