Finding 542008 (2024-003)

Department of Health and Human Services FFAL #93.087, 90CU0095, 9/30/2018 – 9/29/2024 Enhance Safety of Children Affected by Substance Abuse Activities Allowed or Unallowed and Allowable Costs and Cost Principles Significant Deficiency in Internal Control over Compliance Criteria: The Center 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. Condition: In our sample of expenditures selected for testing, we noted calculation errors when allocating payroll expenses to the federal grant. Cause: The calculation errors were due to the use of a wrong employee’s allocation percentage, a keying error for the amount of payroll taxes for an employee, and not properly updating the calculation of worker’s compensation based upon the new percentage effective January 1, 2024 for the state of Iowa. In addition, the secondary review of federal grant expenditure tracking spreadsheet did not identify the calculation errors. Effect: The Center’s controls did not detect or correct the errors identified, which results in a reasonable possibility that the Center could submit disallowed costs under the federal awards and would not be able to detect and correct noncompliance in a timely manner. Questioned Costs: The program was overcharged by $1,348. Context: A total non-statistical sample of 60 nonpayroll and payroll transactions out of more than 250 transactions were selected for testing, which accounted for $113,666 of $474,590 of federal payroll and nonpayroll direct program expenditures. Repeat Finding from Prior Year: Yes, prior year finding 2023-003 Recommendation: We recommend management review the procedures and control processes involving allocating payroll expenses and the federal grant expenditure tracking spreadsheet to ensure compliance with the federal grant. Views of Responsible Officials: Management is in agreement.