Finding Text
Identification of the Federal Program: Federal Assistance Listing #93.600; US Department of Health and Human Services; Head Start Cluster; Activities Allowed/Unallowed and Allowable Costs/Cost Principles Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: Internal controls over the payroll transaction cycle were not operating effectively in that payroll was being processed without proper review and approval of employee timecards being performed by supervisors. Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to the Organization?s federal programs. In testing payroll transactions for compliance, we identified instances of employees? timecards lacking approval from supervisors prior to their hours being charged to the federal program. Cause: The Organization did not have an effective internal control process in place to ensure documentation of adequate review and approval of timecards being performed prior to payroll processing. Effect: Payroll costs were being charged to the federal program without proper approval of timecards for time charged to the federal program. Questioned Costs: None reported. Context: A nonstatistical sample of 40 expenditures were selected for testing. Of the sample of 40 transactions selected, 20 of the transactions were related to the payroll transaction cycle. The sample of 20 payroll transactions totaling $287,754 included testing of payroll for 387 individual employee payroll transactions from a population of 9,340 individual employee payroll transactions totaling $3,688,359. Of the 387 payroll transactions tested, 106, or 26%, were lacking documentation of adequate review and approval. Repeat Finding from Prior Years: No Recommendation: We recommend the Organization review and enhance its existing internal control processes over the payroll transaction cycle to ensure timecards are reviewed and approved by supervisors prior to salaries and benefits being charged to federal programs. Views of Responsible Officials: Management agrees with the noted finding. Management will continue to refine processes to ensure timecards are reviewed and approved by supervisors prior to salaries and benefits being charged to federal programs.