Finding Text
2023-003 – 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: 1H79TI084507-01
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 received a full bi-weekly pay even after termination. This resulted to an overpayment to the employee amounting to $6,923 which was charged to the program.
Cause:
The overpayment was due to an oversight and payroll missing to update the employee’s status to terminated in the payroll system.
Effect or Potential Effect:
This resulted to the questioned costs noted above.
Questioned Costs:
Known questioned costs of $6,923 in relation to our sample. Unable to determine unknown questioned costs.
Context:
We tested a sample of 40 items and found one exception amounting to $6,923 as noted in the condition. 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 to processing and payment to employees. Management should also consider automating the process, where possible, to avoid human errors in the process. 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.