Leaks, Drips, and Spills

Are OSM Assets Protected with Sound Internal Controls?

07 Nov 2011
Written by 
Rate this item
(5 votes)

It takes so long to get OSM to release the minutes of their board meetings and then when they finally do, they make freshman mistakes. Like this first item on the August 29, 2011 minutes.

I. Approval of previous meeting's minutes Dianne brings the motion to approve the minutes from the June 21st board meeting. Jacques seconds. The motion passes by unanimous consent.

Of course, that is the EXACT same approval - even down to the minutes from June 21st - that appeared in the July 18, 2011 board minutes! You would think in three months they might have proofed it just a tad bit better.

Attendance by Altansukh Tumenjargal has not improved any. Counting the August meeting as one meeting even though it continued on another day which he also missed gives him an attendance record now of 12.5% (1 out of the last 8 board meetings). And Akarawuth Tamrareang has missed 4 of the eight board meetings. That is a 50% attendance record.

But that is not the reason for today's blog. Something else in those minutes caught my eye and it was this statement (my emphasis):

Ryan agrees to Paul's suggestion to move some of the funds from checking to the money market account. Ryan will give Paul access to the account so that he can do that.

Made me think of two things. First, the financials dated October 30, 2011 still show that money has not moved to the money market acount. That's two months worth of interest lagging on providing access? And, second, it seems that OSM is missing some critical internal controls. Back when I was treasurer, I had full access to all of the bank accounts (except for the TD Bank which only had a token sum). The secretary who was then Ryan Ozimek had access but I believe I limited some of his capabilities - at least until I left and then I restored all access to him. Both Ryan and I carried corporate debit cards that could access the the main checking account. I relied on the President of OSM (Elin Waring) to authorize expenditures I made. I deposited all funds received whether checks or PayPal donations or even wired funds. I balanced the accounts each month and with the accountants help we tried to balance the books at the end of the tax year. With only about 8 board members, that was a reasonable division of labor and provided some internal control.

However, now that Ryan has risen to President of OSM and has the final authority on disbursing funds, he should no longer have acccess to the bank accounts or a debit card. Establishing good internal controls requires more of an investment of attention than money. Thus, OSM can institute appropriate controls and reap the benefits. The following internal controls should be be attempted by the responsible board members of OSM.

Proper Authorization and Approval

  • establish an annual budget — provide the board with time to review it and ask questions and have it approved before the start of the fiscal year;
  • create a purchasing process that tracks purchases from request through payment; and
  • making sure that the board knows who has authority to obligate OSM funds.

Proper Documentation and Accurate Recording

  • require that all vendors and consultants submit detailed invoices for goods and services provided;
  • require receipts for expenses of more than $5 for reimbursement; and
  • demand documentation is attached to check request forms.

Proper Physical Security

  • ensure that blank checks are locked up and controlled by someone other than the person who cuts checks;
  • require that another staff member sign out blank checks;
  • use passwords to prevent access to accounting software and records by staff or visitors who do not need to know them;
  • change passwords every six weeks; and
  • deposit daily receipts (checks, cashiers checks, money orders and cash) in the bank each day.

Early Detection

  • ensure that the another board member receives and reviews the monthly bank statement(s) before the Treasurer performs the bank reconciliation;
  • cross-train several board members so they can make bank deposits and perform other essential accounting duties when the regular bookkeeper or Treasurer is absent, and instruct them to report any irregularities; and
  • engage the services of a certified public accounting firm to conduct an annual financial statement audit that is reported to the board without staff present.
Read 8417 times
David Huelsmann

Dave Huelsmann was Treasurer of Open Source Matters, Inc. from 2008 to July, 2010 and Joomla Forum Global Moderator from 2005 to November, 2010. Now retired, he was a senior healthcare executive who managed large and diverse clinical laboratory, radiology, electroencephalography, and centralized patient transport operations/departments in both not-for-profit and for-profit companies throughout the United States.

Dave was a Navy Corpsman who served in Vietnam while attached to Seabee battalionmcb71

Read more about Dave Huelsmann

Add comment

Policy: Comments limited to ten per blog and are queued for review by site administrator before publishing.