Finding Text
Finding 2022-002 Lack of Internal Control over Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: U.S. Department of the Treasury (passed through Alaska Community Foundation and Municipality of Anchorage). Federal Program: ARPA Nonprofit Recovery Fund (Alaska Community Foundation), 2021 ARPA Houselessness Stabilization & Coordinated In/Outflow (Municipality of Anchorage), respectively. ALN: 21.027 Award Numbers: None (Alaska Community Foundation) and #21356 (Municipality of Anchorage), respectively. Award Year: 2021 Type of Finding: Significant deficiency in internal control over compliance and noncompliance. Criteria: Adequate internal control over payroll transactions should be in place to ensure that personnel files are complete with all necessary documentation, which includes documented proof of approved pay rates and documentation of where the payroll expense should be coded. Condition and Context: During our testing of payroll transactions, we noted a substantial number of transactions which we were unable to verify pay rates or a personnel action form indicating approved coding, as required by the Organization?s policies and procedures. The finance department lacked the necessary supervisory capacity to determine and approve personnel information essential to determine the accuracy of payroll expenses. For each of the major programs listed above we attempted to test four payroll transactions and management was unable to provide supporting documentation of pay rates or personnel action forms for nearly all transactions tested. Cause: Lack of an adopted policy for documentation of employee pay rates. Effect: The lack of supporting documentation allows for the potential for misstatement of expenditures due to employees being paid incorrectly or charged to funding sources for which their payroll is an unallowable cost. Questioned Costs: Actual and likely questioned costs estimated to be below the reporting threshold of $25,000. Based on the auditors? review of pay rates, all employees were being paid a reasonable amount based on their position and the auditors? experience with similar entities. Repeat Finding: This is not a repeat finding; however, we have determined it to be a systemic issue. Recommendation: We recommend that management implement employment contracts or personnel action forms that document the approved pay rates for employees that are included in personnel files. Managements Response: Management agrees with this finding. See Corrective Action Plan.