Finding Text
Criteria: Controls over allowable costs. Internal controls should ensure payroll and nonpayroll expenditures included in the monthly billings are allowable costs under the program requirements and for proper financial reporting.
Condition and Context: People Working Cooperatively, Inc. and Subsidiaries’ process for approving payroll timecards did not function as designed. CSH noted two instances (in a sample of 40) specific to Community Development Block Grants/Entitlement Grants payroll control testing and 1 instance (in a sample of 40), specific to Community Development Block Grants/Entitlement Grants nonpayroll control testing, in which the employee’s timecard (labor related to payroll and mileage related to nonpayroll) was not approved by a manager or supervisor.
Effect of Condition: An unallowable cost could have been included in the billing to the grant. In addition, an error in financial reporting could have occurred.
Cause of Condition: People Working Cooperatively, Inc. and Subsidiaries did not follow their documented internal controls over financial reporting and allowable costs to ensure only allowable payroll and nonpayroll expenditures were properly approved.
Recommendation: People Working Cooperatively, Inc. and Subsidiaries should review its payroll approval process with the appropriate supervisors and members of management to ensure the implementation of internal controls for proper timecard approval.
Management’s Response: Prior to this audit, PWC engaged with an independent third party for an assessment of our internal processes and procedures. PWC is proactively working to both improve processes and have an impartial outside expert identify potential weaknesses. Upon discovery of this weakness in internal control, an exception report was developed to ensure appropriate supervisors have approved all timecards each week. Additionally, PWC has made a request to the software developer of its timecard system to address and correct the approval logic which allowed this weakness to exist. We expect the software fix to be created and implemented by the summer of 2024.