Management Report: Opportunities for Improvements in the Congressional Award Foundation's Internal Controls and Accounting Procedures
Highlights
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.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Congressional Award Foundation | The Foundation should conduct a review of its current accounting policies and procedures and update them as necessary. |
GAO confirmed that the Foundation has updated its accounting policies and procedures to better ensure they are comprehensive and address all relevant accounting standards.
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| Congressional Award Foundation | 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. |
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.
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| Congressional Award Foundation | The Foundation should institute a management review process for the Foundation's draft financial statements that is effective in identifying material misstatements. |
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.
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| Congressional Award Foundation | The Foundation should expand its policies and procedures to ensure all adjusting entries are properly documented, supported, reviewed, and approved by management. |
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.
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| Congressional Award Foundation | 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. |
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.
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| Congressional Award Foundation | 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. |
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.
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| Congressional Award Foundation | The Foundation should reassess its current practice of relying on the use of the National Director's personal credit card to transact Foundation business. |
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.
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| Congressional Award Foundation | The Foundation should take steps to obtain a business credit card to support its business operations as determined by the Foundation's business needs. |
Our FY 2010 audit revealed that the Foundation obtained a corporate credit card in January, 2011, to support its business operations.
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| Congressional Award Foundation | The Foundation should institute policies and procedures on the use of that business credit card once acquired. |
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.
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| Congressional Award Foundation | 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. |
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.
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| Congressional Award Foundation | The Foundation should include in its policies and procedures requirements for physically safeguarding assets and limiting access to only authorized staff. |
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.
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| Congressional Award Foundation | 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. |
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.
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| Congressional Award Foundation | The Foundation should enhance its policies and procedures over the bank deposit process by requiring that the National Director sign and date the deposits. |
Our FY 2010 audit revealed that the Foundation has implemented policies and procedures requiring that the National Director review, sign, and date all deposits.
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| Congressional Award Foundation | 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. |
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.
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| Congressional Award Foundation | 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. |
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.
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| Congressional Award Foundation | The Foundation should expand its policies and procedures to require routine monitoring and assessing the collectibility of outstanding receivables. |
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.
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