Avoiding Clerical Mistakes with Deadlines, Descriptions & Proper Delegation

Monday August 1, 2022 comments

Any accounting business and tax advice contained in this podcast is not intended as a thorough in depth analysis of specific issues. Nor is it a substitute for forming information. Nor is it sufficient to avoid tax related penalties. If you have specific questions that you need advice for, be sure to schedule a strategy session and not solely rely on information in this podcast. 

Welcome to another episode, this season, I am talking about nonprofits in the news, some shenanigans, mis something, misappropriation, misreporting, misbehavior at the organizations and what you can do so that this is not you. So I'm not going to talk about whether or not the allegations prove to be true. I want to talk about how you prevent this from being your organization. 

So this week, the article is for an organization in Danville, Illinois. East Central Illinois Community Action Agency, they received federal grant funds and the feds said that they did not do the right thing. So there are four main points to this. 

One, they did not submit mandatory financial reports. When you get a grant, you should put on your calendar what the due dates for all the reports are. This way, there is somewhere outside of your head where you are tracking this information. I like to put it on a shared calendar. So if there's multiple people in the organization who need to be aware of the deadlines, it happens to be there. If you keep a spreadsheet, maybe you put it there. You want to make sure that this is all plotted out, so that you are not surprised. There's not one person who's responsible for these reports, there are multiple people who should have an eye on it. So that's number one, put all the dates that things are due on your calendar. 

Two, there was a lack of financial management. In this case, they were like there's not a system for identifying whether expenses were necessary, reasonable, allocable and adequately documented. This is the peak of the things that can go wrong. So like I mentioned before is you want to make sure that one, you have a way to track what people are spending. So are they submitting receipts? Is it expense reports? their corporate card? You don't want people just charging you also want them to give you a report of like, What is this for? And now it is not nearly enough for them to know like, Oh, I needed to buy diapers. Why? Because they might have children. 

So you want to know why they bought these diapers? Was it personal? Or was it really for work? So the way you do that is to get it adequately documented, you need to get the receipts. The receipts are the things that keep everybody afloat, you want to make sure that you have a way to one, have people submit what they're spending things on. So giving a description, that description is so you can know is it necessary? Is it reasonable? What programs do we allocate it to? And then you have the receipts so that it's documented, it's clear where they got it from. Alright.

The third item was lack of timely responses to federal findings. So they didn't give up a, hey, this is how we're gonna address this non-compliance. How do you address that? For us at CNRG, whenever we have an audit, when I hear what the auditors are saying, in terms of findings, I meet with our client, and I say, these are the steps that we're going to take. And you want to make sure that there is a plan for that, you know, who is the point person who's going to come up with? What is our response to the findings? When are we going to turn those in? What is that going to look like? 

Making sure that structure is set up before there's an issue makes it easy to be timely in those responses. You don't want it to fall through the cracks, similar to the grant reports, putting it on a calendar and making sure that that has been a conversation and it gets out of your head about who is going to be responsible for communicating about findings. 

Then the fourth item is lack of internal control. This is the most common finding for any organization. So it's easy to say Ah, it's fine. Everyone lacks it, it's okay. It's not! You have to have some sort of mitigating controls. You have to have some things in place that say okay, I know we don't have the best internal controls, but there are things in place that prevent it from going completely off the rails. 

So here you want to think about what are your processes or procedures? Are you following your processes and procedures? How is the governing body overseeing it? So the policies and procedures, one of the things that I recommend early in the year is that you go through them. Remember, remind people what they are. That way people, you know, can’t say, I didn't know, we go through this every year, the new team members get a copy. We want to make sure people are aware of what the policies and procedures are so that they can follow them. 

Another thing about the lack of governing body oversight. This is another place where I say it's nice at the beginning of the year to give the board a refresher, let them know what they are expected to do. That way they're not surprised. They can't say, Oh, we didn't realize that was our job. Yes, you did. We are telling you this every year when we have a new board member come aboard, we will tell them to. 

So those are the things that I really want you to think about. Getting a calendar where you can put all the ideas about the grant management part, when are reports due, when do reimbursements need to go in and when can we bill that type of thing. You also want to put on the calendar at the end of the audit, what's the timeline for us to meet to discuss the findings, put together a draft and who will be responsible for sending out any responses related to the findings? 

Next, you want to be sure that your system is adequate. You want to make sure that you have a way to say, are all the expenses that are going through the system necessary? Are they reasonable? What programs or departments should be charged? And do we have the receipts to support it? 

And then finally, the governing part, so making sure that there's adequate oversight. I'm a strong believer, you can have a bookkeeper, you can have an accountant, you can say, Hey, we gave them all the things. But if you don't check it, you don't know if it's actually correct. And I say this as an accountant. Because what I might interpret this receipt to mean may not be what you intended. So there has to be a level of oversight that you could say, Oh, that's not where that should be coded. So don't  just decline your duties because you're like, oh, there's a person there who is responsible for that. That doesn't mean it's not your job. It means that you don't do the day to day, but you are still responsible for some oversight. 

So I'd love to know your thoughts on this. What things have you put in place to make the grant management process easier? What have you done to bring your board up to speed about what's happening and how they can improve their oversight process?


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