Rockefeller Philanthropy Advisors, Inc.

Criteria and Context: Organizations that receive federal funding are required to accurately report employee compensation and allocate salaries to programs in accordance with the Office of Management and Budget (OMB) Uniform Guidance, specifically 2 CFR Part 200. These regulations establish a framework to ensure that costs charged to federal awards are reasonable, allocable, and properly documented. When it comes to employee costs, organizations must maintain time and effort records that reflect the actual work performed, especially when staff are funded by multiple programs. These records must account for the total activity for which an employee is compensated and be verified by the employee or a supervisor with direct knowledge of the work. Salary allocations must be based on the relative benefit received by each program, meaning organizations cannot rely on arbitrary splits or budget estimates. Instead, they must use consistent and documented methodologies that align with their internal policies and federal requirements. Compensation must also conform to the terms and conditions of each award and be supported by internal controls that ensure accuracy and compliance. Effective internal control over compliance requires that payroll expenditures be accurately allocated to appropriate funding sources and that such allocations be subject to proper review and approval Condition: During our audit procedures over allowable costs for payroll expenditures, out of a sample of forty we identified two instances of over-allocation to grant-funded programs that occurred in the early part of the fiscal year. These overallocated funds resulted in inaccurate reporting of payroll costs charged to specific grants. Cause and effect: The over-allocations were primarily due to weaknesses in the payroll allocation process. At the beginning of the fiscal year, management utilized a monthly allocation methodology, which lacked sufficient precision and oversight. Additionally, there were instances where payroll allocations were not appropriately reviewed or approved prior to posting. Inaccurate allocation of payroll expenditures may result in noncompliance with grant requirements. Questioned Costs: None reported Identified as a Repeat Finding: No Recommendation: Management should continue enhancing the payroll allocation process by ensuring that all salary distributions are at the actual time worked and substantiated with appropriate documentation. A consistent and well-documented review and approval process should be maintained to uphold transparency and accountability. Additionally, the allocation methodology should be periodically assessed to confirm its alignment with grant requirements and internal control best practices, allowing the organization to remain compliant and responsive to evolving standards. Management Response and Remediation: In the second half of the fiscal year, management transitioned to a more granular allocation approach based on actual pay periods. A more frequent review process was also implemented to monitor payroll allocations and ensure accuracy.

Criteria and Context: Per the Office of Management and Budget (OMB) Uniform Guidance, specifically 2 CFR Part 200, costs charged to federal awards must be allowable, allocable, and incurred within the period of performance specified by the grant agreement. Expenses incurred outside the designated performance period are not eligible for reimbursement under the award and may result in noncompliance. Effective internal control over compliance requires that expenditures be reviewed to ensure they are properly timed and aligned with the terms and conditions of the federal award. Condition: During our audit procedures over allowable costs, we identified two instances from a sample of forty in which expenses were charged to the grant outside of the approved period of performance. Cause and Effect: The exceptions noted were related to invoices that spanned a period that began within the period of performance but had a portion that extended beyond. The transaction timing was insufficiently reviewed during the expense allocation process, and adequate controls were not in place to verify that all costs charged to the grant were incurred within the period of performance. Questioned Costs: None reported Identified as a Repeat Finding: No Recommendation: Management should strengthen controls around recording and charging grant expenses by implementing a formal review process to ensure all costs are incurred within the designated period of performance. This process should include validation of transaction dates prior to posting and periodic training for staff responsible for grant accounting. Management Response and Remediation: Management acknowledges the exceptions and has taken steps to improve the review of grant-related expenditures.