Finding Text
Criteria:The accounting practices of the non-Federal entity must provide for adequate documentation to support costs charged to the Federal award. Standards for documentation of personnel expenses in Uniform Guidance 2 CFR part 200.430 Compensation – personal services state that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Among various other requirements, these records must: Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award, a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different bases; or an unallowable activity and a direct cost activity. 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; Significant changes in the corresponding work activity are identified and entered into the records in a timely manner. Condition: Salaries charged to the federal award were not supported by distribution schedule identifying the percentage of time each employee was working on the Federal award objective. Cause: The City charged salary expenditures to the grant baased upon percentages used in the grant application. Effect: The City was unable to provide supporting documentation that the costs charged to the grant were allowable. Questioned Costs: $697,935 Context/Sampling: The internal control and compliance testing performed included all salaries charged to the grant. Out of the items tested none of the salaries charged were supported by documentation supporting the allocation charged to the federal award. Prior Year: None Recommendation: We recommend the City review its policies and procedures related to the internal controls over payroll expenditures related to grants and implement a time system to capture appropriate salaries to be charged to the grant. Client Response: The City recognizes the importance of internal controls and plans to enhance procedures to ensure payroll expenditures related to grants are properly captured, documented and charged to the grant. Covid interruptions with related illnesses, early retirements and hiring difficulties all contributed to a negative impact on productivity.