Finding Text
Criteria: The Organization is required to have procedures in place to ensure that federal awards are expended
only for allowable costs in accordance with Subpart E – Cost Principles of the Uniform Guidance. Allowable costs
are supported by appropriate documentation and correctly charged as to account, amount, and period. 2 CFR
200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal
award that provides assurance that the entity is managing the federal award in compliance with federal
statutes, regulations, and the terms and conditions of the federal award. 2 CFR 200.430(i) establishes the
standards for documentation of personnel expenses including charges to Federal awards for salaries and wages.
Charges must be based on records that accurately reflect the work performed with the records meeting the
following standards:
a) Be supported by a system of internal control which provides reasonable assurance that the charges are
accurate, allowable, and properly allocated.
b) Be incorporated into the official records of the non-Federal entity.
c) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity,
not exceeding 100% of compensated activities.
d) Encompass both 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.
e) Comply with the established accounting policies and practices of the non-Federal entity.
f) Support the distribution of the employee’s salary or wages among specific activities or cost objectives.
g) Budget estimates alone do not qualify as support for charges to Federal awards, but may be used for
interim accounting purposes.
Condition: Through testing over payroll expenditures management could not provide support to substantiate the
rate of pay paid to one employee was approved by the President or Board of Directors. Additionally, six
instances identified in which the employee’s wages that were billed to the federal award were billed at a higher
hourly rate than the employee’s hourly rate with the Organization.
Cause: There was a lapse in oversight of the internal control process ensuring management retained support of
President or Board of Directors approval of employee’s salary.
Effect: The Organization’s controls did not detect or correct the errors identified, which results in a reasonable
possibility that the Organization could submit disallowed costs under the federal awards.
Questioned Costs: No questioned costs over $25,000.
Context/Sampling: A nonstatistical sample of 29 payroll transactions out of approximately 144 total payroll
transactions, accounting for approximately $36,400 of $140,200 total payroll costs charged to federal program.
Repeat Finding from Prior Year: No.
Recommendation: We recommend management to review payroll policies and procedures over retaining
approvals over employee’s salary.
Views of Responsible Officials: Management is in agreement.