Finding Text
2023-003: Allowable costs/cost principles – Compensation
Cluster: Research and Development
Sponsoring Agency: U.S. Department of Justice, Department of Health and Human Services, and U.S. Department of Homeland Security
Award Names: 2021 DOJ NIJ Heat Flux Through Walls, 2021 National Institute of Health Award, 2022 National Institute of Health Award, 2019 DHS Fire Prevention and Safety (FP&S), and 2018 DHS Assistance to Firefighters Grant (Subaward)
Award Numbers: 15PNIJ-21-GG-04167-RESS, 7R56DE029950-02, 1R56DE031814-01, EMW-2019-FP-00770, and EMW-2018-FP-00482
Assistance Listing Titles: National Institute of Justice Research, Evaluation, and Development Project Grants, Oral Diseases and Disorders Research, Assistance to Firefighters Grant
Assistance Listing Numbers: 16.560, 93.121, and 97.044
Pass-through entity: The Board of Trustees of the University of Illinois (for grant # EMW-2018-FP-00482)
Criteria
According to the Code of Federal Regulation Standard 2 CFR 200.430(i)(1)(viii), 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:
(A) The system for establishing the estimates produces reasonable approximations of the activity actually performed;
(B) Significant changes in the corresponding work activity (as defined by the non-Federal entity's written policies) are identified and entered into the records in a timely manner. Short term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and
(C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.
Condition
The Company charges compensation costs to federal awards based on actual hours incurred, however, for
certain awards, the hourly rate used to charge the federal award is based on midpoint of the labor rate
range by employee type (versus the actual compensation rate for a given employee). No formal review was
performed over the budgeted labor rates used to determine if any adjustments to actual cost were needed
for each award. Through our testing of 13 compensation selections totaling $47,724, we identified eight
selections totaling $33,240 where the compensation rate used was based on budgeted labor rate. When assessing these further with management, the impact to the awards for our selections was the Company could have charged an additional $4,287 to the awards.
Cause
The Company was not aware that a control should have been in place to true up labor charges based on a budgeted rate to actual labor rates.
Effect
The lack of a formal process for review over the budgeted rate used in calculating the allowable compensation could result in amounts charged to federal awards that are not accurate.
Questioned Costs
Based on the audit results, there was a net amount of $4,287 of additional labor costs that could have
been charged to certain federal awards.
Recommendation
We recommend the Company formalize the review required for the budget labor rates used in calculating charges to federal awards.
Management's Views and Corrective Action Plan
Management’s views and corrective action plan are included at the end of this report after the summary of status of prior audit finding.