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.