Recognizing Common Audit Issues

Financial management is an essential component of the administration of service organizations, including those receiving funding from the Corporation for National and Community Service. There are Office of Management and Budget (OMB) provisions (Circular A-133) that require organizations that expend more than $500,000 in federal funds to have an annual audit (2007). Recognizing that potential pitfalls can help in managing your organization, project or program, this effective practice from Jonnie Jenkins of Walker & Company, LLP lists some of the most common audit issues, and was developed from materials shared at the Financial and Grants Institute held in San Diego, CA, in October 2006.

Issue

Recognizing common audit issues that other similar organizations have experienced may help your organization be proactive by setting up policies and procedures and possibly avoiding common pitfalls.

Action

Common Audit Issues

TIME AND ACTIVITY REPORTING

  • No timesheets or documentation for staff hours charged to the grant
  • Unsigned timesheets
  • Timesheets signed weeks later by the supervisor
  • No designation of time/allocation
    • Estimated
    • Allocated per budget
    • Allocated 100 percent even though staff is an officer of the organization who performs other functions not solely related to the grant
  • Lack activity reports for staff charged to more than one grant

MEMBER RECORDS

  • No timesheets or documentation of member hours
  • Insufficient or no member contracts
  • Insufficient member eligibility documentation
  • No supervisory signature on timesheets
  • Late member enrollment or exit from WBRS (web-based reporting system)
  • Hours in WBRS do not agree with member timesheets
  • Incomplete or nonexistent evaluations (mid-year or final)
  • Failure to get background checks for members serving within a vulnerable population

LACK OF WRITTEN POLICIES AND PROCEDURES

  • Written policies and procedures are required by A-110, Subpart C, b.6 (45 Code of Federal Regulations Part 253)

LACK OF DOCUMENTATION

  • Expenditures
  • Original invoice
  • Approval for the expenditure
  • Authorized signature on check
  • The documentation should be stamped or marked paid to reduce the risk of double payment
  • Documentation should be maintained and accessible for purposes of management as well as the Corporation for National and Community Service review and the required annual or semi-annual audits
  • All expenditures should contain documentation that support why the transaction is allowable for grant purposes (i.e., brief description or agenda)

MATCH

  • Match is not verifiable by grantee's records
  • Match documentation should have:
    • What was donated
    • Signature of donor
    • Amount donated
    • Date of service
    • How the donation was valued

For example, if the donation was for a painter spending five hours painting a house and painters in the area are paid $20 per hour, the documentation should include the calculation of hours and the hourly rate.

The grantee is responsible for maintaining ADEQUATE documentation of in-kind match. This does not mean that the grantee has to maintain documentation for a sub-grantee's in-kind match, although the grantee is responsible for ensuring that the sub-grantee has ADEQUATE documentation and that it can be made available on request. The grantee should not accept in-kind match until it is satisfied that the documentation is sufficient

GRANTEE'S ACCOUNTING RECORDS

  • Records don't identify cost by programmatic year, by budget line item, or do not differentiate between direct and indirect costs or administrative costs

SUBGRANTS

  • No written agreements with program sub-grantees

SUB-GRANTEES

  • Lack of oversight of sub-grantees

Context

All service organizations need to practice sound financial management. Knowing the pitfalls can go a long way in avoiding them

Outcome

Organizations that are aware of common financial management problems manage finances more effectively. Programs receiving funding from the Corporation for National and Community Service must comply with many rules and regulations. The easiest way to do this is to consult the manual for program directors and to invest time learning the grant provision, Office of Management and Budget (OMB) circulars and the Code of Federal Regulations.

Recognizing Common Audit Issues. Jonnie, Jenkins. Financial and Grants Institute held in San Diego, CA. 2006. English.

   
 

Last Reviewed: November 2008

Last Updated: September 10, 2015