Finding Text
Criteria
Title 2, Code of Federal Regulations (CFR), Subtitle A, Chapter II, Part 200, Subpart D, Cost Principles for Non-Profit Organizations, Section 200.303 states “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal Statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). (b) Comply with Federal statues, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity’s compliance with statues, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. (e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state, local, and tribal laws regarding privacy and obligations of confidentiality.”
Additionally, Section 200.430 (g) states “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.” The section continues to clarify the records must “Reasonably reflect the total activity for which the employee is compensated by the recipient or subrecipient, not exceeding 100 percent of compensated activities.”
Condition
During our testing of the Organization’s expenditures, we noted the following deficiencies in internal controls:
1. 7 of the 50 non-payroll samples selected for testing lacked evidence of approval.
2. Management had incorrectly allocated time for 10 of the 50 payroll transactions selected for testing.
3. One employee selected for payroll testing had been compensated, and expenses allocated to the GL, at a rate other than what had been approved for the individual.
Cause
The Agency has not implemented sufficient internal control policies to adhere to the requirements of Uniform Guidance.
Repeat Finding
No.
Effect
Noncompliance may impact future funding from federal and state awarding agencies.
Recommendation
We recommend the Agency establish and maintain effective internal control over Federal Awards in order to provide reasonable assurance that the Agency is managing the Awards in compliance with Federal statutes and regulations, as well as the terms and conditions set forth in the specific Federal Award. Additionally, we recommend the Agency implement proper internal control procedures to document hours worked, by employee, by grant; and maintain documentation to support charges allocated to each Federal award.