Bridge House and Subsidiaries

Criteria and Condition: Under Uniform Guidance, to be allowable under a federal award, costs must be necessary and reasonable, conform to any limitations or exclusions in the terms and conditions of the award, be consistent with the non Federal entity’s policies, be treated consistently, be determined in accordance with GAAP as applicable, and be adequately documented. Payroll charges to federal awards must be supported by recorded evidence that accurately reflects the work performed, including documentation of hours worked and pay rates used to charge the program. Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations and terms and conditions of the Federal award. Costs that are not properly supported, or that are unreasonable or noncompliant with award requirements, are subject to being reported as questioned costs.

During testing of twenty-five payroll transactions charged to the program, Bridge House was unable to provide adequate supporting documentation for seven items. Five items in the sample lacked evidence of proper supervisory approval of the related time records or payroll charges. In addition, five items were determined to be unallowable expenses under the grant, based on the nature of the costs and/or the lack of support. Several of these exceptions overlapped, such that some sampled items were inadequately documented, lacked required approval, and/or included unallowable costs.

Cause: These conditions occurred because Bridge House has not implemented or consistently enforced sufficient internal controls over payroll charges to the grant. Specifically, management did not ensure that (1) required supporting documentation for payroll costs was obtained and maintained for all employees charged to the program, (2) time records and payroll charges were reviewed and formally approved by appropriate supervisors prior to billing, and (3) staff responsible for preparing and reviewing grant payroll charges were adequately trained to identify and exclude unallowable payroll costs. As a result, multiple sampled items lacked adequate documentation, were missing required approvals, and included unallowable expenses, with overlap among these conditions.

Context and Effect: Because of these control deficiencies, payroll charges to ALN 21.027 were overstated and/or inadequately supported, resulting in known questioned costs of $945 that may be disallowed by the federal awarding agency or pass through entity. These conditions increase the risk of noncompliance with the Uniform Guidance requirements for allowable costs and documentation for payroll charged to the program.

Questioned Costs and Likely Questioned Costs: Based on the specific exceptions identified in our sample, known questioned costs total $954 for the period tested. Using the results of the sample and projecting the errors to the applicable population of payroll charges, we estimate likely questioned costs of $30,991 for the program.

Identification of Repeat Findings: This is not a repeat finding.

Recommendation: Proper control activities should be implemented to allow for a consistent, accurate, and allowable method to support distribution of personnel charges to federal programs. Management should establish procedures requiring that all hours billed to the grant be supported by approved timesheets that are compared to payroll system hours, with differences investigated and resolved before reimbursement requests are submitted. In addition, a secondary review of grant invoicing templates (by someone independent of preparation) should be performed to verify the accuracy of hours, rates, and period of performance prior to submission.