Cattlemen’s Beef Board
Summary of Findings and Recommendations from QSBC Reviews
Updated July 2008
Table of Contents
Section Page #
Cash and Investment Balances ...... 2
Cash Receipts Procedures ...... 3
Cash Disbursements and Expense Procedures ...... 4
Contracts with Universities ...... 11
Written Policies and Procedures ...... 12
Programs/Services Conducted by State Industry Organizations . . 15
Collections Policies and Procedures ...... 19
CPA Audit Procedures and Reporting ...... 24
Other Issues ...... 26
Cash and Investment Balances:
Non-compliance with Beef Board Investment Policy / 1. Total bank deposit balances in one financial institution exceeded the FDIC insurance limit of $100,000 and the balances in excess of $100,000 were not secured by a security pledged by the financial institution. / 1. If the QSBC is a government agency and their funds qualify as public funds, then the QSBC should have their bank pledge securities to cover the balances in excess of $100,000. The pledged securities should comply with the most current Beef Board Investment Policy for QSBCs.
If the QSBC is not a government agency, the QSBC should determine if bank balances at each financial institution can be maintained below $100,000 by analyzing their cash receipts and disbursements activity. In this analysis, the QSBC should determine if there is cash flow activity that exceeds $100,000 during a relatively short timeframe. For example, the QSBC could have either deposit or disbursement activity in a single financial institution within a period of two - three business days that is greater than $100,000. If this situation exists, the QSBC will not be able to maintain a bank balance below $100,000 for these business days, so the QSBC should look for ways to reduce the cash flow activity in its primary bank, such as depositing funds into another financial institution. After the QSBC has made any necessary changes to its deposit procedures which ensure the bank balance at each financial institution can be maintained below $100,000, the QSBC should implement procedures for each bank account to ensure the balance is kept below $100,000. These procedures could include a proactive monitoring process performed by QSBC staff such as transferring money to investment accounts when balances hit a designated amount or utilizing cash management services offered by the bank such as automated transfers of excess collected balances into eligible money market funds that comply with the most current Beef Board Investment Policy.
Non-compliance with Beef Board Investment Policy / 2. QSBC held investments with a maturity date of more than one year (defined as 365 days). / 2. The Beef Board Investment Policy for QSBCs requires all investments to be short-term, which is defined in the policy as a maturity period of one year or less.
Cash and Investment Balances (con’t):
Non-compliance with Beef Board Investment Policy / 3. QSBC invested checkoff funds in a money market fund that did not invest solely in U.S. Government securities and repurchase agreements, therefore the fund did not comply with the Beef Board’s Investment Policy for QSBCs. / 3. QSBC should move its investment to a money market fund that invests solely in U.S. Government securities and repurchase agreements. Most banks have eligible funds available, so the transition should not be difficult.
Non-compliance with Beef Board Investment Policy / 4. QSBC had deposits at a bank in excess of the $100,000 FDIC insurance limit. To guarantee the uninsured deposits, the bank pledged a security that did not comply with the Beef Board Investment Policy for QSBCs. / 4. QSBC should ensure the security pledged by the bank as collateral is in compliance with the Beef Board’s Investment Policy for QSBCs.
Non-compliance with Beef Board Investment Policy / 5. QSBC kept all funds in a checking account which did not provide a reasonable investment return. / 5. Excess cash balances should be invested in accordance with the Beef Board Investment Policy for QSBC’s to provide a reasonable investment return.
Non-compliance with Beef Board Investment Policy / 6. QSBC held funds in an investment account secured by a repurchase agreement collateralized by a security that complied with the Beef Board Investment Policy. However, the market value of the security collateralizing the repurchase agreement was less than the 102% of the bank balance as required by the Beef Board Investment Policy. / 6. QSBC should obtain additional qualifying securities as collateral for the repurchase agreement so that the value of the securities is at least 102% of the balance. This will provide additional security if interest rates increase.
General cash management / 7. QSBC did not perform a monthly reconciliation of bank account balances. / 7. QSBC should perform bank account reconciliations on a monthly basis.
General cash management / 8. The bank account reconciliations were not independently reviewed. / 8. The bank reconciliation should be reviewed each month by an independent party such as the Executive Director or Treasurer. The reviewer should document the review by initialing and signing the bank reconciliation.
General cash management / 9. QSBCs cash management system was complex and difficult to understand. / 9. QSBC should streamline the banking process by eliminating unnecessary bank accounts and the related transfer of funds between bank accounts.
Cash Receipts Procedures:
General cash receipts / 1. QSBC did not have an adequate segregation of duties in the cash receipts process. There was a risk that an employee could divert cash/checks without being detected in a timely manner. It also left employees vulnerable to suspicion of wrongdoing, even when that was not the case. / 1. QSBCs should segregate the cash receipts functions (i.e., opening the mail, logging the checks/cash, recording receipts in the collection and accounting systems, and reconciling the bank accounts) by including more people in the process. If a QSBC cannot segregate duties due to staff size, it should consider using a bank lockbox for receipts.
General cash receipts / 2. QSBC did not restrictively endorse all checks upon receipt. / 2. All checks should be logged, copied and restrictively endorsed immediately upon receipt to help ensure that checks are only deposited into the QSBC’s bank account.
General cash receipts / 3. QSBC only collected mail from the post office box a few times a month and/or QSBC held checks in the QSBC’s office too long before depositing them at the bank. / 3. Checks should be deposited into the bank on a daily basis when the amount of the deposit justifies a trip to the bank. At a minimum, all deposits should be taken to the bank within a week of receipt. This process will lower the risk of checks being misplaced or stolen and increase interest income.
General cash receipts / 4. QSBC only received the remittance forms and deposit tickets with an attached detail of check amounts deposited for their lockbox receipts. QSBC did not receive check copies and the envelopes in which the remitters mailed the checks. / 4. QSBC should ensure the bank sends all documents the bank received with the deposit including check copies and envelopes. The check copies will help to ensure deposits are properly matched to remittance forms and the envelopes are needed to ensure timely submittals by collection points.
General cash receipts / 5. QSBC had a written cash receipts procedure requiring a designated staff member (i.e., a staff member that was not opening the mail, logging the checks or making the deposits) to compare the monthly cash receipts log to the deposits on the bank statement for payments received in the QSBC’s office. The QSBC was not following this procedure resulting in a key internal control function not being performed. / 5. QSBC should follow the written cash receipts procedures to ensure that all checkoff remittances are properly received, recorded and deposited.
Cash Disbursements and Expense Procedures:
Segregation of duties / 1. QSBC did not have an adequate segregation of duties in the cash disbursements function because the accountant was authorized to prepare checks, sign checks and perform the bank reconciliations. There was a risk the accountant could divert cash without being detected in a timely manner. It also left the accountant vulnerable to suspicion of wrongdoing, even when that was not the case. / 1. QSBCs should always segregate as many of the critical phases of the cash disbursements process as possible (e.g., opening the mail, recording disbursements in the accounting system, reconciling the bank accounts, and signing checks). The person preparing the checks should never have check signing authority, even as a second signer, and should never have access to a stamp of the authorized check signer’s signature. If a QSBC cannot segregate duties due to limited staff size, then a volunteer leader on the board, preferably the Treasurer or Chairman, should sign checks. QSBCs could also have canceled checks and the monthly bank statement sent directly from the bank to the Treasurer (or another volunteer leader). The Treasurer would then be able to review all checks on a monthly basis.
Segregation of duties / 2. QSBC utilized an electronic payment process that did not provide adequate internal controls because the process allowed one employee to initiate and transmit electronic payments. / 2. QSBC should use checks to pay expenses until such time as an online bill payment system is located that requires two employees to make payments (one to enter the transaction and one to approve the transaction on-line before payment).
Review and approval / 3. The Executive Director was the only or primary check signer and there was no review and/or documentation of a review by a volunteer leader of the check registers. / 3. The QSBC should send a copy of each check register to one or more volunteer leaders on the board, preferably the Treasurer or Chairman. The register should be sent at least monthly, but preferably after each check run. At least one volunteer leader should sign or initial the check register as an indication that this review has occurred.
Review and approval / 4. The QSBC staff member authorized to approve a given expense did not review and approve and/or did not document their review and approval of invoices, expense reports or credit card statements. / 4. All expenses (i.e., invoices, expense reports and credit card statements) should be reviewed and approved by the QSBC staff member authorized to approve the expense. The reviewer should document their review by signing or initialing the supporting documents.
Cash Disbursements and Expense Procedures (con’t):
Review and approval / 5. A volunteer leader on the board did not review and approve and/or did not document his/her review and approval of the Executive Director’s expense reports and detail company credit card expenses. / 5. It is important for a volunteer leader (e.g., the QSBC Chairman or Treasurer) to review and approve all expenses incurred by the Executive Director to ensure all expenses are proper. This will serve to protect the QSBC and the Executive Director. This approval can be performed after the expenses are reimbursed (e.g., at regularly scheduled board of directors’ meetings) if that timing works better under the circumstances, but the approval should occur within one to two months to be an effective control.
Supporting documentation / 6. Disbursements were made without supporting documentation and/or the supporting documentation was not complete. The following are examples of issues noted:
· Disbursements made based upon verbal requests.
· Board members were reimbursed for mileage without completing a travel/expense report.
· Receipts were not obtained for credit card charges and/or items on a travel/expense report.
· Receipts/invoices did not contain documentation of the business purpose of the expense.
· An advance was made to an employee for a purchase and the employee did not provide a receipt supporting the purchase.
· An employee who worked from home was reimbursed for phone and internet charges and only the summary page of the bill was provided. / 6. Expenses should not be paid without the proper supporting documentation (i.e., an approved contract, invoice, receipt, travel/expense report or credit card statement). There should be a receipt for all items on a travel/expense report and credit card statement (unless the QSBC’s policy allows for items under a reasonable dollar amount, such as $25, to be paid without a receipt). Additional documentation (e.g., meal attendees, business discussed, meeting or event name) should be provided on invoices and credit card receipts that do not already contain an adequate description of the business purpose. The supporting documentation should allow the item to be independently verified as to the validity of the expense.
Supporting documentation / 7. QSBC did not execute a written agreement for one of the following business services:
· Lease of office space
· Production and airing of radio spots
· Fees paid to a consultant
· Services of an advertising agency / 7. QSBCs should execute written agreements with third parties who provide business services such as consulting, advertising, public relations, rental of equipment or buildings, etc. The agreement should be executed prior to the start of the business service to ensure that both parties understand the terms of the agreement and should include important terms such as the fees to be paid, the services to be provided, the length of the agreement, etc.
Cash Disbursements and Expense Procedures (con’t):