Finding Text
Finding 2023-002: Salaries and Wages (Allowable Costs)
Federal Programs: U.S. Department of Health and Human Services (HHS) ALN 93.600
Criteria: According to 2 CFR Section 200.430(i), charges to federal grants for salaries and wages
must be based on records that accurately reflect the work performed and the records must:
i. Be supported by a system of internal control which provides reasonable assurance that the
charges are accurate, allowable, and properly allocated;
ii. Be incorporated into the official records of the non-Federal entity;
iii. Reasonably reflect the total activity for which the employee is compensated by the non-Federal
entity, not exceeding 100% of compensated activities;
iv. Encompass Federally-assisted and all other activities compensated by the non-Federal entity on
an integrated basis, but may include the use of subsidiary records as defined in the non-Federal
entity’s written policy;
v. Comply with the established accounting policies and practices of the non-Federal entity;
vi. [Reserved]
vii. Support the distribution of the employee’s salary or wages among specific activities or cost
objectives if the employee works on more than one Federal award; a Federal award and non-
Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities
which are allocated using different allocation bases; or an unallowable activity and a direct or
indirect cost activity.
viii. Budget estimates (i.e., estimates determined before the services are performed) alone do not
qualify as support for charges to Federal awards.”
Condition: Educare allocates time to federal grants based on estimates made by management that
are adjusted throughout the year.
Cause: For several years, most of Educare's employees charged 100% of their time to one federal
program. However, in recent years, the number of employees who charged 100% of their time to one
federal program has decreased while the number of employees who charged time to multiple
programs has increased. While Educare uses timesheets, salaries were not allocated to federal
programs based on actual time spent per timesheets. Instead, Educare performed an after the fact
reconciliation of time spent to the estimates used, but the reconciliation was not documented and
incorporated into Educare's official records.
Effect or Potential Effect: The possibility exists that salaries and wages charged to federal grants
were not supported by documented evidence in accordance with the Uniform Guidance.
Questioned Costs: None.
Context: All of the salaries and wages selected for testing were determined by management based
on estimates of time spent that were adjusted throughout the year. Documentary evidence of the
reconciliation between the estimates and actual effort was not maintained in Educare's official records.
Identification as a Repeat Finding: Not applicable. Recommendation: While the amount of time that was charged to each program may have been
materially correct, documentary evidence of the reconciliation between the estimates and actual effort
was not maintained by Educare. We recommend that Educare maintain documentation of its
allocation process to support time charged to its federal programs. The allocation process can be
supported by either timesheets or after the fact effort reports from employees which are reconciled to
the estimates used to allocate salaries and wages to programs, including federal programs.