Finding Text
Criteria: The Organization allocates payroll costs using an allocation that is updated on a quarterly basis based on the pounds of food distributed by category.
Condition: During audit testing it was noted that indirect payroll costs did not follow the cost allocation plan for the final three quarters of the fiscal year.
Cause: Cost allocation percentages were not reviewed and updated for transactions in the final three quarters of the fiscal year which allowed expenses to be recorded at the incorrect allocation among programs.
Effect: The incorrect allocation being used amounted to a $132,257 overstatement of expenses being allocated to the food distribution cluster.
Questioned costs: $132,157 (total payroll transactions incorrectly allocated based on finding above).
Context: A non-statistical sample of 4 payroll periods were selected out of a population of 26 for testing. It was noted that three of the payrolls tested the costs allocation was not accurate. Upon further review by the Organization it was noted that error impacted three of the four quarters.
Recommendation: We recommend that the Organization ensure review procedures are implemented or adjusted to include the review of the cost allocation used.
Views of responsible official and planned corrective action: Management's response is reported in "Management's View and Corrective Action Plan" included at the end of this report.