Finding Text
2022-002 Allowable Costs/Cost Principles Criteria: Reports reflecting the distribution of activity of each employee must be maintained for all staff members whose compensation is charged, in whole or in part, directly to awards, in accordance with Cost Principles for Non-Profit Organizations (2 CFR Part 230.8). Charges to Federal awards must also be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. These records must also 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. Condition: The Organization provided time records that account for the number of hours worked by the selected employees and the departments employees are charged. The Organization is using projected salaries including vacant positions in order to calculate their full-time equivalent rate to be used for administrative allocations and not using actual time. We noted that the expenses are not being properly tracked by federal grant within the general ledger properly to show expenses are not being allocated to multiple grants. Cause: The Organization asserts that time records are consistently maintained to support the allocation of staff time to different functions however, budget estimates are used to support for charges to Federal awards. Effect: Budget estimates (i.e., estimates determined before the services are performed) alone, do not qualify as support for charges to Federal awards. Questioned Costs: None. Recommendation: We again recommend that quarterly recaps of the time sheets be done and that the time analysis be compared to the actual percent being allocated. If necessary, the projected allocation percentages, including full time equivalents, should be changed to reflect the actual time spent as required under 2 CFR 230. Also, the previous quarter should also be adjusted if the revised percentages would cause the financials to be materially misstated. We further again recommend that all employees receive additional training on filling out time sheets and that supervisors receive written procedures on reviewing the time sheets before approving to ensure that they are properly completed. With regards to allocations to awards, we recommend that the Organization properly allocate expenses within the general ledger to reflect the actual expenditures submitted for reimbursement and to ensure no expenses are being reimbursed from multiple grants. Grantee Response: El Hogar del Ni?o will strengthen its internal controls. An expense allocation method will be developed that will more closely reflect the benefit each funding source receives from the expense and is supportable either by an amendable allocation method such as, real time tracking of time, number of students served or square footage to name a few possible examples. Where estimates are used in budgeting, quarterly after-the-fact adjustments will be made when there is a material variance from budget.