Finding Text
Federal Agency: U.S. Department of the Treasury
Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds
Assistance Listing Number: 21.027
Federal Award Identification Number and Year: N/A
Pass-Through Agency: State of Arizona, the Office of the Governor
Pass-Through Number(s): GR-ARPA-AHCA-050122-01
Award Period: May 1, 2022 - June 30, 2024
Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matters
Condition/Context: Although management had processes and procedures in place to allocate
budgeted employee time and costs to their grant award program, management either did not maintain
or did not perform procedure to formally track employees' actual time and effort.
Criteria or specific requirement: In accordance with the Compliance Supplement, Part 6 – Internal
Control, 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and
maintain internal control over the federal awards that provides reasonable assurance that the
nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and
the terms and conditions of the federal awards.
In accordance with 2 CFR 200.430 (a), 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 established 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, when applicable.
In accordance with 2 CFR 200.430 (g), for compensation to members of nonprofit organizations,
trustees, directors, associates, officers, or the immediate families thereof, determination must be made
that such compensation is reasonable for the actual personal services rendered rather than a
distribution of earnings in excess of costs. This may include director's and executive committee
member's fees, incentive awards, allowances for off-site pay, incentive pay, location allowances,
hardship pay, and cost-of-living differentials.
Questioned costs: None.
Cause: The Organization did not have established internal controls and policies over the
documentation of time and effort related to payroll disbursements. Because of the limited number of
staff participating in the grant, management was aware that the actual time spent by employees met or exceeded the budgeted allocations. Effect: The Organization was not in compliance with the Compliance Supplement and the Code of
Federal Regulations related to the documentation of time and effort provisions for payroll
disbursements.
Repeat Finding: No
Recommendation: We recommend that the Association adopt a formal policy for tracking employee
time and effort supporting grant expenses. Additionally, management should summarize the actual time
employees spend on grant award programs and adjust the budgeted cost allocations to reflect the
actual time spent. A second person knowledgeable of grant award requirements should review the time
and effort summaries for proper completion and recording. This will help ensure that internal controls
over compliance are established and will help ensure that cost charged to grant award programs are
supported and allowable.
Views of responsible officials: Management agrees with the audit condition.