Overview
During the audit period, BCArc charged its Client Funds7 account $43,192 in credit card purchases for which it did not have the required documentation (a completed Savings Withdrawal Form signed by the client, indicating that the client had approved the expenditure). These purchases included an air conditioner, a television, iPads, a computer, concert tickets, amusement park tickets, cruise tickets, hotel stays, and flights. As a result of this issue, there is inadequate assurance that all expenses charged to this account were incurred with client knowledge and consent.
Authoritative Guidance
BCArc’s policies and procedures require the use of a Savings Withdrawal Form in withdrawing or transferring a client’s funds. This form includes signature lines for the client, site manager, director of residential services, and president and CEO (or designee). The “Individual Funds Procedure” states,
All withdrawals or transfers of individuals’ funds will require the approval of the appropriate Director and the President & CEO or designee on the Savings Withdrawal Form.
Reasons for Issue
BCArc did not have monitoring controls in place to ensure that its staff completed Savings Withdrawal Forms when using client funds to pay for expenses.
Recommendation
BCArc should develop procedures to monitor the use of client funds to ensure that all expenses paid for with these funds are properly approved using the Savings Withdrawal Form.
Auditee’s Response
BCArc follows Social Security Administration [SSA] regulations for administering individuals’ funds and undergoes successful annual independent audits without findings. According to SSA regulations, a Representative Payee is appointed when a person is deemed incapable of managing their monies. BCArc is the designated Representative Payee for a large majority of the individuals it serves. Many of the individuals served by BCArc are not able to approve and sign off on the expenditure of their own funds.
Previously, BCArc left the signature line blank if the individual was incapable of signing his/her name. BCArc employees have been instructed to write “non-applicable” if the individual is unable to sign his/her name and BCArc is the Representative Payee. All expenditures for clients had approved Savings Withdrawal forms that were provided to OSA. BCArc maintains strict policies concerning the use of Individual Funds. . . . In addition, BCArc updated the Savings Withdrawal . . . form to read “if applicable” under the individual’s signature line. Additionally, a new Savings Withdrawal form has been implemented . . . when individuals are unable to sign for themselves. OSA has been provided all of the documentation.
BCArc states unequivocally that all client fund expenses were legitimate. In addition, BCArc’s credit card policies and procedures, updated in March 2020, provide sufficient control over funds. When a purchase is made with an individual’s funds, it is listed on the Weekly Individual Spending Form, which is reconciled with receipts that are submitted weekly to the Finance department pursuant to the procedures. . . . Those receipts and related documentation are stored within an individual’s file (not within the credit card files).
Most of the reimbursement documentation requested by the State Auditor was not filed with the actual credit card invoices, but instead within the file of the individual who benefited from the expenditure, as is the practice of BCArc (to provide accurate accounting of the services needed by each individual); therefore, what appeared to be a lack of backup documentation was merely a difference in where the backup was filed. OSA never requested the supporting documents and apparently assumed that since they were not in the credit card files, they didn’t exist. OSA has now been provided all of the backup documentation.
Auditor’s Reply
In its response, BCArc states, “BCArc follows Social Security Administration regulations for administering individuals’ funds.” To do this, BCArc would have needed to establish and follow effective policies and procedures for the administration of these funds. This did not always happen.
Specifically, as noted above, BCArc’s policies and procedures require the use of a Savings Withdrawal Form in withdrawing or transferring a client’s funds. This form includes a signature line for the client, indicating that the signature is required. BCArc’s policies and procedures do not address the process its staff must follow if a client cannot sign this form. During the audit, OSA requested all documentation related to the expenditures in question. We reviewed the documentation and found instances where BCArc personnel wrote “unable to sign” on the signature line. Although there was no BCArc policy that clearly allowed this annotation instead of a client signature, we are aware that some of BCArc’s clients may not be able to sign this document, and we accepted all the forms that had this annotation as acceptable documentation. The expenditures we questioned were ones that were not signed by clients, where the signature line had a note saying “unavailable for signature.” OSA understood this notation to mean that the client was able to sign the form but BCArc personnel did not exercise due diligence in making sure that the purchase was made with the client’s knowledge and consent.
In addition, some of the documentation BCArc provided appeared to be questionable. Specifically, one of the Savings Withdrawal Forms BCArc provided to us indicated that the form was “Reviewed & Revised 1/2021,” but it was for a client expenditure in 2019, and the approval signature on the form was from 2019.
Our testing in this area was not intended to specifically identify improper use of client funds but rather to determine whether BCArc had implemented effective internal controls over the administration of these funds that ensured that expenditures of the funds were proper. Based on the issues we identified in this area, we urge BCArc to implement our recommendation.
| Date published: | May 25, 2021 |
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