Finding Text
2022-004 – Internal Control Over Compliance and Compliance - Activities Allowed or Unallowed and Allowable Costs/Cost Principles
Program- U.S. Department of Energy, Environmental Monitoring/Cleanup, Cultural and Resource Management Emergency Response Research, Outreach, Technical Analysis
ALN: 81.214, Award #: DE-EM0005173, Award Year: 04/23/2018 – 06/30/2023
Program- U.S. Department of Health and Human Services, Strengthening Public Health Systems and Services through National Partnerships to Improve and Protect the Nation’s Health
ALN: 93.421, Award #: Various, Award Year: 08/01/2018 – 07/31/2023
Criteria - The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award.
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 our payroll disbursement testing for major program ALN 81.214, we noted that for one (1) out of eight (8) samples for testing, there was no proper review on the calculation of compensated absences and fringe benefits. In particular, the expense calculation was prepared, reviewed and approved by only one individual, the CFO. During our payroll disbursement testing for major program ALN 93.421, forty (40) samples were selected for testing. We noted the following:
• For two (2) samples, the project codes used to record the payroll expense in the general ledger were not the same as the project codes entered by the employees in the timesheets.
• For one (1) sample, the project code used to record the payroll expense in the general ledger was not found in the timesheet.
• For one (1) sample, the hours used to record payroll expense in the general ledger did not agree with the hours entered by the employee in the timesheet.
• For one (1) sample, there were two different salary rates used for regular hours worked by the employee.
• For six (6) samples, there was no proper review process on the calculation of compensated absences and fringe benefits. In particular, the expense calculation was prepared, reviewed and approved by only one individual, the CFO.
Questioned Costs – Not determinable.
Context – This is a condition identified per review of NGA Center’s compliance with specified requirements using a statistically valid sample.
Cause – NGA Center is not adhering to the internal control policies and procedures to ensure that payroll costs are in accordance with the time and effort reporting requirements. NGA Center does not have procedures in place to ensure adequate documentation that the hours entered in the timesheet are correctly charged to the project codes.
Effect – NGA Center was unable to provide documentation to demonstrate that the payroll expenditures charged to the programs accurately reflected the actual time incurred on the programs and whether they were properly supported in accordance with 2 CFR Part 200.430 Compensation-personal service.These errors resulted in incorrect amounts charged to the Federal programs.
Repeat Finding – This is not a repeat finding.
Recommendation – We recommend that NGA Center improve internal controls over the review of timesheets and hours charged to the grants, including the maintenance of adequate records and documentation. In addition, we recommend improvement on the preparation and review of compensated absences and fringe benefits. The preparation and review should be performed by different individuals to reduce the risk of both erroneous and inappropriate actions.
Views of Responsible Officials – NGA Center agrees with the finding and recommendations of this finding set forth within and has developed a corrective action plan to address the lapse in the prescribed internal controls.