Finding Text
2023-002 – Allowable Cost/Cost Principles – Internal Control Over Compliance –Noncompliance
Information on Federal Program:
U.S. Department of Health and Human Services
ALN Number: 93.243
ALN Name: Substance Abuse and Mental Health Service Projects of Regional and National
Significance
Grant Award Number: 1H79TI083607-01
Contract Period: 07/01/2022 - 6/30/2023
Criteria:
The 2 CFR Part 200 establishes cost principles for determining costs applicable to federal awards. The OMB Compliance Supplement, Part 3 – Compliance Requirements, Allowable Cost/Cost Principles notes that “Direct costs are those costs that can be identified specifically with a particular final cost objective, such as a federal award, or other internally or externally funded activity, or that can be directly assigned to such activities relatively easily with a high degree of accuracy.” Further, the Uniform Guidance Section §200.403(g) states that for costs to be allowable under federal awards, they must be adequately documented, and there must be sufficient documentation.
Condition:
During our testing of personnel costs, we noted that one employee was improperly classified as an hourly employee instead of a salary-based employee which led to the employee being paid $200 more per paycheck for four pay periods.
Cause:
The overpayment was due to human error caused by the Human Resource clerk. The employee sampled was a salaried employee, however, in the timekeeping system the employee was classified as an hourly employee in error. This led to payroll not being able to review and make adjustments to this employee’s hours (related to any leave taken during the pay period) when payroll ran the timekeeping system report for salary employees and led to the employee being overpaid.
Effect or Potential Effect:
This resulted to the questioned costs noted above.
Questioned Costs:
Known questioned costs of $800 in relation to our sample. Unable to determine unknown questioned costs.
Context:
We tested a sample of 40 items and found one employee exception as noted in the condition. The sampled employee occurred twice in sampled items that were tested during the audit and based on information reviewed, the total overpayment to this employee amounted to $800. This is a condition identified per review of the Organization’s compliance with specified requirements using a statistically valid sample.
Recommendation:
In order to facilitate accurate reporting and compliance with terms and conditions of federal awards, we recommend management to enhance controls related to payroll processing to ensure that payroll is accurate prior processing and payment to employees. This also assists in ensuring that only allowable costs are charged to the program.
Views of Responsible Official and Planned Corrective Action:
The Company agrees with the finding identified. The Company’s response to the finding is described in the accompanying management’s corrective action plan.