OIG Audit – Fringe Benefits

Summary Paragraph

The Office of Inspector General (OIG) conducted an audit of the Applicant’s projects related to Tropical Storm Frances and recommended disallowing $63,095 from ten Project Worksheets (PWs), due to ineligible overtime fringe benefit charges.  FEMA concurred and de-obligated $63,095 from the ten PWs.  In its first appeal, the Applicant asserted that its project systems team conducted an internal audit of its SAP financial accounting system and confirmed that the payroll overtime additives were accurately calculated.  The Applicant argued that the OIG’s misunderstanding of its financial accounting system led to the misinterpretation of the accounting data.  The Regional Administrator denied the first appeal because the Applicant offered no additional documentation on which to base a challenge to the OIG’s conclusion.  In its second appeal, the Applicant reiterated its argument and provided additional documentation addressing the ineligible overtime fringe benefit costs identified by the OIG audit. 

Authorities and Second Appeals

• 44 C.F.R. § 206.228(a)(4).
• PA Guide, at 37.

Headnotes

• 44 C.F.R. § 206.228(a)(4) states that for the performance of eligible permanent work, straight-time salaries and benefits of a subgrantee’s permanent employees are eligible for reimbursement.

• Fringe benefits are calculated differently between straight-time and overtime labor.  The OIG audit found that the Applicant incorrectly claimed some fringe benefits applicable to regular time on overtime labor.  The Applicant disagreed and provided additional documentation to demonstrate that its SAP financial accounting system accurately calculated all fringe benefits on both regular and overtime labor.

• PA Guide provides that fringe benefits actually paid as part of an established policy are eligible.  The fringe benefit rates are different for regular and overtime hours because certain items in a benefits package, such as health insurance, are not dependent on hours worked. 

• The Applicant argued that the OIG misunderstood its financial accounting system and disallowed certain fringe benefits that should be allowed on overtime hours.  The Applicant provided sufficient documentation to show that its SAP financial accounting system accurately calculated fringe benefit rates that are appropriately different for regular and overtime hours.