Finding Text
#2022-003 – Material Weakness – Activities Allowed or Unallowed
Opioid STR Grant ALN 93.788
Block Grants for Prevention and Treatment of Substance Abuse 93.959
Criteria
The Office of Management and Budget issuance of the Code of Federal Regulations (CFR) specifically states uniform administrative requirements, cost principles, and audit requirements for federal awards.
In accordance with CFR 200.430, payroll costs charged to the program are allowable when: the total compensation paid to individual employees is reasonable according to the work performed on the program and the compensation is in accordance with the established policies of the organization.
Condition
During the audit we noted the Organization does not have established policies and procedures over payroll. We noted that while the Organization has established hourly and salary pay rates, these rates are not formally established and approved by the Organization’s Board.
Cause
The cause is a lack of a proper control structure that requires Board approval of pay rates and salaries. The Organization also does not have a process in place to ensure that payroll reports are properly reviewed and approved by a second independent reviewer prior to submission to the payroll company for processing.
Effect
The potential effects of not having formally approved pay rates and not having payroll reports reviewed by a second level prior to payroll processing is the potential for errors and overcharging of grants.
Questioned Costs
None
Perspective Information
We reviewed a sample of reports filed with the Pennsylvania Department of Military and Veterans Affairs and the Drug and Alcohol Program. We examined the payroll for each employee charged to the grants for a total of 284 samples. The finding represents the unsupported costs noted from this review.
Identification as a repeat finding
A similar issue was noted in prior year finding #2021-003.
Recommendation
We recommend that the Organization begin to formally establish and approve employee pay rates and salaries at Official Board Meetings and that these rates are documented in the Board Minutes. The Organization should also implement procedures to include a second level review of the payroll report for accuracy and completeness prior to submission for payment.