Finding Text
2024-003 Internal Controls over Payroll – (Significant Deficiency)
Federal Program Information:
Funding Agency Title Federal
Assistance
Listing
Number(s)
Award Year and
Number
U.S. Department of Interior Indian School Equalization Program 15.042 2023; A23AV00801
U.S. Department of Interior Indian Schools Student
Transportation
15.044 2023; A23AV00801
U.S. Department of Interior Administrative Cost Grants for Indian
Schools
15.046 2023; A23AV00801
U.S. Department of Interior Indian Education Facilities,
Operations, and Maintenance
15.047 2023; A23AV00801
Criteria or Specific Requirements:
In accordance with 2 CFR § 200.302(b)(3) and § 200.430(i), recipients of federal funds must maintain
documentation that supports the allowability and allocability of compensation costs. Personnel expenses
must be supported by records that accurately reflect the work performed, and documentation must be
maintained for each employee, including executed contracts, offer letters, pay rate approvals,
timesheets, and separation documentation. Adequate support is necessary to demonstrate that federal
funds were used in compliance with award conditions.
Condition:
During our review of internal controls over payroll processing, we selected 102 payroll transactions
across four major programs. The School did not fully comply with its own adopted policies or applicable
federal regulations concerning payroll documentation and processing. The following exceptions were
identified:
Termination letters were not provided for 5 samples.
Adequate supporting document was not provided for 1 sample.
Timesheet was not provided for 1 sample.
Cause:
The deficiencies appear to be due to a lack of consistent personnel file maintenance and insufficient
internal controls over payroll documentation, record retention, and post-hiring compliance reviews.
Effect:
The lack of complete personnel documentation increases the risk of charging unallowable or unsupported
costs to federal awards. It also affects the ability to verify employee eligibility, compensation accuracy,
and the proper use of federal funds, potentially resulting in questioned costs and potential repayment
obligations to granting agencies. Auditor's Recommendation:
We recommend that the School implement enhanced internal controls and standardized procedures to
ensure complete and accurate personnel records are maintained. This should include routine
documentation checks to ensure that all required items, such as offer letters, contracts, paystubs, pay
rate verifications, timesheets, and termination letters, are present and properly filed. Management should
also provide training to relevant staff on federal compliance requirements related to payroll and personnel
documentation.