In recent years, federal agencies have been increasing the intensity of their monitoring efforts over federal grant awards. This is likely the result of a higher level of federal grant expenditures due to the American Recovery and Reinvestment Act (ARRA) as well as the directive from the Office of Management and Budget (OMB) for federal agencies to increase the transparency and accountability over grant funding.
One area that has been frequently reviewed is compliance with payroll charged to federal awards. We recommend you take some time to evaluate your government’s compliance in this area.
OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, establishes principles and standards for costs charged to federal grants. Within this circular, specific requirements are applicable to salaries and wages. Federal agencies have frequently been finding instances of noncompliance with the specific time distribution requirements. The following summarizes the key requirements of time distribution:
Budgeted estimates or other distribution percentages may be use for interim accounting purposes provided that, at least quarterly, comparisons of actual costs to budgeted distributions are done and necessary adjustments are made. OMB Circular A-87 provides specific guidance if this methodology is followed:
We encourage you to review your compliance with these requirements.