Finding 977720 (2023-002)

Finding 2023-002 Significant deficiency in internal control over compliance for allowable costs related to cost allocation. Federal Agency: United States Agency for International Development Program Titles: USAID Foreign Assistance for Programs Overseas Assistance Listing Number: 98.001 Pass-Through Entity: N/A Award Numbers: 72065618CA00001 Award Periods: May 14, 2018 through April 23, 2024 Criteria Internal controls requirements contained in Title 2 U.S. Code of Federal Regulations Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, Subpart D ‐ Post Federal Award Requirements, Section 200.303, Internal Controls, require that a non‐Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition/Context In our review of one employee's compensation, we discovered that the gross salary registered in the allocator for January did not account for travel pay. This oversight led to an undercharge of $371 to the federal award associated with our selection. The issue was not unique to this incident, resulting in a total under allocation to the award for January amounting to $658. It is important to note, however, that all affected employees received the correct pay for this month. Upon reviewing the records of three other employees, we found that the gross salary entered in the allocator did not include holiday or retroactive pay. Consequently, this resulted in an undercharge to the federal award, amounting $4,077. However, despite this discrepancy, all the employees were paid correctly. Cause The Organization’s internal controls failed to prevent, or detect and timely correct, these payroll errors from occurring. Effect These payroll errors resulted in over and under charges to the federal awards which could result in questioned costs. Questioned Costs Not determinable. Repeat Finding This is a repeat finding of finding 2022-001. Recommendation We recommend the Organization evaluate where manual payroll processes could be automated to reduce input errors and provide continuous oversight of cost allocations to ensure they are accurately calculated and recorded. Views of Responsible Individual and Corrective Action Plan Management agrees with the finding and has provided the accompanying corrective action plan.