Overview
MassVentures (MV) did not maintain documentation that employment survey information collected from companies receiving financial support from MV was consistently reviewed. The absence of this documentation hinders management’s ability to detect potentially inaccurate employment data.
Authoritative Guidance
The US Government Accountability Office’s document Standards for Internal Control in the Federal Government, dated September 2014, which represents an industry best practice, contains 17 principles that must be present in an effective system of internal control. Section 10.01 states, “Management should design control activities to achieve objectives.” Control activities such as documenting a review process provide evidence to support management decisions, as well as reasonable assurance that MV will achieve its mission.
Reasons for Issue
Management appears to follow a consistent set of procedures with respect to the collection, verification, and reporting of employment survey data; however, MV does not consistently maintain documentation to support the review procedures. Because of the organization’s small size, written policies and procedures have not yet been developed.
Recommendation
MV should document procedures for data collection, verification, and reporting to provide supporting evidence that reviews have been completed.
Auditee’s Response
We agree with this finding and with the reason. While we acknowledge that we do not have documented procedures for our documentation collection, verification and review process of survey data, we have an unwritten, but consistently applied, process that provides us with confidence that the employment survey information we report on our current companies receiving financial [support] is materially accurate and has been effectively collected, verified and reviewed. By way of example, within our investment portfolio:
- MassVentures annually requests, in writing, employment data from its portfolio companies. These companies complete a documented survey and provide both Federal and State payroll tax filings (Form 941 and WR-1) to verify employment data. MassVentures then reviews and records the underlying data, verifies the reported data matches the underlying companies’ tax return data, and saves both the underlying company reports as well as the email trail of communications.
- Further, MassVentures’ investment staff is actively involved with these portfolio companies to various degrees, including attending board meetings, company visits and meetings with other investors and management. Precise headcount figures are typically part of a company’s standard report to their board or investors. As such, the investment staff typically has an accurate sense of the overall employment figures of the company that serves as a reasonableness test of the provided employment data.
Further, on the grant side:
- On a semi-annual basis, employment data is requested via email from grant recipients that remain in operation. This email request includes a survey file for them to complete. The email is saved by MassVentures. Completed survey files, as well as email trails, are also saved by MassVentures.
- Completed surveys are reviewed for reasonableness with any issues being communicated to grant recipients via email, and remedied when applicable. The email trails are saved.
- MassVentures’ controller then reviews all completed information including, but not limited to, reviewing against prior year information.
- Once all grant recipient data has been received, logged and reviewed [by] MassVentures’ controller, summary level data is reviewed by MassVentures’ [chief executive officer].
The Recommendation provided by your office for this finding was that MassVentures should “document procedures for data collection, verification, and reporting to provide supporting evidence that reviews have been completed.”
In response to this Recommendation: MassVentures, upon becoming aware of this issue, has since developed a written review and sign-off process that documents its current process and procedures for data, collection, verification, and reporting as well as creates documented evidence to show reviews have been completed.
Auditor’s Reply
Based on its response, MV is taking measures to address this issue.
| Date published: | March 19, 2020 |
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