Finding Text
2022-002 Internal Control over Compliance with Activities Allowed or Unallowed, Allowable Cost/Cost Principles ? Payroll Activities Information on the Major Federal Programs ? United States Department of Treasury Assistance Listing Number: 21.027 Assistance Listing Name: Coronavirus State and Local Fiscal Recovery Funds Passthrough Entity: State of Illinois, Department of Commerce and Economic Opportunity Program Title - Small Business Community Navigators Program Pass-through Entity Identifying Number - 21-483011 Sub-award Period - July 1, 2021 to June 30, 2022 National Endowment for the Humanities (NEH) Assistance Listing Number: 45.164 Assistance Listing Name: Promotion of the Humanities Public Programs Program Title - Telling the Full Story: Sustaining the Stewards of America?s Diverse Historic Places Award Number - ZOR-283411-21 Award Period - October 1, 2021 to September 30, 2023 Program Title - For the People by the People: Transforming National Trust Historic Sites through the Humanities Award Number - ZPP-283412-22 Award Period - October 1, 2021 to March 31, 2023 Criteria ? The Code of Federal Regulations 2 CFR 200.303, Internal Control, requires the non-federal entity to establish and maintain effective internal control over Federal awards that provides reasonable assurance that the non-federal entity is managing Federal awards in compliance with Federal statutes, regulations, and other terms and conditions. Per 2 CFR Section 200.430 Compensation ? Personal Services: ?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 establish 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 (i) of this section, Standards for Documentation of Personnel Expenses, when applicable.? 2 CFR Section 200.430(i): ?Standards for Documentation of Personnel Expenses (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. (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards.? Condition ? During the audit, we noted that the Trust has a system of internal control by which every pay period, timesheets are submitted by each employee and approved by a supervisor. However, given the system limitations from the time-entry system, employees can only charge hours to their home department, and those employees who do not work solely on the federal program are not able to charge hours directly to the federal award through the system. Given the system limitations, program managers gathered documentation to evidence the hours and associated costs which should be charged to the federal award and recorded the corresponding personnel costs to the federal award through a journal entry; however, there was no direct evidence of review and approval of these personnel costs charged to the federal awards, other than an approval of the journal entry. While there was a lack of direct approval of hours charged to the federal program by program managers, we validated that the employees who charged time to the federal awards as part of our sample selection were included in the budgets for the federal programs. Cause ? The Trust?s system of internal control did not have procedures in place for program managers to approve the hours charged to the federal awards. Effect or Potential Effect ? Without direct approvals that the personnel costs charged are accurate, the Trust is not able to demonstrate that key elements in a system of internal control over recording of time exists. Questioned Costs ? None. Context - This is a condition identified based upon our review of the Trust?s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. Repeat finding ? This is not a repeat finding.Recommendation ? We recommend that the Trust strengthen its current policies and procedures to ensure that payroll costs charged to federal awards are supported by a system of internal controls that allows for timely employee preparation and certification and supervisory approval of time charged to the federal awards. Views of Responsible Officials - The Trust will implement procedures in fiscal year 2023 requiring supervisors to review and approve time charged to federal awards in addition to the reviews performed by finance staff as part of ongoing monitoring of federal awards, including approval of time incurred during the fiscal year prior to implementation of new procedures.