Finding 571768 (2024-006)

Material Weakness
Requirement
AB
Questioned Costs
-
Year
2024
Accepted
2025-07-22
Audit: 362784
Organization: City of Commerce (CA)

AI Summary

  • Core Issue: Inconsistent review and approval of timecards led to payroll errors, with 4 employees underpaid due to inadequate documentation.
  • Impacted Requirements: Noncompliance with 2 CFR §200.430(i) regarding accurate salary documentation and supervisory review processes.
  • Recommended Follow-Up: Strengthen payroll controls by ensuring all timecards are reviewed, maintain Personnel Action Forms for all employees, and conduct regular internal audits to catch discrepancies.

Finding Text

Identification of the Federal Program: Assistance Listing Number: 20.507 Assistance Listing Title: Federal Transit Cluster Federal Agency: U.S. Department of Transportation Federal Award Identification Number: CA-2020-191; CA-2021-018; CA-2021-115; CA-2021-239; CA-2022-135; CA-2023-034 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Total salaries charged to Federal awards (including extra service pay) are subject to the Standards of Documentation as described by 2 CFR §200.430(i). Per this section, salaries and wages charged to Federal awards must be based on records that accurately reflect the work performed. These records must: - Be incorporated into the organization’s official records; - Reasonably reflect the total activity for which the employee is compensating across all grant related and non-grant related activities (100% effort); - Support the distribution of employee salary across multiple activities or cost objectives (for example, effort spent on multiple federal awards, spent on general/or administrative activities, vacation, sick leave, leave without pay, etc.); and - Utilize an "after-the-fact" review of the employee’s actual hours worked during the reporting period for identifying and correcting significant changes (as defined by the organization’s written policies). Condition: During our audit, we noted that 27 out of 40 timecards were not consistently reviewed and approved by supervisors or department heads prior to payroll processing. Additionally, Personnel Action Forms (PAFs) were not maintained for all employees, only full-time employees had PAFs on file, and several PAFs did not reflect current salary step information. These deficiencies led to instances where 4 employees were paid incorrect wages and subsequently had to be issued retroactive pay adjustments. Cause: The City did not adhere to its established policies and procedures for supervisory review and approval of timecards for all employees. Furthermore, there is no policy mandating the preparation and maintenance of PAFs for part-time or temporary employees, and no systematic process to update PAFs for salary changes or step increases. Effect or Potential Effect: Lack of appropriate review and documentation increases the risk of payroll errors, noncompliance with federal cost principles, and misallocation of federal funds. In this case, 4 employees were underpaid due to inaccurate salary records and had to receive retroactive pay, resulting in potential risk of unallowable costs being charged to federal programs. Questioned Costs: None noted. Context: See condition above for the context of the payroll finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommend the City enhance its internal controls over payroll processes to ensure that all timecards are reviewed and approved by the appropriate supervisor prior to processing. Additionally, PAFs should be prepared and maintained for all employees, regardless of employment status, and should be regularly updated to reflect salary step adjustments or other compensation changes. The City should also consider periodic internal reviews of payroll records to identify and correct discrepancies in a timely manner and ensure compliance with federal cost principles. Views of Responsible Officials: Management concurs with the finding and agrees to implement necessary corrective procedures.

Categories

Allowable Costs / Cost Principles

Other Findings in this Audit

  • 571761 2024-005
    Significant Deficiency
  • 571762 2024-005
    Significant Deficiency
  • 571763 2024-005
    Significant Deficiency
  • 571764 2024-005
    Significant Deficiency
  • 571765 2024-005
    Significant Deficiency
  • 571766 2024-006
    Material Weakness
  • 571767 2024-006
    Material Weakness
  • 571769 2024-006
    Material Weakness
  • 571770 2024-006
    Material Weakness
  • 571771 2024-006
    Material Weakness
  • 571772 2024-007
    Material Weakness Repeat
  • 571773 2024-007
    Material Weakness Repeat
  • 571774 2024-007
    Material Weakness Repeat
  • 571775 2024-007
    Material Weakness Repeat
  • 571776 2024-007
    Material Weakness Repeat
  • 571777 2024-007
    Material Weakness Repeat
  • 1148203 2024-005
    Significant Deficiency
  • 1148204 2024-005
    Significant Deficiency
  • 1148205 2024-005
    Significant Deficiency
  • 1148206 2024-005
    Significant Deficiency
  • 1148207 2024-005
    Significant Deficiency
  • 1148208 2024-006
    Material Weakness
  • 1148209 2024-006
    Material Weakness
  • 1148210 2024-006
    Material Weakness
  • 1148211 2024-006
    Material Weakness
  • 1148212 2024-006
    Material Weakness
  • 1148213 2024-006
    Material Weakness
  • 1148214 2024-007
    Material Weakness Repeat
  • 1148215 2024-007
    Material Weakness Repeat
  • 1148216 2024-007
    Material Weakness Repeat
  • 1148217 2024-007
    Material Weakness Repeat
  • 1148218 2024-007
    Material Weakness Repeat
  • 1148219 2024-007
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
16.710 Public Safety Partnership and Community Policing Grants $185,710
14.218 Community Development Block Grants/entitlement Grants $156,930
20.507 Federal Transit Formula Grants $66,060