Establishing Policies and
Procedures to Support Your
Program
2008 California AmeriCorps
Conference
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Session Objectives
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Provide an understanding of why an
organization should have policies and
procedures that support internal controls
Provide an understanding of the impact of
not having adequate controls
Understand the key components of internal
controls
Work hands on with participants to review
examples of various policies
2008 California AmeriCorps
Conference
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Nat’l & Community Svc. Act of 1990
Code of Fed. Regulations (CFR)
OMB Circulars (part of CFR)
State & Local Regulations
NOFO
Notice of Grant Award
Certifications and Assurances
Provisions
What are Internal Controls?
Internal controls are “processes” adopted by an
organization’s board, management and other
personnel designed to provide reasonable
assurance regarding the achievement of:
– Effectiveness and efficiency of operations
– Reliability of financial reporting
– Compliance with laws and regulations
2008 California AmeriCorps
Conference
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What are Internal Controls?
System of checks and balances
Protect the organization from financial abuse
and enhance its ability to achieve its goals
Not a “organizational burden,” it is a way to
optimize of resources
2008 California AmeriCorps
Conference
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Why Have Internal Controls?
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Improve accountability to customers (Federal
Government, CNCS, trustees, etc.)
Help organization achieve performance and
budget targets
Improve reliability of financial reporting
Improve compliance with laws, regulations
Prevent loss of resources, public assets and
public trust
2008 California AmeriCorps
Conference
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Internal Control Objectives
Adequacy of audit trail
– Can a transaction be traced from the accounting records
back to the original documentation (invoice, timesheet)?
Segregation of duties
– Are the various aspects of the accounting functions
separated and performed by more than one person?
Physical safeguard of assets
– Protection of the assets of the organization to ensure its
mission can be carried out
Adequacy of Records
– Are adequate records maintained to provide a proper trail
for the audit
2008 California AmeriCorps
Conference
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Internal Controls Interrelated
Components
Control environment
– What is the atmosphere of the work environment?
Risk assessment
– Is your organization considered low risk or high risk?
Control activities
– What activities provide control within your organization?
Information and communication
– Is information communicated clearly to staff and is there a
means for staff to provide feedback?
Monitoring
– Are the controls monitored and reviewed to ensure that they
are appropriate and meeting compliance requirements?
2008 California AmeriCorps
Conference
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A Good Control Environment
Includes:
Positive “atmosphere” in the work environment
Existence of a code of conduct and code of
ethics
Written job descriptions
Timely communications with board of directors
Written policies to hire, train, promote and
compensate employees
Safeguards for employees related to whistleblowing (Sarbanes-Oxley)
A clear chain of command
2008 California AmeriCorps
Conference
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Elements of Good Internal Controls
Documented policies and procedures
Adequate review process for financial reports and
budgets
Adequate cash management procedures (e.g., monthly
bank reconciliations by supervisory personnel)
Physical safeguarding of assets
System to track participants’ & employees’ activities
System to follow up on problems to ensure resolution
2008 California AmeriCorps
Conference
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How Can Internal Controls Impact
an Organization?
Potential impacts of insufficient internal
controls:
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Audit findings
Federal funds may be managed inappropriately
Funding sources are jeopardized
Inconsistencies
Inefficient use of time and resources
2008 California AmeriCorps
Conference
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Audit Findings
Two types of audit findings
– A questioned cost is what is believed to be a
violation of a provision of law, regulation, contract,
grant, cooperative agreement or other agreement or
document governing the expenditures of federal
funds.
– A material weakness is a reportable condition in
which the design or operation of one or more of the
internal control components does not reduce, to a
relatively low level, the risk that errors or
irregularities, in amounts which would be material to
the financial schedules. This is also known as a
reportable condition.
2008 California AmeriCorps
Conference
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Examples of Audit Findings Due to
Inadequate Internal Controls
General:
Late submission of financial status reports
Timesheet/evaluations not signed or dated
AmeriCorps:
Enrollment/exit of members not in WBRS or not submitted
on time
Inappropriate documentation for changes made to
timesheets
2008 California AmeriCorps
Conference
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Creation and Documentation of
Internal Controls
through Policies and Procedures
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Conference
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Policies & Procedures
Documented policies and procedures are
important because:
– They are the standards for the organization’s
operations
– They help in maintaining information that is crucial to
operations that would otherwise remain in employees’
“heads”
– They help in orienting new employees and substitutes
if the appropriate personnel are absent
2008 California AmeriCorps
Conference
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Policies & Procedures
Policies should be established, followed,
monitored, updated and reviewed
As times change, so does the need for our
policies
– Example: Internet access to cash accounts and
ability to make electronic transfers
2008 California AmeriCorps
Conference
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Written Policies and Procedures
Assist with consistency and clear communication of
expectations:
– Policies set expectations: “what is to be done”
– Procedures or processes describe “how is it to be done”
– Effective ones explain rationale and include examples of
principal transactions and completed forms
2008 California AmeriCorps
Conference
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Examples of Key Items Included in
Policies & Procedures
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Authorizations of transactions
Payroll procedures
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Cash receipts procedures –
Procurement policies
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Travel regulations
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Financial reporting
Budgeting
Record retention
Conflict of interest
Timekeeping
Specific Policies Governing Federal Funds:
– FSR completion
– Drawdown of federal funds
– Matching requirements
2008 California AmeriCorps
Conference
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Small Group Breakout
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Conference
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Staff Timesheet - Basic Criteria
Signed and dated by employee or by supervisor
Reflect after-the-fact time determination of actual activity
Are prepared at least monthly and coincide with one or more pay
periods
Account for the total activity for which employees are
compensated and which is required in fulfillment of their
obligations to the organization
Provide support for charges for salaries and wages must also be
supported by records indicating the total number of hours
worked each day in conformance with the Dept. of Labor
2008 California AmeriCorps
Conference
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In-kind Contribution - Basic Criteria
Document the donor’s basis for determining value of
personal services, material, equipment, building, and land
Obtain written acknowledgement from the donor to include:
– Date and location of donation
– Detailed description of item/service
– Estimated value of contribution, how value was determined, and
who made the determination
– Confirm that the contribution was or was not obtained with federal
funds
– Name and signature of donor
2008 California AmeriCorps
Conference
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Job Description - Basic Criteria
Job title:
Reports to:
Supervises:
Basic function:
Duties and responsibilities:
Qualifications:
Classification:
2008 California AmeriCorps
Conference
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Accounting Systems - Basic
Criteria
System must be capable of:
– Distinguishing grant versus non-grant related
expenditures
– Identifying costs by program year
– Identifying costs by budget category
– Differentiating between direct and indirect costs
(administrative costs)
Maintains federal/non-federal matching
funds separately from grant funds
Records in-kind contribution as both
revenues and expenses
2008 California AmeriCorps
Conference
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Chart of Accounts - Basic Criteria
Numerical outline of accounts
Narrative description of each line item
Note special accounts created to track CNCS
specific grant funds
2008 California AmeriCorps
Conference
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Budgetary Controls - Basic
Criteria
Monitoring of budgets to actual year-to-date and current
period expenditures or outlays
Explaining any budget variations that are unexpected or
unusual and determining necessary adjustments
Ensuring compliance with laws, regulations, and CNCS
provisions, particularly matching percentage
requirements
Requesting prior approvals for modification, if
necessary
Assuring budget changes are properly approved
Reviewing movements between line items and verifying
if they are within provisions and/or guidelines
2008 California AmeriCorps
Conference
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Documentation - Basic Criteria
Documentation should ensure that costs:
Conform to grant/contract limitations
Are allowable under the budget
Are treated consistently
Determined in accordance with Generally Accepted
Accounting Principles (GAAP)
All documentation should support:
What services or goods were obtained
Why the transaction is allowable for the grant purposes
The value of the contribution
2008 California AmeriCorps
Conference
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Documentation Information
Costs need to be:
– Allowable
– Allocable
– Reasonable and Necessary
Documentation should also reflect that these
requirements were met
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Conference
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In Summary!
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Ensure accountability and transparency
Know that internal controls affect every level in all
organizations irregardless of size
Creation and monitoring of internal controls is a continual
process
Strong internal controls allow an organization to achieve
its goals effectively and efficiently
Review current policies and procedures to be sure they
will guide you to compliance
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Conference
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