COMMUNITY CONNECTION OF NE OREGON, INC.

Significant Deficiency: During compliance testing we reviewed internal control over compliance of allowable costs for payroll items. We tested 80 total paychecks for internal controls over compliance of allowable costs and found in 2 instances the hours charged to the federal grant were incorrect. One paycheck had all hours charged to a single grant when it should have been allocated to 5 grants. The second instance had the same timesheet entered for 2 employees in error. The overall error was immaterial to the total federal grants affected, however the findings indicate a weakness in internal controls over compliance of allowable costs for payroll being reported to federal grants. Criteria: Auditing standards require us to assess the internal control system of the entity. Communicating internal control related matters identified in an audit is a requirement of the standards. One aspect of this standard requires us to extend this assessment to controls over federal reporting. Condition: Although we found total payroll reported was correct, mis-classification of payroll by grant could lead to incorrect federal reporting.Cause: This condition is caused by a weakness in the internal control process when review of payroll is completed. The entity reviews and approves payroll in total, but specific review of payroll to specific federal grants has limited control.Effect: The total dollar effect is immaterial, however the internal control process should be improved to prevent a material misstatement in the future.Context: The reader should be aware that the entity does have an internal control review of all payroll. In addition, total payroll paid to individuals was correct. Allocations of federal funds should be reviewed for each payroll.Recommendation: We recommend the entity implement a process to review specific charges to federal grants. View of Responsible Officials and Planned Corrective Actions: As recommended above, CCNO has implemented a more thorough review process. The process was implemented effective with the September payroll.