Finding 555344 (2024-003)

Criteria: In accordance with 2 CFR 200 Subpart E, the University is required to conform to allowability of cost provisions, and 2 CFR 200.303 requires the organization to establish and maintain effective controls over federal awards. Allowable costs charged to federal programs, whether direct or indirect, must be allowable and be determined in accordance with Subpart E – Cost Principles of the Uniform Guidance. Effective internal controls should include procedures to ensure federal expenditures and amounts are for activities allowed or unallowed and allowable costs/cost principles, as well as accurately and completely reported on the SEFA. The Sacramento campus confirmed with the Chancellor’s office that the final federal expenditures for the SNAP Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws and regulations. Effective internal controls should include procedures to ensure federal expenditures are accurately and completely reported on the SEFA. According to 2 CFR 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i)Be supported by a system of internal control that providesreasonable assurance that the charges are accurate, allowable,and properly allocated; (ii)Be incorporated into the official records of the recipient orsubrecipient; (iii)Reasonably reflect the total activity for which the employee iscompensated by the recipient or subrecipient, not exceeding 100percent of compensated activities; (iv)Encompass federally-assisted and all other activities compensatedby the recipient or subrecipient on an integrated basis but mayinclude the use of subsidiary records as defined in the recipient's orsubrecipient's written policy; (v)Comply with the established accounting policies and procedures ofthe recipient or subrecipient and (vi)Support the distribution of the employee's salary or wages amongspecific activities or cost objectives if the employee works on morethan one Federal award; a Federal award and non-Federal award;an indirect cost activity and a direct cost activity; two or moreindirect activities allocated using different allocation bases; or anunallowable activity and a direct or indirect cost activity. Cause and Effect: The University receives Supplemental Nutrition Assistance Program (SNAP) Cluster program funding at its Sacramento campus to perform nutrition outreach and education services to residents of the State of California. The Sacramento campus administers the SNAP Cluster nutrition education programs through its College of Continuing Education (CCE) and Population Research Center (PRC) offices. SNAP Cluster program expenditures are primarily comprised of payroll for program personnel performing various program activities and related fringe benefits and indirect costs. During our testing of 2 payroll expenditures for CCE employees (totaling $7,101) and 4 payroll expenditures for PRC employees (totaling $6,285), we noted effort reports detailing 100% of the employee's activities were not prepared for certain employees. Upon further investigation and discussion with CCE and PRC program management, we noted effort reports were not prepared for any employees whose payroll expenditures were charged to the SNAP Cluster program. The payroll expenditures and related costs impacted by the inadequate effort reports, are described in the table below: Expenditure category Questioned costs Excerpt of total SNAP Cluster program expenditures by impacted expenditure category Payroll $1,544,086 $1,544,086 Fringe benefits $708,935 $708,935 Indirect costs $563,225 $735,693 Total $2,816,276 $2,988,714 Total SNAP Cluster program expenditures were $4,267,405 for the year ended June 30, 2024. We noted additional instances of noncompliance as follows: • In our testing of 6 payroll expenditures, the hourly payroll ratesused to prepare the quarterly payroll remittances submitted to theState of California exceeded the actual payroll rates paid for 2employees resulting in an overcharge of payroll, fringe benefits,and indirect costs to the SNAP program of $2,880, $1,152 and$1,008, respectively. As these 2 employees did not have effortreports as discussed above, payroll, fringe benefits, and indirectcosts associated with these 2 employees has already beenincluded in the table above. In addition, we noted the Sacramento campus has not established adequate internal controls to ensure: (1) payroll expenditures charged to the SNAP Cluster program are properly determined and supported in accordance with the requirements of the Uniform Guidance and (2) fringe benefit and indirect costs are properly calculated by applying the approved fringe or indirect cost rate to a base that includes only allowable costs. Cause and Effect: The errors noted above were primarily due to insufficient controls over the establishment and tracking of SNAP Cluster program activities as federal funding within Sacramento’s general ledger. As a result, a portion of SNAP program expenditures and activities were not processed in accordance with applicable federal guidelines. Additional errors noted above relate to insufficient controls over the accuracy of the payroll, fringe benefits, and indirect cost charged to the SNAP Cluster program. The inadequate review procedures over payroll, fringe benefits, and indirect cost expenditures resulted in unallowable charges to the SNAP Cluster program in the amount of $2,816,276.