Finding Text
Significant deficiency in internal control over compliance for allowable costs related to cost allocation. Federal Agency: United States Agency for International Development Program Titles: USAID Foreign Assistance for Programs Overseas Assistance Listing Number: 98.001 Pass ? Through Entity: PATH Award Numbers: 72065618CA00001, AID.2134.01708827-SUB Award Periods: May 14, 2018 through April 23, 2024 and February 12, 2021 to December 12, 2021 Criteria Internal controls requirements contained in Title 2 U.S. Code of Federal Regulations Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, Subpart D - Post Federal Award Requirements, Section 200.303, Internal Controls, require that a non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition/Context The Organization?s internal controls require review and approval of costs charged to the Federal awards by a knowledgeable and authorized individual to ensure that costs are accurately allocated and charged. For one of employee selections out of the 40 total selections tested, we noted that the gross salary entered in the allocator for several months was higher than the actual gross wages earned. This resulted in an overcharge of $150 to the federal award. However, the employee was paid correctly for these months. For another selected employee from the 40 selections we tested, the June backpay was inadvertently included in the August payroll allocation resulting in an overall allocation error of $1,957. However, the overcharge to the federal award out of this total error was $1,161. Again, the employee was paid correctly. For one other selection tested, the payroll allocation was pulling May and June hours in the calculation instead of just June, resulting in an undercharge of $240 to the federal award. Management performed additional follow up and noted that this allocation error for June 2022 affected 7 employees in total including the one above. The known extrapolated misstatement was approximately $1,951. The employees were correctly paid. Cause The Organization?s internal controls failed to prevent, or detect and timely correct, these payroll errors from occurring. Effect These payroll errors resulted in over and under charges to the federal awards which could result in questioned costs. Questioned Costs Not determinable. Repeat Finding This is a repeat finding of finding 2021-003. Recommendation We recommend the Organization evaluate where manual payroll processes could be automated to reduce input errors and provide continuous oversight of cost allocations to ensure they are accurately calculated and recorded. Views of Responsible Individual and Corrective Action Plan Management agrees with the finding and has provided the accompanying corrective action plan.