Asian Counseling and Referral Service

2020-001 ? Allowable Costs/Cost Principles Federal Agencies: Department of Health and Human Services Assistance Listing Numbers: 93.044, 93.045, 93.053 Program: Aging Cluster Criteria: The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.430 Compensation ? Personal Services: ?Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity?s written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity; and (vi) [Reserved] (vii) Support the distribution of the employee?s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. (viii) 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 purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-Federal 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; and (C) The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal award 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 allocated.? Condition: We noted that the Agency allocated payroll expenditures to the Aging Cluster programs during 2020 based on budget allocation rates. Employees properly tracked and reported their time based on actual time spent, however, when payroll and related costs were charged in the accounting system, they were charged based on the budgeted allocated rates, which differed from the allocations per the timesheets. There was no procedure in place to determine if a true-up was necessary from allocated costs. Specifically, 24 out of 40 timesheets were recorded based on budgeted allocation rates that differed from actual time charged by employees. The amount undercharged was $822. Questioned Costs: For the employees? payroll and related expenditures that were based on budgeted allocations instead of actual time spent, as the timesheets tested resulted in an undercharging to the grants, there are no known or likely questioned costs. Context: This is a condition identified per review of the Agency?s compliance with specified requirements using a statistically valid sample. Payroll costs including fringe benefits for the Aging Cluster program in 2020 were $188,227. Effect: Without adequate controls in place to ensure costs based on budgeted allocations are reasonable and reconcile to the actual time spent on the program, the Agency could incorrectly charge expenditures to the federal program, or not request appropriate reimbursement the Agency is entitled to under the terms of the grant. Cause: The Agency did not have policies and procedures in place to review and reconcile the estimated amounts of payroll expenditures charged to the Aging Cluster program to the actual expenditures incurred. Recommendation: We recommend that the Agency implement policies and procedures to review for any necessary budget to actual adjustments, and we recommend that sufficient documentation be maintained to support any adjustments made as required by 2 CFR 200.430. Views of Responsible Officials: The Agency agrees with the finding. See the attached unaudited corrective action plan.