Finding Text
Significant Deficiency – Year End Accrued Payroll - Period of Performance
U.S. Department of Health and Human Services CFDA #93.566
U.S. Department of Labor CFDA #17.258 / 17.259 / 17.278
Criteria: Uniform Guidance requires that revenue is recognized when federal expenditures under cost reimbursement contracts are incurred.
Condition: The Organization's internal controls over financial reporting did not ensure that revenues and expenses were recorded in the proper period. The year end payroll totaling approximately $69,000 was not accrued at June 30, 2022, and therefore was not allocated and charged to grants until the following fiscal year. In addition, the year-end accrued vacation did not agree to the supporting detail resulting in an adjustment of approximately $7,000 that was not allocated to grants in the year ended June 30, 2022.
Cause: This situation was attributed to the turnover and vacancy in the accounting department positions from July 2021 through May 2022 which resulted in the absence of guidance as well as the use of inconsistent accounting methodologies during this period and at year end.
Effect: Grant expenditures and the associated invoicing for reimbursement do not occur in the appropriate fiscal year. Although this is just a timing difference, there is a potential to lose out on receiving reimbursement for expenses depending on the grant period.
Questioned Costs: None
Repeat Finding: No
Recommendation: We recommend the Organization implement payroll accrual procedures at month end in order to ensure costs are captured in the appropriate period and within the appropriate grant period.
Response: The Organization agrees with the finding. There were gaps in information flow due to staff turnover. The Organization already has a process in place for reviewing payroll expenditures. The Organization will significantly increase the practice of capturing payroll expenses in the appropriate period and within the appropriate grant period to report grant expenses for reimbursement.