Finding Text
Finding 2024-003: MATERIAL WEAKNESS—Transit Services Programs Cluster Payroll Procedures
U.S. Department of Transportation
Pass-through Entity: Michigan Department of Transportation
Assistance Listing Numbers: 20.516 and 20.521
Award Numbers: 215509NI, 215541NI, 220776NI and 221303NI
Award Year End: September 30, 2024
Specific Requirements: (A.) Activities Allowed Unallowed, (B.) Allowable Costs/Cost Principles
Criteria: Section 200.430 of the cost principles of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires that a) the charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed; b) the records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; c) budget estimates may be used for interim accounting purposes provided that the estimates are reasonable, significant changes in the corresponding work activity are identified and entered into the accounting records in a timely manner, and necessary adjustments are made to the accounting records based on an after-the-fact review of interim charges to federal awards. In addition, accounting records should be retained in accordance with the Organization’s written record retention policy. Such records should be timely and properly filed so that they can be readily located when needed.
Questioned Costs: Questioned costs total $48,617 for payroll and related benefits for all employees charged to the federal program cluster for the first three quarters of the fiscal year.
Condition: The Organization was unable to provide supporting documentation for the payroll costs for all employees charged to the federal program cluster for the first three quarters of the fiscal year.
Context: For the first three quarters of the fiscal year, the Organization was unable to identify the employees charged to the federal program cluster or provide timecards to support the payroll expenses for any of the employees charged to the program cluster. However, for the entire fourth quarter, we recomputed the payroll expenses for all six employees charged to the program cluster. Timecards were readily available for testing. They identified the portions of time worked in the federal program cluster, and they were timely approved by supervisors with documented approval.
Effect: Failure to prepare and maintain proper payroll records could cause improper amounts to be charged to the federal program cluster, and certain expenses charged to the cluster could be disallowed.
Cause: The Organization experienced personnel changes within key positions in the business office during the year, leaving the Organization understaffed and unable to properly follow its established procedures for filing and maintaining payroll records.
Repeat Finding: This is not a repeat finding.
Recommendation: The Organization should follow its established procedures to ensure that payroll records, including manual and electronic, are properly and timely filed and maintained in accordance with the Organization’s written record retention policy so that they can be readily located when needed.
Views of Responsible Officials: The Organization agrees with this finding.