Finding Text
Finding 2023-001 Criteria or specific requirement – The Organization is subject to 45 CFR sections 75.403-405 which require all expenses charged to a federal award to be allowable, reasonable and allocable.
Condition – The Organization made bonus payments to staff totaling $38,750 during July and August 2023 without appropriate policies, controls and processes in place.
Context – The external auditor reconciled salaries expense recorded on the general ledger to salaries reported on payroll tax returns noting the total amount reported on the payroll tax returns exceeded the total amount recorded on the general ledger. The difference was due to bonus amounts paid to staff during July and August 2023 being recorded in a separate account on the general ledger. These bonuses represent all of the bonus payments recorded during the year. The bonuses were not determined to be excessive or improper; however, due to the lack of formal policies and documentation the bonuses are being reported as questioned costs. Effect – The cost of the bonus payments may be determined not to be reasonable or justified and may be disallowed.
Cause – The Organization did not have formalized policies in place to provide guidance on assessing staff performance and delivery of bonus payments. In addition, the Organization did not maintain appropriate documentation of the criteria used to evaluate staff performance or documentation of how the bonus amounts were determined.
Recommendation – The Organization should adopt and implement formalized policies to provide guidance on assessing staff performance and delivery of bonus payments. Also, the Organization should maintain sufficient documentation of the methodology followed in determining the amount of any bonus payments and the approval of such payments.
Views of responsible officials and planned corrective actions – The Organization agrees with the finding and is in the process of adopting updated policies and having them approved by ACL. These updated policies will provide clear guidance on the staff performance review process and the methodology for determining any bonus amounts to be paid.
Questioned costs - $38,750