Finding Text
Finding Number: 2022-005
Prior Year Finding Number: N/A
Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities
Program:
U.S. Department of Treasury
COVID-19 - Coronavirus State and Local Fiscal Recovery Funds
ALN #: 21.027
Award #: Various
Award Year: 03/03/2021 – 12/31/2024
Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, 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.
Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must:
• Be incorporated into the organization’s official records;
• Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and
• Support the distribution of employee salary across multiple activities or cost objectives.
Condition – We sampled and selected 60 out of 10,079 payroll transactions and noted two instances where employee’s salary for the period recorded in the general ledger did not reconcile with statement of earnings that supports the time and effort for the time charged to the program. As a result, payroll expense charged for the period were overstated.
Questioned Costs – Not determinable.
Context – This is a condition identified per review of School System’s compliance with the specified requirements using a statistically valid sample. Total amount of payroll expenditures charged to the program in fiscal year 2022 were $11,603,462 and the known amount of the overstated payroll expenses were $14,525. The total amount of the 60 samples selected was $261,550.
Effect – The School System is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding.
Cause – Payroll expense were not properly calculated and captured in the accounting system.
Recommendation – We recommend that School System improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. In additions, OMB should review and reconcile cost to ensure accuracy.
Views of Responsible Officials – The School System concurs with the auditor’s findings and recommendations. As an on-going effort, the process for creating pay elements for specialized compensation will be monitored for accuracy during the creation stages. Electronic alerts generated in the oracle system will be re-employed to notify appropriate finance personnel of changes. The planned corrective actions are presented in the School System’s Corrective Action Plan attached as Appendix B to the Single Audit Report.