Finding Text
2024-001 – Allowable Costs/Cost Principles – Internal Control and Compliance over Payroll Expenditures (Significant Deficiency)
Information on the Federal Program(s):
Assistance Listing Number: 14.218
Federal Program Name: Community Development Block Grants-Entitlement Grants Cluster
Federal Agency: Department of Housing and Urban Development
Pass-Through Entity: N/A
Federal Award Number(s) and Award Year: B-23-MC-06-0554
Assistance Listing Number: 14.871
Federal Program Name: Housing Voucher Cluster
Federal Agency: Department of Housing and Urban Development
Pass-Through Entity: N/A
Federal Award Number(s) and Award Year: CA120
Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation):
Total salaries charged to Federal awards (including extra service pay) are subject to the Standards of Documentation as described by 2 CFR §200.430(i). Per this section, salaries and wages charged to Federal awards must be based on records that accurately reflect the work performed. These records must:
• Be incorporated into the organization’s official records;
• Reasonably reflect the total activity for which the employee is compensating across all grant related and non-grant related activities (100% effort);
• Support the distribution of employee salary across multiple activities or cost objectives (for example, effort spent on multiple federal awards, spent on general/or administrative activities, vacation, sick leave, leave without pay, etc.); and
Utilize an "after-the-fact" review of the employee’s actual hours worked during the reporting period for identifying and correcting significant changes (as defined by the organization’s written policies).
Condition:
Community Development Block Grants-Entitlement Grants Cluster
During the audit period, the City has required all Housing Department staff, including administrative support staff, to fill out project activity timesheets reflecting the actual hours worked on the program. The City performed reconciliation on the staff payroll charges to reflect actual hours worked. However, not all staff members have fully complied with this policy. Payroll costs for the fourteen (14) out of forty (40) payroll samples tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on the grant.
Housing Voucher Cluster
During the audit period, the City has required all Housing Department staff, including administrative support staff, to fill out project activity timesheets reflecting the actual hours worked on the program. The City performed reconciliation on the staff payroll charges to reflect actual hours worked. However, not all staff members have fully complied with this policy. Payroll costs for the thirteen (13) out of forty (40) payroll samples tested were allocated to programs based on percentages provided by management. These allocations were not supported by approved time samples or updated cost allocation plan, nor were they reconciled to actual time spent on the various programs. Employee timesheets did not record the actual labor efforts expended on the grant.
Cause:
Due to staff turnover, the City did not fully implement its adopted policies and procedures for relating payroll charges to grants. The City's efforts to address the prior year finding were not deemed sufficient, as it was unable to retrospectively perform reconciliations of actual hours worked for all employees. This limitation applied to both former employees who had left the City and certain current employees with time charges during parts of the fiscal year in supporting roles.
Effect or Potential Effect:
The City did not fully comply with the program’s requirements for allowable costs.
Questioned Costs:
Community Development Block Grants-Entitlement Grants Cluster
$53,625
Housing Voucher Cluster
$19,099
Context:
See condition above for the context of the finding.
Identification as a Repeat Finding, If Applicable:
Yes. See prior year finding 2023-002.
Recommendation:
We recommend the City comply with federal regulation requiring that any employee funded by federal grant document the actual time they spend working on the grant’s objectives. Documentation must reflect “actual” time spent by employees on awards being charged. The City should develop and implement policies and procedures that ensure that employees’ compensation charged to federal programs reflect a contemporaneous or after-the-fact distribution of employees’ actual time and effort expended on federal programs. We also recommend the City enhance its internal controls over the payroll processes.
Views of Responsible Officials:
Management concurs.