SIGNIFICANT DEFICIENCY 2025-001 Inadequate Internal Controls Over Monthly Grant Billings and Allowable Costs Recommendation: Monthly grant billings should be prepared by the CEO and reviewed by the Director of Operations prior to submission. This will establish segregation of duties and reduce the r...
SIGNIFICANT DEFICIENCY 2025-001 Inadequate Internal Controls Over Monthly Grant Billings and Allowable Costs Recommendation: Monthly grant billings should be prepared by the CEO and reviewed by the Director of Operations prior to submission. This will establish segregation of duties and reduce the risk of billing errors. In addition, management should implement a quarterly oversight review by the board to confirm that allowable cost requirements are being followed. The Manchester Community Resource Center, Inc recognizes that during the 28 years of operation, this is the first audit finding for the agency. The total overbilling was less than 3% of the overall contract. The agency acknowledges the overbilling resulted from inadequate internal controls over the invoicing process. Specifically, the existing procedures does not define the segregation of duties. Management review controls were not adequate to identify billing errors before invoices were sent to the contracting agency. Corrective Actions: The organization has taken immediate and long-term corrective actions to address this finding and strengthen its financial management system. Immediate Actions: • Management will conduct a comprehensive review of all invoices submitted under the affected contract to identify any additional discrepancies. • Immediately following the completion of the financial audit, the contracting agency will be notified of the error, and arrangements will be made to reimburse the overpayment. • Staff responsible for contract billing received immediate instruction regarding allowable costs, billing requirements, and contract compliance. Internal Control Improvements: The Board of Directors will work with management to review and revise the organization's written financial policies and internal controls related to contract billing. Revised procedures will include: • A standardized invoice preparation checklist. • Verification that all billed costs are supported by accounting records and source documentation. • A reconciliation of invoices to the general ledger and contract budget before submission. • Documentation of all calculations supporting each invoice. • Written supervisory approval of every invoice prior to submission. Maintain a grant billing file containing all supporting documentation for each invoice. • Have the finance committee review federal grant billing as part of its regular meetings. Segregation of Duties: To the greatest extent possible, billing responsibilities will be separated among multiple individuals. The employee preparing the invoice will not be the sole individual responsible for reviewing and approving the invoice prior to submission. When staffing limitations prevent full segregation of duties, an independent management review will be documented. Management Oversight: The Chief Executive Officer will prepare all invoice packets that will include supporting documentation. The Director of Operations will perform and document a secondary review of each invoice before it is submitted to the funding agency. This review will verify: • Mathematical accuracy. • Compliance with contract requirements. • Accuracy of supporting documentation. • Proper allocation of costs. • Consistency with the approved budget and contract terms. Board Oversight: The Board of Directors will enhance its financial oversight by: • Reviewing, revising, and approving the financial policies and internal controls. • Receiving periodic reports regarding grant and contract billing compliance. • Reviewing the results of any internal monitoring activities and ensuring corrective actions remain effective. Staff Training All employees involved in grant administration, accounting, payroll allocation, and invoicing will receive annual training on: • Federal grant requirements. • Uniform Guidance financial management requirements. • Contract-specific billing procedures. • Internal control responsibilities. • Documentation standards. Training will also be provided whenever significant changes occur in funding requirements or internal procedures. Ongoing Monitoring: Management will implement quarterly internal compliance reviews of a sample of invoices to verify adherence to the revised procedures. Any deficiencies identified will be corrected immediately, and additional staff training will be provided as needed. The organization will also conduct an annual review of its financial policies and internal controls to ensure they remain effective and compliant with applicable federal requirements. Ongoing Responsible Parties: • Chief Executive Officer • Director of Operations • Board Treasurer • Board of Directors Expected Completion Date: The revised policies, staff training, and implementation of the new internal control procedures will be completed within 90 days of the audit report issuance. Ongoing monitoring and Board oversight will continue thereafter. The contracting agency will be notified of overbilling and arrangements for reimbursement will be completed immediately upon the filing of the annual financial audit.