Boyne City Public SchoolsLocal Government

Documentation of Allocation of Employee Compensation to Federal Awards Type: Significant Deficiency in Internal Control over Major Program, Immaterial Noncompliance Criteria: Under the cost principles contained in Title 2 US Code of Federal Regulations Part 200.430, allowable direct costs chargeable to federal awards include compensation of employees for the time devoted and identified specific to the performance of these awards. When an employee spends time among specific activities or cost objectives, the School District should maintain support for the distribution of time. 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, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity performed. (B) Significant changes in the corresponding work activity (as defined by the nonfederal 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. (C) The nonfederal entity’s system of internal controls includes processes to review after-the-fact interim changes made to a federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Condition and Context: Per School District policy, all federal employees are required to have personnel activity reports (PARs) or semi-annual certifications. It was noted during payroll tested that these items were not maintained for all federal employees. There were no questioned costs and all payroll expenses appeared to be allocated correctly. Cause: Incorrect implementation of District policy caused the condition to exist. Effect: As a result of this condition, it is possible the District does not fully comply with Department of Education requirements. Recommendation: We recommend the District closely monitor its personnel documentation, specifically related to PARs and semi-annual certifications to ensure that compliance is sufficiently documented. View of Responsible Officials: The CFO is going to ensure the District’s policy of maintaining PARs and semi-annual certifications is followed in subsequent years.