Finding 522502 (2023-005)

Condition: During our testing of a sample of payroll transactions charged to the major programs, we noted one employee had a portion of time charged to the grant as a direct expense while the remainder of their time worked was charged to the indirect cost pool for allocation to other grants and departments, including the same major program the direct costs tested were charged to. Criteria: Under 2 CFR Part 200, Subpart E -Cost Principles, costs charged to a federal program must meet certain criteria to be allowable including those costs be accorded consistent treatment. A cost must not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. Cause: Policies and procedures are not designed effectively to ensure that payroll costs charged to federal programs adhere to the criteria listed above. Effect: As a result of the deficiency noted, certain payroll costs were charged within both the direct and indirect categories. Context: Out of a test of 40 payroll transactions, 2 transactions were identified for an employee who has a portion of time charged as direct and another portion charged through the indirect cost pool. Based on the employee’s job responsibilities, we determined that the amounts charged as direct represent the questioned costs. A statistical sample was not used. We believe this significant deficiency impacts the allowable costs/ cost principles compliance requirement. Questioned Costs: $1,167 Recommendation: Management should review procedures over allocation of payroll transactions and ensure that employees are identified as either direct or indirect and that their time be treated consistently.