Finding 497517 (2023-005)

Significant Deficiency
Requirement
AB
Questioned Costs
-
Year
2023
Accepted
2024-09-20
Audit: 320262
Organization: Lifewire (WA)
Auditor: Bdo USA PC

AI Summary

  • Core Issue: LifeWire allocated payroll costs to the Continuum of Care Program based on budget estimates without verifying actual expenditures.
  • Impacted Requirements: This practice violates 2 CFR §200.430, which mandates accurate documentation and internal controls for salary charges to federal awards.
  • Recommended Follow-Up: LifeWire should establish and implement policies to review budget-to-actual adjustments and maintain proper documentation to support these changes.

Finding Text

Federal Agencies: Department of Housing and Urban Development Federal Assistance Listing Numbers: 14.267 Program: Continuum of Care Program Award/Pass-Through Entity Identifying Numbers: 202212-01122, 202212-01115, DA-202212-01187, 202210-00966, DA-202212-01319 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR §200.430 Compensation- Personal Services: “Standards for Documentation of Personnel Expenses (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; (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; and (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, 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 (as defined by the non-Federal entity’s written policies) are identified and entered into the records in a timely manner. Short-term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity’s system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.” Condition: We noted that LifeWire allocated administrative payroll expenditures to Continuum of Care during 2023 based on budget allocation rates. There were no procedures in place to determine if a true-up was necessary from allocated costs. 27 timesheets were tested during the audit, of which five were charged based on budgets for the grant. Cause: LifeWire did not have policies and procedures in place to review and reconcile the estimated amounts of payroll expenditures charged to Continuum of Care to the actual expenditures incurred. Effect or Potential Effect: Without adequate controls in place to ensure costs based on budgeted allocations are reasonable and reconcile to the actual time spent on the program, LifeWire could incorrectly charge expenditures to the federal program, or not request appropriate reimbursement LifeWire is entitle to under the terms of the grant. Questioned Costs: Below reporting threshold. Context: This is a condition identified per review of LifeWire’s compliance with specified requirements not using a statistically valid sample. Payroll costs for administrative staff selected for testing totaled $1,185. Total payroll costs for the Continuum of Care grants in 2023 were $294,002. Any payroll costs not adequately supported by time and effort reports are considered questioned costs. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend that LifeWire implement policies and procedures to review for any necessary budget to actual adjustments, and we recommend that sufficient documentation be maintained to support any adjustments made as required by 2 CFR §200.430. Views of Responsible Officials: Management agrees with the finding. Management has modified policies and procedures to ensure staff time allocated to the grant is properly reviewed and approved.

Categories

Allowable Costs / Cost Principles Matching / Level of Effort / Earmarking Subrecipient Monitoring Cash Management Reporting

Other Findings in this Audit

  • 497504 2023-001
    Significant Deficiency
  • 497505 2023-002
    Material Weakness
  • 497506 2023-002
    Material Weakness
  • 497507 2023-002
    Material Weakness
  • 497508 2023-002
    Material Weakness
  • 497509 2023-002
    Material Weakness
  • 497510 2023-003
    Significant Deficiency
  • 497511 2023-004
    Significant Deficiency
  • 497512 2023-004
    Significant Deficiency
  • 497513 2023-004
    Significant Deficiency
  • 497514 2023-004
    Significant Deficiency
  • 497515 2023-004
    Significant Deficiency
  • 497516 2023-005
    Significant Deficiency
  • 497518 2023-005
    Significant Deficiency
  • 497519 2023-005
    Significant Deficiency
  • 497520 2023-005
    Significant Deficiency
  • 1073946 2023-001
    Significant Deficiency
  • 1073947 2023-002
    Material Weakness
  • 1073948 2023-002
    Material Weakness
  • 1073949 2023-002
    Material Weakness
  • 1073950 2023-002
    Material Weakness
  • 1073951 2023-002
    Material Weakness
  • 1073952 2023-003
    Significant Deficiency
  • 1073953 2023-004
    Significant Deficiency
  • 1073954 2023-004
    Significant Deficiency
  • 1073955 2023-004
    Significant Deficiency
  • 1073956 2023-004
    Significant Deficiency
  • 1073957 2023-004
    Significant Deficiency
  • 1073958 2023-005
    Significant Deficiency
  • 1073959 2023-005
    Significant Deficiency
  • 1073960 2023-005
    Significant Deficiency
  • 1073961 2023-005
    Significant Deficiency
  • 1073962 2023-005
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.239 Home Investment Partnerships Program $1.91M
14.251 Economic Development Initiative, Community Project Funding, and Miscellaneous Grants $1.00M
16.524 Legal Assistance for Victims $179,465
16.575 Crime Victim Assistance $139,026
16.736 Transitional Housing Assistance for Victims of Domestic Violence, Dating Violence, Stalking, Or Sexual Assault $116,064
21.027 Coronavirus State and Local Fiscal Recovery Funds $74,075
14.231 Emergency Solutions Grant Program $48,600
93.671 Family Violence Prevention and Services/domestic Violence Shelter and Supportive Services $26,022
14.267 Continuum of Care Program $16,165
14.218 Community Development Block Grants/entitlement Grants $7,060