Finding Text
2024-105 Lack of Payroll Review and Approval (repeated, prior year 2023-105) (initially reported 2023)
Assistance Listing Number: 93.224, 93.527 and 93.211
Name of Federal Agency: Department of Health and Human Services, HRSA
Program Title: Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) and Grants for New and Expanded Services Under the Health Center Program and Rural Telemedicine Grants
Compliance Requirement: Allowable Activities and Allowable Costs, Period of Performance
Pass-through Entity: N/A
Federal Grant/Contract Number and Grant Year: H8006452 (2024 and 2023), H2E45500 (2022), H8K49674 (2023), COVID-19 H2E50094 (2023), H8N53812 (2024), H8L50549 (2023), COVID-19 H8G48569 (2022), GA142923 (2021), G2846293(2022) and G3949501 (2023)
Finding Type: Material Weakness in Internal Control
Questioned Costs: $0
Condition: No documentation of employee time approval by supervisors could be provided. The payroll clerk processes the payroll, and the finance director approves through the releasing of the payroll. However, there is no formal documentation of the overall review of the payroll process and the supervisors’ approval of time recorded by employees. This is a systemic issue and has been a finding in the previous year.
Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards The requirement is for the Organization to have a process in place to correctly calculate, record, and pay payroll related expenses in accordance with grant and program requirements.
Cause: The Organization does not have an effective process to review, approve, and document the supervisor’s approvals prior to making the payments.
Effect: This situation provides an opportunity for errors and unauthorized transactions to occur and not be detected in a timely manner resulting in payroll expenses to be charged incorrectly to the federal awards.
Recommendation: In April 2024, the Organization began using a third-party service provider to process payroll resulting in new control processes over the approval of time sheets by supervisors. We recommend that the Organization implement internal control procedures under the new payroll processes to ensure that documentation of supervisor approval of time sheets and subsequent payments is kept on file.
Views of Responsible Officials and Planned Corrective Actions: The Organization has implemented a new payroll process using the ADP system. Employees are now required to approve their own time within the ADP portal, and this approval is documented. Following this, supervisors review and approve their employees’ time, which is also documented in the portal. Human Resources then prepares the payroll, reviewing all entries and initialing a shared file of payroll items and providing backup for changes. Once HR confirms accuracy, they notify Finance. Finance then reviews the payroll, with the Finance Manager providing the final approval within ADP once all items are confirmed. This entire process is fully documented, with approvals recorded within ADP by employees and supervisors and the shared file drive where HR and Finance initial off on the reviewed payroll items, ensuring a traceable record of the entire payroll approval process.