Finding Text
Criteria:
2 CFR § 200.303(a) requires a non-federal entity to 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 the terms and conditions of the award.
Supervisory review and approval of invoices for allowability, adherence to cost principles, accuracy and completeness is a very important internal control over allowable costs/activities.
Condition:
In testing, non-payroll disbursements, we noted that there was no signature showing approval for payment on invoices or other document in the voucher package. We did, however, note that the District matches cancelled checks to the invoices and files a copy of the cancelled check with the invoice within QuickBooks Online system. The District informed us that the District Manager can alone signs all checks up to $5,000 and that additional signatures are required for all invoices over $5000. We reviewed Cash Disbursements Policy 3140, which provides that:
The District Manager may be the sole signatory on checks up to $5,000.
Two signatures by “officials” are required for checks greater than $5,000 but less than $25,000. Further checks over $5,000 require presentation to the Board of Directors at a regular Board meeting unless there is an urgency in payment before the meeting.
For all check amounts greater than $25,000, two Board Directors must be the signatories.
We determined to test the above cited policy on check signatures to show approval of invoices. Of a population of 87 items of non-payroll disbursements, we randomly selected a sample of 22 items and further selected 11 more items based on dollar amount. We located five exceptions to the check signature requirements of Cash Disbursements Policy 3140. In each case, the amount was over $25,000, but the signature on the checks were of the District Manager and only one Board member. We inquired about other, additional controls which could help to ensure that only authorized invoices are paid. The District suggested that Board of Director’s review and approval of the QuickBooks financials at monthly Board Meetings might be considered. We felt that this provided some assurance, though not significant assurance because the financials do not detail disbursements.
Cause: The District Manager changed about mid-year. As well, the District is very small with only three employees.
Effect: Not requiring an approval prior to payment of invoices and omitting to enforce the signatory requirements described in Cash Disbursements Policy 3140 (two signatures of “officials” member for checks over $5,000 and up to $25,000; two Board members’ signature for checks over $25,000) can lead to more errors and possibly even fraud.
Repeat Finding: No.
Recommendation: We recommend that the District discuss, at the next Board meeting, the lack of appropriate signatures on checks noted in testing as required by Cash Disbursements Policy 3140 (two signatures of “officials” member for checks over $5,000 and up to $25,000; two Board members’ signature for checks over $25,000). Further, we recommend that the District enact a review process, checking for required signatures on all checks.
The District might also consider a policy requiring that approval of invoices be documented with a signature affixed to the invoice or other document in the voucher package prior to payment.
Questioned Costs: No costs are questioned.
Views of Responsible Officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.