Finding 520778 (2023-002)

Material Weakness Repeat Finding
Requirement
A
Questioned Costs
$1
Year
2023
Accepted
2025-01-30
Audit: 340574
Organization: Progress House Inc. (CA)
Auditor: St Group

AI Summary

  • Core Issue: The organization had delinquent payroll taxes, paid late in the next fiscal year.
  • Impacted Requirements: Non-compliance with IRS regulations can lead to penalties, interest, and personal liability for responsible individuals.
  • Recommended Follow-Up: Implement effective controls for timely payroll tax payments, including staff training, regular reviews, and possibly automated systems.

Finding Text

Federal Awarding Agency: U.S. Department of Health and Human Services Pass-Through Entity: Sacramento County Category of Finding: Allowable Cost/Cost Principles Federal-Pass through Grantor: 7206000-23-136 AL No: 93.778 Finding: The audit identified that the non-profit organization had delinquent payroll taxes, which were paid after the due date during the next fiscal year. Cause: The Organization did not have adequate controls in place to ensure timely payment of payroll taxes. This could be due to a lack of internal controls, poor communication among departments, or other factors that contributed to delays in processing payroll tax payments. Effect: The failure to pay payroll taxes on time could result in penalties and interest being assessed by the Internal Revenue Service (IRS), which could result in a significant financial impact on the organization. Additionally, this could damage the organization's reputation and relationships with employees, vendors, and other stakeholders. Criteria: In accordance with IRS regulations, the failure to pay payroll taxes on time can result in violations of Internal Revenue Code (IRC) Section 6656. This section imposes penalties and interest on late or delinquent payroll tax payments. IRC Section 6672: Commonly referred to as the Trust Fund Recovery Penalty (TFRP), this section imposes personal liability on individuals, such as corporate officers or responsible parties, for willful failure to collect, account for, and pay withheld payroll taxes to the IRS. It holds individuals personally responsible for unpaid payroll taxes and allows the IRS to assess penalties and pursue collection actions against them. Questioned costs - $19,610 Repeat finding - Yes Recommendation: The non-profit organization should establish and implement effective controls to ensure timely payment of payroll taxes, including regular monitoring and reconciliations to ensure that all payroll taxes are paid on time. This could include designating specific staff members responsible for payroll tax payments, implementing regular reviews of payroll tax processes, and providing training to staff members responsible for payroll tax payments to ensure that they are aware of the requirements for timely payment of payroll taxes. Additionally, the organization should consider implementing automated payroll tax payment systems to streamline the process and improve accuracy and efficiency. Finally, the organization should ensure that it has adequate reserves and resources to cover any penalties or interest assessed by the IRS for late payment of payroll taxes.

Corrective Action Plan

Views of responsible officials and corrective action: Payroll Tax administration integration through ADP automats tax deposits and filings – quarterly/annually for federal, state and local jurisdictions. Conducting continual balancing to ensure that tax filing data matches payroll data. ADP identifies and corrects reconciliation mistakes throughout the year to help save time and ensure an easier year-end tax audit. expense and accounts payable payroll policy Progress House Inc. contracts with an external company for payroll services. payroll preparation and approval Protocol Payroll Records-Employees are paid on a bi-monthly basis. The payroll company is responsible for preparing payroll checks and maintaining the records in a payroll journal. deductions Progress House Inc. is responsible for providing the external payroll company accurate employee information, and providing changes or corrections as needed. The external payroll company is responsible for ensuring deductions including the appropriate social security taxes (FICA), federal income taxes, state income taxes and state disability insurance. Responsible Individual: Cindy Carlson, Executive Director Implementation Date: September 2023

Categories

Questioned Costs Subrecipient Monitoring Allowable Costs / Cost Principles

Other Findings in this Audit

  • 520777 2023-001
    Material Weakness Repeat
  • 520779 2023-003
    Significant Deficiency Repeat
  • 1097219 2023-001
    Material Weakness Repeat
  • 1097220 2023-002
    Material Weakness Repeat
  • 1097221 2023-003
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
93.778 Medical Assistance Program $808,894
93.959 Block Grants for Prevention and Treatment of Substance Abuse $131,200