CITY OF BERLIN, NEW HAMPSHIRE

Criteria: Effective control over financial reporting includes documentation of review and approval of critical inputs, including rates of pay and hours worked to ensure employees are paid appropriate amounts for time worked. Federal cost principles over allowable costs require documentation of time and effort. Condition: During our testing of compliance with the federal programs, we identified multiple instances of individuals who did not have documented rates of pay on file including approval. Additionally, it was noted that the City School Department’s control activities lacked a process for documenting review and approval of employee timecards. Cause: Design of control activities over School Department payroll does not include formal approval of timecards completed by all employees. Additionally, personnel files were not properly reviewed or maintained, which led to incomplete and or missing documentation in regard to rates of employee pay.Effect or potential effect: Failure to document approved rates of pay and approval of time worked increases the risk that employees may be paid an incorrect amount, amounts charged to grant programs may be incorrect or inconsistent with actual time and effort. Increased risk of wage claims against the City from employees claiming underpayment. Questioned costs: None. Context: We noted the lack of approval of time worked was systemic to the design of payroll controls at the City’s School Department. Lack of documentation of rates of pay was noted for 3 individual employees over a total of 6 transactions in a sample size of 26. Recommendation: We recommend reviewing employee personnel files to ensure completeness, including documented approval of rates of pay. Additionally, we recommend the City School Department evaluate the design of its internal control activities over payroll to include documentation of the review and approval of time reported by hourly employees. Views of responsible officials: In agreement with the finding and will comply with the recommendation as outlined above. The City School Department has since implemented (July 1, 2024) a process to follow up with grant managers and file the required documentation in a designated location for each respective grant, and Business Administrator will follow up on certifications on a semi-annual basis.

Corrective Action Plan: Accounts Payable Specialist will send a series of follow up emails to grant managers for, but not limited to IDEA, Title I, & 21 st Century Grants and will file in designated location for each respective grant. Business Administrator will follow up on a semi-annual basis. Name of Responsible Person: Business Administrator - Evan Arsenault Anticipated Implementation Date of Corrective Action: July I, 2024