FRIENDS FIRST, INC.

2021-001 Payroll Condition: The Organization?s internal controls regarding payroll need to be strengthened to assure that charges to federal awards are accurate and are supported by adequate documentation. Estimated time is used to allocate payroll and other costs to federal awards. For the major program, the difference between actual time and estimated time isn?t reconciled. Employees? pay rates aren?t documented with agreements signed by both parties. Most of the agreements consist of a stated percentage increase instead of the actual compensation. Some employees didn?t have any rate agreement available. Criteria: Subpart E-paragraph 200.430(iii) Standards for Documentation of Personnel Expenses states that Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. The Guidance also states that 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?provided that?the entity?s system of internal controls includes processes to review charges based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable and properly documented. Cause: While the Organization does require employees to complete time reports, it?s assumed these reports and the budgeted estimates are very close so there is no need for a final adjustment. During the pandemic, employees generally weren?t given salary increases, so the agreements available were older and sometimes not available due to storage issues. Effect: The Organization hasn?t documented that charges to the major program accurately reflect actual time spent on the program. Support for employee salaries is not as strong as it could be, and any disagreements may be difficult to resolve, given the lack of documentation. Recommendation: The Organization should prepare a reconciliation of actual time spent on the major program vs budgeted time and adjust for any differences before the final closeout of 9/29/21. Any change to an employee?s compensation should be documented by an agreement that is signed by both the supervisor and the employee. These agreements should be kept on file as a resource and in case of any misunderstanding. Views of Responsible Officials and Planned Corrective Actions: Friends First has an electronic time keeping process where employees document the amount of time spent throughout each day on each program. Payroll costs, which are allocated, were reconciled to actual time recorded for the final closeout Quarter ending 9/29/21, and time keeping was shown to accurately reflect time allocated to the program with no adjustment required. Friends First created standardized agreements in 2020 that are signed by both parties for pay rates and adjustments to pay, and filed electronically, originals retained by organization, and a copy distributed to employee. No new agreements were initiated during the Program Audit 7/01/20-6/30/21.