Finding Text
Finding: 2022-003 Allowable Costs/Cost Principles ? Internal Control and Compliance over Payroll Expenditures Identification of the Federal Program: Assistance Listing Number: 14.871 Assistance Listing Title: Section 8 Housing Choice Vouchers Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: CA032 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to ?200.430 Compensation - Personal Services under Uniform Guidance Title 2 Grants and Agreement, Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart E ? Cost Principles: In general, costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees: (1) Is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity's laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph in accordance with the Standards for Documentation of Personnel Expenses. When budget estimates are used, the Standards for Documentation of Personnel Expenses require the following: Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that:(A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. Condition: During our audit, we noted payroll allocation of the one employee in six selected payroll periods didn?t match with the current approved payroll distribution schedule. Furthermore, there was no updated cost allocation plan after fiscal year 2020, and there was no further justification of actual activities performed by the City staff during the year to the budgeted allocation. Cause: The program did not follow the Uniform Guidance requirements. Effect or Potential Effect: Without further reviewing and reconciliation over actual activities performed by the City staff, it resulted in the City not in compliance with the Uniform Guidance. Questioned Costs: $2,813 Context: See condition above for the context of the finding. Identification as a Repeat Finding, If Applicable: Not applicable. Recommendation: We recommended the City incorporate the Uniform Guidance requirements into its existing policies and procedures to ensure the City is in compliance with the Uniform Guidance. Views of Responsible Officials: The cost allocation study is currently being updated and any changes will be reflected in the next fiscal year.