Finding Text
Finding Reference Number: SA2023-002 Documenting Payroll Costs Charged to Grant
Assistance Listing Number: 14.218
Assistance Listing Title: Community Development Block Grant – Entitlement Grants
COVID-19 - Community Development Block Grants/Entitlement
Grants-CV
Federal Agency: Department of Housing and Urban Development
Federal Award Identification Number: B-22-MC-06-0010
COVID-19 - B-20-MW-06-0010
Criteria: 2 CFR Part 200.430(i), “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” requires that grantees adhere to the following, “Payroll systems must be based on records that accurately reflect the work performed” and “be supported by a system of internal controls that provides reasonable assurances that charges are accurate, allowable, and properly allocated...” The payroll records must be a part of the official record, reflect the employee’s total activity and show if the specific activity of the person is being paid by more than one federal award.
Section 200.430(i)(viii) indicates that budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that the system for establishing the estimates produces reasonable approximations of the activity actually performed, among other requirements.
Condition: We noted that the payroll costs for three employees were charged to the program based on a flat rate percentage of the payroll and benefits costs, rather than based on the actual hours worked. Although we understand the housing staff periodically reviews the estimates to ensure they were supported and did not need adjustment, there is no formal documentation of the review and conclusions reached. City staff did provide us with the annual timesheet reconciliation worksheets for two of the employees that showed that on average over fiscal year 2023, the employees spent more actual time than was allocated via the flat percentage rate to the grant program.
Effect: The City is not in compliance with the payroll documentation requirements set forth in 2 CFR Part 200.430(i).
Cause: We understand that grant program staff were not aware of the payroll documentation requirement.
Recommendation: The City should establish procedures to ensure that payroll costs charged to the program are documented in accordance with 2 CFR Part 200.430 for the CDBG program and all federal grant programs.
View of Responsible Officials and Planned Corrective Actions: Please see Corrective Action Plan separately prepared by the City.