(Boston, MA – August 30, 2011). In the last month alone, the Massachusetts Office of the State Auditor has issued two audit reports highly critical of the operations and internal control of two large agencies receiving Federal and State funds. As a result, the State is asking that hundreds of thousands of dollars be returned. In both situations the audit reports cited internal controls as a major element. Any organization receiving Federal and State funds without a current assessment of its internal controls and without an updated procedures manual is at serious risk of non-compliance should it be selected for a governmental audit.

Among many other requirements, one of the first assessments of these audits is whether the agency is in compliance with Chapter 647 of the Acts of 1989 (Massachusetts) which states clearly that agencies must have written documentation of its internal controls. Here is an excerpt from Chapter 647:

“(A) Internal control systems of the agency are to be clearly documented and readily available for examination…… Documentation of the agency’s internal control systems should include (1) internal control procedures, (2) internal control accountability systems and (3), identification of the operating cycles. Documentation of the agency’s internal control systems should appear in management directives, administrative policy, and accounting policies, procedures and manuals.”

Here is an excerpt from one of the critical reports:

“Our audit identified that [the agency] has not established adequate internal controls over a number of its administrative activities ……. nor is the Board meeting all of its oversight responsibilities.” It goes on to say that the agency “is required to have a documented comprehensive plan of internal controls” and “an entity’s internal control system should be backed up with a set of detailed subsidiary policies and procedures that would communicate responsibilities and business operations such as accounting, billings, cash receipts, accounts payable, human resources, and payroll.”

NPA Consultants

NPA Consultants are specialists in Policies, Procedures and Controls. We perform inexpensive assessments and have updated/created appropriate procedures manuals for organizations from $1M to $100M in revenue. We are also happy to answer any questions. Contact us at info@NPAccountants.com or 617 694 4600.