Finding Text
2023-013 – Allocable Costs related to Compensation (Material Noncompliance, Material
Weakness in Internal Controls over Compliance)
Federal Program Information
Federal Award Title and ALN: Formula Grants for Rural Areas and Tribal Transit Program, 20.509
Federal Awarding Agency: U.S. Department of the Transportation
Pass-Through Entity: New Mexico Department of Transportation
Federal Award ID Number: N/A
Federal Award Year: 2023
Condition - During reconciliation of the general ledger to SEFA, it was noted administrative
percentages of payroll were included on reimbursement requests monthly that did not include
supporting documentation on what the percentages were based on or support by the employee
documenting the time spent on the grant. No documentation is maintained to support the process
by which these estimates were produced, or the relationship to the activities actually performed.
No analysis of actual activities versus budgeted activities is performed. There are no controls in
place to review after-the-fact charges to the Federal grant by the administrative personnel vs. the
amounts charged.
Criteria - Per 2 CFR 200.303(a), the non-federal entity must establish and maintain effective internal
control over the Federal award that provides reasonable assurance that the non-Federal entity is
managing the Federal award in compliance with Federal statutes, regulations, and the terms and
conditions of the Federal award. These internal controls should be in compliance with guidance in
“Standards for Internal Control in the Federal Government” issued by the Comptroller General of
the United States or the “Internal Control Integrated Framework”, issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
Per 2 CFR section 200.403 – Factors affecting allowability of costs, except where otherwise
authorized by statute, costs must meet the following general criteria in order to be allowable under
Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal
award and be allocable thereto under these principles; paragraph (g) Be adequately documented.
Per 2 CFR section 200.430(i)(1) – Compensation – personal services, Charges to Federal awards for
salaries and wages must be based on records that accurately reflect the work performed: (i) Be
supported by a system of internal control which provides reasonable assurance that the charges are
accurate, allowable, and properly allocated; (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; (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.
Cause - The County does not have policies and procedures in place to ensure the allowability of the
percent allocations or retain detailed approved supporting documentation.
Questioned Costs – Questioned and likely costs of $77,520
Effect - The County could spend federal award funding on time not spent on the grant which could
lead to disallowed costs.
Auditor’s Recommendation - The auditor recommends the County strengthen policies and
procedures to ensure the charging of administrative costs for allowability is based off supported
calculations or documented time spent to grant.
Views of Responsible Officials and Planned Corrective Action - The County will create a documented
process in the new policy and procedures manual for federal guidelines and charging of
administrative costs for documented time spent on grants with supporting calculations will be
documented for clarity and consistency.
Responsible Official – Andrea Montoya, Deputy County Manager and Robert Placencio, Finance Director
Timeline and Estimated Completion Date - No later than August 31, 2024.