Finding 565805 (2024-002)

Significant Deficiency

Requirement

Questioned Costs

Year

2024

Accepted

2025-06-23

Audit: 359504

Organization: Metropolitan Economic Development Association (MN)

Auditor: Eide Bailly LLP

AI Summary

Core Issue: Meda's internal controls for payroll allocation to grants are not functioning properly, leading to incorrect pay allocations for employees.
Impacted Requirements: The organization failed to adhere to its own policy for allocating employee pay, affecting compliance with federal assistance guidelines.
Recommended Follow-Up: Meda should consider switching to a new payroll provider to improve accuracy in payroll allocations to grants.

Finding Text

Department of Treasury Federal Financial Assistance Listing 21.033, Award 22ERP060843 Community Development Financial Institutions Equitable Recovery Program (CDFI ERP) Activities Allowed or Unallowed and Allowable Costs/Cost Principles Significant Deficiency in Internal Control over Compliance Criteria: Meda’s internal control structure should be designed to properly follow the allocation methodology for employees’ pay to each grant, in accordance with the policy established by the Organization. Condition: Meda has an internal control system designed to detect or prevent improper allocation of employees pay to grants in a timely manner in accordance with their established policy, but the controls did not operate as designed in certain instances. Sixteen of the forty-six payroll lines tested did not have the correct payroll amounts allocated to the program. Cause: Meda has a process for allocating employee wages based on hours worked, however controls in place did not operate prevent errors in the allocation of employees’ pay to the grants. Effect: Employees had some of their pay allocated improperly and not in accordance with the policy established. Questioned Costs: None reported. Context: A nonstatistical sample of forty-six payroll lines out of two hundred and five was selected for testing, which accounted for $126,707 of $796,502 of federal program expenditures. Repeat Finding from Prior Years: No Recommendation: We acknowledge the challenges Meda faced with allocating their payroll with the current payroll provider and recommend that management work with a new payroll provider to ensure payroll is accurately allocated to the grants. Views of Responsible Officials: Management is not in agreement with the finding.

Corrective Action Plan

Federal Agency Name: Department of Treasury Assistance Listing Number: 21.033 Program Name: Community Development Financial Institutions Equitable Recovery Program Finding Summary: MEDA has a process for allocating employee wages based on hours worked, however controls in place did not operate to prevent errors in the allocation of employees’ pay to the grants. Corrective Action Plan: MEDA’s payroll is performed by a third party. The errors identified during the audit were made by the third-party provider. Prior to the audit, MEDA was unsatisfied with the accuracy of records and customer service of the provider and engaged with a different payroll provider, transitioning the payroll processing at the beginning of 2025. This finding has very little impact on the financials and on the CDFI award. Total amount of differences between booked payroll and auditor-calculated payroll were less than $200. With the new payroll provider in place, we expect to have accurate results and accurate allocations to federal awards. Responsible Individuals: Catherine Rossini – Controller, Tarsha Humpries- Payroll Manager, Mesude Cingilli – VP of Finance Anticipated Completion Date: January 31, 2025

Other Findings in this Audit

565806 2024-003

Significant Deficiency Repeat
1142247 2024-002

Significant Deficiency
1142248 2024-003

Significant Deficiency Repeat

Programs in Audit

ALN	Program Name	Expenditures
21.033	Community Development Financial Institutions Fund Equitable Recovery Program (cdfi Erp)	$2.09M
11.805	Mbda Business Center	$278,866
59.005	Small Business Development Center Program	$43,228
21.027	Coronavirus State and Local Fiscal Recovery Funds	$21,600