INMED PARTNERSHIPS FOR CHILDREN, INC.Non-Profit

U.S. Agency for International Development, Assistance Listing Number 98.001, USAID Foreign Assistance for Programs Overseas Criteria 2 CFR 200.430(i) requires non-federal entities to maintain records that accurately reflect the work performed. The records should be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated. 2 CFR 200.431(b) states the cost of fringe benefits in the form of regular compensation paid to employees during periods of authorized absences from the job, such as for annual leave, family-related leave, sick leave, holidays, court leave, military leave, administrative leave, and other similar benefits, are allowable if all of the following criteria are met: (1) They are provided under established written leave policies; (2) The costs are equitably allocated to all related activities, including Federal awards; and, (3) The accounting basis selected for costing each type of leave is consistently followed by the non-Federal entity or specified grouping of employees. Condition INMED used timesheets to allocate payroll to the federal grants as required, but leave and holidays were not equitably allocated based on timesheets for personnel working in South Africa. Instead, INMED allocated leave and holidays among various projects judgmentally. Furthermore, when allocating salaries among projects at month end INMED used each program?s pro-rata share of time for all employees and the total salaries for the month instead of calculating the allocation on an individual employee basis. Context We tested two monthly allocations of payroll for four personnel in South Africa, consisting of 8 payroll transactions. We noted all 8 payroll transactions charged to the federal program were not allocated properly. Management reviewed the payroll allocation for the whole year and noted that the two issues noted above resulted in a net understatement of payroll related expenses charged to the major program of $2,836 for the year. Payroll is the largest expense charged to this grant and as a result this could cause a material error. Our sample was not a statistically valid sample. Cause Personnel in South Africa were not aware of the proper allocation rule as required by Uniform Guidance and the review by INMED?s headquarters staff as part of the financial close process did not detect the error. Effect This resulted in understatement of payroll related expenses charged to the federal program. Questioned Costs None. This resulted in a net understatement of payroll related expenses charged to the federal program. Recommendation As part of the monthly closing process, we recommend that US accounting personnel review the timesheet allocation prepared by South Africa personnel to ensure that the allocation methodology is in compliance with Uniform Guidance.