Management Report:

Opportunities for Improvements in the Congressional Award Foundation's Internal Controls and Accounting Procedures

GAO-10-964R: Published: Sep 9, 2010. Publicly Released: Sep 9, 2010.

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In May 2010, we issued our opinion on the fiscal years 2009 and 2008 financial statements of the Congressional Award Foundation (the Foundation). We also reported on our evaluation of the Foundation's compliance with provisions of selected laws and regulations for the fiscal year ended September 30, 2009, and our consideration of the Foundation's internal control over financial reporting. The Foundation was formed in 1979 under the Congressional Award Act and is a private, nonprofit, tax-exempt organization under section 501(c)(3) of the Internal Revenue Code. It was established to promote initiative, achievement, and excellence among young people in the areas of public service, personal development, physical fitness, and expedition. During fiscal year 2009, there were approximately 27,700 participants registered in the Foundation's award program. Although the organization does not receive government funding, we are responsible for conducting audits of the Foundation's financial statements annually in accordance with section 107 of the Congressional Award Act, as amended (2 U.S.C. 807). During our audit of the Foundation's fiscal years 2009 and 2008 financial statements, we identified a material weakness in the Foundation's internal control over financial reporting. The purpose of this report is to present (1) additional detail on the material weakness we previously identified concerning the Foundation's internal control over financial reporting, (2) other issues identified during our audit of the Foundation's fiscal years 2009 and 2008 financial statements regarding certain internal controls and accounting procedures, and (3) recommended actions to address the material weakness and other issues we identified. Specifically, we are making 16 recommendations for strengthening the Foundation's internal controls and accounting procedures.

During our audit of the Foundation's fiscal years 2009 and 2008 financial statements, we identified a material weakness in the Foundation's internal control over financial reporting. Specifically, we found that the Foundation lacked sufficient and appropriate policies, procedures, and resources to prepare the financial statements and accompanying notes accurately, completely, and in accordance with U.S. generally accepted accounting principles (GAAP). This resulted in the need for material audit adjustments to the Foundation's fiscal year 2009 financial statements to achieve a fair presentation. In addition, we identified six other internal control issues that we do not consider to be material weaknesses or significant deficiencies, but which we nonetheless believe could adversely affect the Foundation's ability to meet its internal control objectives and increase the risk that the Foundation would not prevent or timely detect and correct errors or inconsistencies in financial reporting. These issues, all of which warrant management's attention and action, concern the Foundation's: (1) lack of supporting documentation for a large adjusting journal entry; (2) deficiencies in its bank reconciliation process, including lack of documentation of the process, resolution of reconciling items, and timely review; (3) reliance on the National Director's use of her personal credit card to transact Foundation business, and lack of independent co-signer on checks payable to the National Director; (4) lack of effective access controls over its check stock; (5) lack of evidence of date of cash deposit review; and (6) insufficient policies and procedures for recording, reconciling, and monitoring contributions receivables. At the end of our discussion of each of these issues in the following sections, we present our recommendations for strengthening the Foundation's internal controls and accounting procedures. These recommendations are intended to improve management's oversight and controls and minimize the risk of misappropriation of assets and misstatements in the Foundation's accounts and financial statements.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: GAO confirmed that the Foundation has updated its accounting policies and procedures to better ensure they are comprehensive and address all relevant accounting standards.

    Recommendation: The Foundation should conduct a review of its current accounting policies and procedures and update them as necessary.

    Agency Affected: Congressional Award Foundation

  2. Status: Closed - Implemented

    Comments: GAO confirmed that the Foundation has updated its policies and procedures to require that all staff responsible for accounting obtain a minimum of 2 to 4 hours of recurring training in nonprofit accounting.

    Recommendation: The Foundation should establish and document policies and procedures to ensure that staff receive training aimed at developing knowledge and skills in accounting and financial reporting for nonprofit organizations.

    Agency Affected: Congressional Award Foundation

  3. Status: Closed - Implemented

    Comments: During our FY 2010 audit of the Foundation, we found that Foundation management were effectively reviewing the Foundation's financial statements. We found no material misstatements during our FY 2010 audit.

    Recommendation: The Foundation should institute a management review process for the Foundation's draft financial statements that is effective in identifying material misstatements.

    Agency Affected: Congressional Award Foundation

  4. Status: Closed - Implemented

    Comments: During our FY 2010 audit of the Foundation, we found that the Foundation had expanded its policies and procedures to require that adjusting journal entries be explained, supported, and reviewed and approved by management. Our audit procedures verified that the new policy is being followed.

    Recommendation: The Foundation should expand its policies and procedures to ensure all adjusting entries are properly documented, supported, reviewed, and approved by management.

    Agency Affected: Congressional Award Foundation

  5. Status: Closed - Implemented

    Comments: During our FY 2010 audit, we found that the Foundation documented policies and procedures to follow up on outstanding checks. Our audit procedures showed that the Foundation is following the new policy.

    Recommendation: The Foundation should document in its policies and procedures requirements for a timely investigation and resolution of reconciling items, such as outstanding checks, in its bank reconciliation process.

    Agency Affected: Congressional Award Foundation

  6. Status: Closed - Implemented

    Comments: GAO confirmed that the Foundation has augmented its accounting policies and procedures to require a Foundation management representative to review, sign, and date bank reconciliations.

    Recommendation: The Foundation should include requirements in its policies and procedures for management to review, sign, and date bank reconciliations indicating management's review for accuracy and completeness.

    Agency Affected: Congressional Award Foundation

  7. Status: Closed - Implemented

    Comments: Our FY 2010 audit revealed that the Foundation obtained a corporate credit card in January, 2011, and has instituted appropriate policies and procedures on the use of the credit card.

    Recommendation: The Foundation should reassess its current practice of relying on the use of the National Director's personal credit card to transact Foundation business.

    Agency Affected: Congressional Award Foundation

  8. Status: Closed - Implemented

    Comments: Our FY 2010 audit revealed that the Foundation obtained a corporate credit card in January, 2011, to support its business operations.

    Recommendation: The Foundation should take steps to obtain a business credit card to support its business operations as determined by the Foundation's business needs.

    Agency Affected: Congressional Award Foundation

  9. Status: Closed - Implemented

    Comments: Our FY 2010 audit revealed that the Foundation obtained a corporate credit card in January, 2011, and has instituted appropriate policies and procedures for the credit card.

    Recommendation: The Foundation should institute policies and procedures on the use of that business credit card once acquired.

    Agency Affected: Congressional Award Foundation

  10. Status: Closed - Implemented

    Comments: Our FY 2010 audit revealed that the Foundation has updated its policies and procedures to require that expense reimbursements to the National Director in any amount, and any other disbursements over $2,500, must be approved by the Treasurer and/or Chairman of the Board of Directors. The results of our audit showed that the new policy is being followed.

    Recommendation: The Foundation should expand its policies and procedures for reviewing and authorizing payment for expenses incurred by the National Director to require another individual from the Board of Directors to co-sign checks over $2,500 payable to the National Director.

    Agency Affected: Congressional Award Foundation

  11. Status: Closed - Implemented

    Comments: Our FY 2010 audit revealed that the Foundation has implemented policies and procedures requiring that all checks and deposit slips be kept in a secure location that is accessible by only the Controller and the Director of Operations.

    Recommendation: The Foundation should include in its policies and procedures requirements for physically safeguarding assets and limiting access to only authorized staff.

    Agency Affected: Congressional Award Foundation

  12. Status: Closed - Implemented

    Comments: GAO verified that the Foundation is now keeping its check stock stored in a locked filing cabinet accessible only to the Controller, Director of Operations, and National Director.

    Recommendation: The Foundation should identify a secure location to store its check stock which is known and accessible only to senior management and staff responsible for handling the Foundation's disbursements.

    Agency Affected: Congressional Award Foundation

  13. Status: Closed - Implemented

    Comments: Our FY 2010 audit revealed that the Foundation has implemented policies and procedures requiring that the National Director review, sign, and date all deposits.

    Recommendation: The Foundation should enhance its policies and procedures over the bank deposit process by requiring that the National Director sign and date the deposits.

    Agency Affected: Congressional Award Foundation

  14. Status: Closed - Implemented

    Comments: Our FY 2010 audit revealed that the Foundation has implemented policies and procedures to ensure that pledges are timely and consistently recorded in the subsidiary ledger and the general ledger as contributions receivable.

    Recommendation: The Foundation should establish formal policies and procedures to ensure pledges are timely and consistently recorded on the subsidiary ledger and the general ledger as contributions receivable.

    Agency Affected: Congressional Award Foundation

  15. Status: Closed - Implemented

    Comments: GAO confirmed that the Foundation has updated its accounting policies and procedures to require documentation of the monthly reconciliation between the subsidiary ledger and the general ledger for contributions receivable.

    Recommendation: The Foundation should include in its policies and procedures requirements to document the monthly reconciliation between the subsidiary ledger and the general ledger for contributions receivable and resolve any discrepancies identified.

    Agency Affected: Congressional Award Foundation

  16. Status: Closed - Implemented

    Comments: Our FY 2010 audit revealed that the Foundation has implemented policies and procedures to monitor and assess the collectibility of outstanding receivables by requiring follow-up with donors on unpaid invoices.

    Recommendation: The Foundation should expand its policies and procedures to require routine monitoring and assessing the collectibility of outstanding receivables.

    Agency Affected: Congressional Award Foundation

 

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