Overview
The expenditures of Mount Wachusett Community College Foundation, Inc. (MWCCF) were used for the exclusive benefit of the college. However, during our audit fieldwork, we noted areas for improvement in the existing internal control environment that we would like to bring to the attention of management. These areas include the following.
- MWCCF’s treasurer has check-signing authority, access to blank checks, the responsibility of recording cash disbursement transactions in the accounting system, and the responsibility of reconciling the monthly bank statements. We suggest strengthening the internal controls surrounding cash disbursement processing by establishing segregation of duties so that one person is not able to complete a cash disbursement transaction from start to finish and be responsible for reconciling the corresponding bank statement.
- MWCCF’s executive director has a credit card that is used to purchase incidental items. The executive director makes purchases, receives the monthly statement, notes the expense classification next to each charge, pays the statement by wire transfer, and then forwards the statement to the treasurer to record the expenditures in the general ledger. We suggest strengthening the internal controls over credit card use by establishing segregation of duties for credit card transaction processing. MWCCF should consider involving a board member in the credit card payment process. This person should review and approve the reconciled monthly statement before payment.
- Adequate supporting documentation to substantiate foundation expenditures during the audit period was not readily available for review for several transactions because invoices and electronic correspondence (emails) supporting credit card purchases were retained only on the executive director’s computer. If the executive director left the foundation, this institutional information might not be accessible to successors. We suggest that all foundation expenditures be accompanied by business expense forms that include the following information:
- requestor
- amount
- date
- account
- purpose
- detailed description of expense (including name, title, company, and business relationships)
- authorized approval
The foundation should retain each expense form and all supporting expense documentation in its files. Using a standardized business expense form would clarify the business purposes of expenditures and improve transparency.
- As of June 30, 2019, MWCCF managed $7.7 million of assets that supported the growth and improvement of Mount Wachusett Community College. During our review, we noted that the foundation did not have documented accounting policies and procedures to guide management in performing daily accounting activities. Since the treasurer and executive director share the responsibility of accounting for the foundation, they should work together to document accounting policies and procedures in a manual that can be used to support succession training and increase the transparency of this critical function.
Auditee’s Response
MWCCF’s board chair provided the following response to this report:
We were pleased to see that your audit found our organization is living up to our mission of supporting the college, its students, and our broader community. We appreciate your recommendations for improvements to our internal control environment as well. As you are aware, with such a small staff and volunteer board, it is difficult to have as sophisticated [a] structure as we would like, but where feasible we will seek to enhance our systems:
- With regard to the treasurer’s access to checks and general responsibility for the checking account, we take exception to the contention that he has sole responsibility. At a minimum, the Executive Director has access to the account information, and is checking it regularly.
- For credit cards, we believe the process we have in place currently is sufficient. The card limit is [approximately] $11,500, and actual amounts charged rarely exceed $5,000. In the highly unlikely event that [the executive director] were to use this card inappropriately, the actual loss would be immaterial to the foundation. That said, we are going to try having the bills sent electronically to the Treasurer and myself for review ahead of time. This may or may not become part of our procedures going forward; we would like to see the activity and potential burden on volunteer board members.
- We don’t believe the Foundation needs a standard business expense form or more sophisticated Accounts Payable system at this time. While we appreciate the purpose of such a form, our finances are not that complicated. We believe the Finance Committee and Board have a good understanding of our expenditures as it is.
- We do agree that the organization could benefit from a documented set of policies and procedures. This letter, along with the full audit report, will be shared with the Board at our next scheduled meeting. We will work with [the executive director] to determine a time frame for completion of these; we expect this will be a joint effort of management and the Board.
Auditor’s Reply
As previously noted, during our audit, we identified areas in MWCCF’s internal control environment that we thought could be improved. We decided that these issues were significant enough to present in an “Other Matters” disclosure in this report for management’s consideration. Although we are confident that the internal control enhancements we suggest will strengthen MWCCF’s control environment and better protect its assets, we acknowledge that it is ultimately up to MWCCF’s management to determine what measures to take to address these issues given MWCCF’s work environment and available resources. We are encouraged by MWCCF’s acknowledgement that improvements can be made in the areas identified and by its willingness to take the measures it deems feasible to enhance controls over these areas.
| Date published: | April 13, 2020 |
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