Finding Text
Criteria: 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 nonfederal entity and(iii) Reasonably reflect the total activity for which the employee is compensated by the nonfederal 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 nonfederal 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: During 2023, the Organization allocated payroll costs to grants based upon budgeted amounts/percentages submitted to the funding agency and did not have a system for ensuring that the estimates used produce reasonable approximations of the activity actually performed. Subsequent to year end, the Organization had employees complete a 2023 time and effort report. In multiple instances, we noted employees who had left the Organization and thus certain reports were not signed by the employees. We also noted instances of missing reports for employees. The 2023 time and effort reports did not accurately reflect what was charged to the grant during the year.
Questioned Costs: Unknown
Context: The amounts charged to the grant did not represent the actual time and was not tracked properly throughout the year. This resulted from the Organization no having a system of internal control that provided reasonable assurance that the charges are accurate, allowable, and properly allocated.
Cause: The Organization was using budgeting amounts and did not have a system in place to charge accurate time.
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.
Recommendation: Management should develop a process whereby payroll costs allocated to federal grants are supported by a system of internal controls which provides reasonable assurance that the charges are accurate 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 works on more than one federal award. It is recommended that the Organization implement the time and effort certification reports at least quarterly or utilize timesheets within in payroll system to properly allocated to federal grants. If utilizing certification reports, ensure time and effort reporting charged to the grant is updated on regularly basis.
Grantee Comment: Refer to the Correction Action Plan