Finding Text
#2021-003 – Material Weakness – Activities Allowed or Unallowed
Opioid STR Grant ALN 93.788
Criteria
The Office of Management and Budget issuance of the Code of Federal Regulations (CFR) specifically states uniform administrative requirements, cost principles, and audit requirements for federal awards.
In accordance with CFR 200.430, payroll costs charged to the program are allowable when: the total compensation paid to individual employees is reasonable according to the work performed on the program and the compensation is in accordance with the established policies of the organization.
Condition
During the audit we noted the Organization does not have established policies and procedures over payroll. We noted that while the Organization has established hourly and salary pay rates, these rates are not formally established and approved by the Organization’s Board.
Cause
The cause is a lack of a proper control structure that requires Board approval of pay rates and salaries. The Organization also does not have a process in place to ensure that payroll reports are properly reviewed and approved by a second independent reviewer prior to submission to the payroll company for processing.
Effect
The potential effects of not having formally approved pay rates and not having payroll reports reviewed by a second level prior to payroll processing is the potential for errors and overcharging of grants.
Questioned Costs
None
Perspective Information
We reviewed a sample of reports filed with the Pennsylvania Department of Military and Veterans Affairs and the Drug and Alcohol Program. We examined the payroll for each employee charged to the grant for a total of twenty-six employees. The finding represents the unsupported costs noted from this review.
Identification as a repeat finding
A similar issue was noted in prior year finding #2020-003.
Recommendation
We recommend that the Organization begin to formally establish and approve employee pay rates and salaries at Official Board Meetings and that these rates are documented in the Board Minutes. The Organization should also implement procedures to include a second level review of the payroll report for accuracy and completeness prior to submission for payment.
View of responsible officials and planned corrective action
JFT does have all the board minutes on file. However, because we were a small agency, salary rates were not often changed. Additionally, all salary rates and changes were always driven by the ability to obtain the funding needed. Since we were small and there was not always a lot to discuss with the board our board only met twice a year. Therefore, all salary was discussed with the board president, then taken to the board unfortunately there is no formal documentation at this time. As of 2023 our board now meets quarterly. Therefore, the following policy will be included in the fiscal manual: the JFT board of directors will hold a public meeting quarterly. All matters of pay rates and salaries will be approved at the start of each grant cycle. State and county grants will be discussed prior to the July 1 start dates, all federal will be discussed prior to October 1. Any changes in salary must be approved by the board and documented in official board minutes. All board minutes will be placed in a lock file in the Fiscal Coordinator’s office.