Criteria
2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, requires:
(1) “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must:
(i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated;
(ii) Be incorporated into the official records of the non-Federal entity;
(iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities;
(iv) Encompass both federally assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy;
(v) Comply with the established accounting policies and practices of the non-Federal entity;
(vi) [Reserved]
(vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity.”
In accordance with LAUSD Policy Bulletin 2643.13 and 2643.14 entitled, “Documentation for Employees Paid from Federal and State Categorical Programs,” the Periodic Certification (formerly referred to as Semi-Annual Certifications) must be completed each fiscal year for employees whose compensation is singularly sourced from federal funds. The first Periodic Certification covers the period between July 1st through December 31st, and the second Periodic Certification covers the period between January 1st through June 30th. These certifications should be completed no later than January 31st and July 31st, respectively. Employees whose compensation is sourced by a combination of Federal or State funds that are not a Single Cost Objective are required to complete and sign the Multi-Funded Time Report at the end of each month.
Condition
As part of our compliance review over payroll expenditures, we selected samples of payroll expenditures charged to the program and reviewed the supporting documents to ascertain if they were allowable per program regulations, accurately charged to the program, and appropriately supported in accordance with 2 CFR section 200.430(i) and LAUSD Policy Bulletin 2643.13 and 2643.14.
Title I Grants to Local Educational Agencies: In our sample of sixty (60) payroll expenditures, we identified discrepancies in the timesheet hours submitted by two (2) employees when compared to the records in SAP. One (1) employee’s hours reported on the timesheet was less than the hours recorded in SAP, leading to an overstatement of program expenditures. Conversely, another employee’s hours reported on the timesheets were greater than the hours recorded in SAP, leading to an understatement of program expenditures.
Total exceptions for overstatement and understatement amounted to $132 and $726, respectively, of the $186,080 sampled from $278,384,872 of the total payroll expenditures.
Special Education-Grants to States (IDEA, Part B): In our sample of sixty (60) payroll expenditures, we identified a compliance issue regarding signatures on Periodic Certifications. Specifically, four (4) employees signed their Periodic Certifications only in response to our audit request, indicating that these signatures were not obtained within the required timeframe.
Total exceptions for untimely certifications amounted to $23,194.
English Language Acquisition State Grants: In our sample of sixty (60) payroll expenditures, we identified discrepancies in the Multi-Funded Time Reports submitted by three (3) employees compared to the hours recorded in SAP. Specifically, one (1) employee reported hours on the Multi-Funded Time Reports that were less than the hours recorded in SAP, leading to an overstatement of program expenditures. In contrast, two (2) employees reported more hours on the Muti-Funded Time Reports than the hours recorded in SAP, leading to an understatement of program expenditures.
Total exceptions for overstatement and understatement amounted to $49 and $1,280, respectively, of the $156,424 sampled from $8,984,427 of the total payroll expenditures.
Improving Teacher Quality State Grants: In our sample of sixty-one (61) payroll expenditures, we identified discrepancies in the Multi-Funded Time Reports submitted by seven (7) employees compared to the hours recorded in SAP. Specifically, five (5) employees reported hours on the Multi-Funded Time Reports that were less than the hours recorded in SAP, leading to an overstatement of program expenditures. In contrast two (2) employees reported hours on the Muti-Funded Time Report that were greater than the hours recorded in SAP, leading to an understatement of program expenditures. In addition, we found that one (1) employee’s hours recorded in SAP did not have a corresponding Muti-Funded Time Report at all, leading to an overstatement of program expenditures.
Total exceptions for overstatement and understatement amounted to $7,697 and $1,957, respectively, of the $284,882 sampled from $17,263,439 of the total payroll expenditures.
COVID-19 American Rescue Plan - Elementary and Secondary School Emergency Relief (ARP ESSER): In our sample of sixty-one (61) payroll expenditures, we identified a compliance issue regarding signatures on Periodic Certifications. Specifically, two (2) employees signed their Periodic Certifications only in response to our audit request, indicating that these signatures were not obtained within the required timeframe.
Total exceptions for untimely certifications amounted to $9,260.
Our samples were statistically valid samples.
Cause and Effect
The untimely certifications appear to be incidents in which employees did not follow the District’s policies and procedures. The discrepancies between time reports/timesheets and SAP data appear to be due to clerical errors and lack of sufficient review processes.
Such oversights lead to instances of non-compliance and inaccuracies in financial reporting/SEFA, impacting the reliability of payroll expenditure documentation.
Questioned Costs
The total costs related to the conditions mentioned above amounted to the following:
Title I Grants to Local Educational Agencies (AL No. 84.010): $132 overstatement and $726 understatement due to unsupported hours charged.
English Language Acquisition State Grants, U.S. Department of Education (AL No. 84.365Z): $49 overstatement and $1,280 understatement due to unsupported hours charged.
Improving Teacher Quality State Grants (AL No. 84.367): $7,697 overstatement and $1,957 understatement due to unsupported hours charged.
There were no questioned costs arising from untimely completed/signed Periodic Certifications or Multi-Funded Time Reports, as the payroll costs incurred were still allowable costs, despite the timing issues, for the respective programs (i.e., IDEA and ESSER).
Repeat Finding
This finding is a repeat finding as indicated in the Status of Prior Audit Findings and Recommendation as finding number F-2022-001.
Recommendation
We recommend that the District enhance its internal controls over payroll expenditures and related compliance requirements by providing adequate and continuous training to school administrators, timekeepers, and supervisors on the necessary procedures to ensure ongoing compliance is effectively monitored. We also recommend that management responsible for each grant develop and reinforce controls for reviewing and approving Multi-Funded Time Reports or timesheets prior to submission to the funding agency, ensuring that the review and approval process is well-documented. In addition, the District should also conduct internal audits to assess the accuracy of timesheets or Multi-Funded Time Reports and the timeliness of signed Periodic Certification submissions to ensure compliance with the established requirements.