Internal Controls Questionnaire 10-0510B

Nonprofit Program Office (NPPO)

Office of Research and Development

Veterans Health Administration

Internal Controls Questionnaire (ICF)

Self-Assessment for

VA Affiliated Nonprofit Research and Education Corporations (NPCs)

September 30, 2011

Nonprofit Program Office (NPPO)

Office of Research and Development

Veterans Health Administration

U. S. Department of Veterans Affairs (VA)

Self-Assessment for VA-Affiliated Nonprofit Research and Education Corporations (NPCs) established pursuant to sections 7361-7366, title 38, United States Code

Table of Contents

Introduction iii

Internal Controls Questionnaire 1

A. Control Environment 1

B. Financial Reporting Cycle 4

C. Budget Reporting Cycle 5

D. Cash Receipts Cycle 6

E. Accounts Receivable Cycle 7

F. Purchasing/Accounts Payable Cycle 8

G. Human Resources Cycle 9

H. VHA Handbook 1200.17……………………………………………………..10

Introduction

The Self-Assessment of Internal Control, commonly referred to as the Internal

Control Questionnaire (ICQ) is a tool to be utilized by the NPPO and NPCs. At this time, we are not expecting documentation for each of these items.

The ICQ is an NPPO review or audit tool. The purpose will be to confirm that internal controls are present and effective, or to identify areas requiring improvement. The NPPO will develop formal written recommendations for improvements to the NPC’s management, the VA Medical Center Director, and the NPC’s board of directors.

The NPPO estimates that it will take an average of four hours to answer the ICQ. However, because of the huge size disparities in the NPCs and other factors peculiar to some of the NPCs, more or less time may be required. If you would like to comment upon the estimated burden of answering this ICQ, or have any questions or suggestions, please contact Kimberly Collins, NPPO Administrator, at (202) 731-6973 or at ([email protected].

VA and the NPPO cannot ensure that the ICQ answers will be kept confidential or private. However, NPPO will make a reasonable effort to confine the answers to those within VA who have a need to know.

The ICQ does not contain any information that can reasonably be regarded as sensitive.

The ICQ will be made available to respondents electronically by email or a download from the NPPO Web site. If requested, answered ICQs can also be returned to NPPO electronically. There is no additional record-keeping requirement for the ICQ.

The ICQ will be answered by the NPC’s Executive Director, Chief Executive Officer, Chief Financial Officer, Controller or other person with equivalent authority, ability and knowledge of the NPC’s operations and internal controls.

Fill out the required information at the top of page one and then circle the correct answer, i.e. yes, no, N/A. If you are uncertain about how to answer a question, leave it blank and go on to the next one.

System of Internal Controls

A proper system of internal control provides reasonable assurance that the financial statements are fairly presented and that management’s goals are being properly pursued. Such a system includes fully documented policies and procedures that ensure, among other things, that:

A. Transactions are executed according to management's general or specific authorization.

B. Transactions are recorded, as necessary, to:

1. prepare the financial statements that conform with generally accepted

accounting principles, and

2. account for assets, liabilities, net worth, cash flow, revenues and

expenses.

C. Access to assets is permitted according to management's authorization.

The ultimate responsibility for a good system of internal control rests with management. Periodically, when submitting financial statement information, management must attest to the accuracy of that information along with the soundness of internal controls. This ICQ should be used as a key tool in making those assertions. Additionally, many aspects of internal control are currently documented in VHA Handbook 1200.17.

Framework

The ICQ consists of the following accounting cycles or sections:

1. Control Environment

2. Financial Reporting

3. Budget Reporting

4. Cash Receipts

5. Accounts Receivable

6. Purchasing/Accounts Payable

7. Human Resource

8. VHA Handbook 1200.17

Acknowledgement

The framework for the ICQ is taken from sources both within and outside the NPPO and VA, particularly the State of North Carolina and the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as published in Internal Control– Integrated Framework in 1992.

Nonprofit Program Office (NPPO)

Office of Research and Development

Veterans Health Administration

U.S. Department of Veterans Affairs (VA)

Self-Assessment of Internal Controls

for VA Affiliated Nonprofit Research and Education Corporations (NPCs)

NPC: Click here to enter text.

City: Click here to enter text.

State: Click here to enter text.

Prepared by: Click here to enter text.

Title: Click here to enter text.

Telephone #: Click here to enter text.

E-mail address: Click here to enter text.

Date Prepared: Click here to enter a date.

A. Control Environment

Please check box for correct answer. Leave other boxes blank.

Yes No N/A 1.Does a written COI Policy (COI) exist and does it apply

to all officers, employees and directors?

2. Does the COI Policy contain:

Yes No N/A a. A definition of COI?

Yes No N/A b. A training requirement for directors, officers

and employees about the policies within 90

days of hire or affiliation with the NPC?

Yes No N/A c. An annual refresher training requirement

for directors, officers and employees with

decision-making authority about the policy?

Yes No N/A d. A requirement for directors, officers and employees with decision-making authority to disclose potential COI?

Yes No N/A e. A requirement that each director, officer and employee sign a statement of acknowledgement of understanding and agreement to comply with the policy upon hire or affiliation with the NPC?

Yes No N/A f. A process for identifying and managing

COI?

Yes No N/A 3. Although not required by VA policy, does the COI policy address nepotism issues?

Yes No N/A 4. Is Internal Controls training provided to directors, officers and employees with decision-making authority within 90 days of hire or affiliation?

Yes No N/A 5. Does the NPC have an anonymous and confidential Whistleblower policy for communicating and receiving information regarding fraud, errors in financial reporting and misrepresentation or false statements made by management?

Yes No NA 6. Are job responsibilities formally documented and reviewed annually by supervisors or management?

Yes No N/A 7. Does management ensure compliance with the NPC’s

personnel policies and procedures?

Yes No N/A 8. Does senior management and the board review financial results at least quarterly?

Yes No N/A 9. Are unusual variances between budget and actual examined?

Yes No N/A 10. Is there a process for internal review of the NPC’s operations?

Yes No N/A 11 .Does the Executive Director report to the board of directors?

Yes No N/A 12. Does the NPC undergo an annual audit by an independent outside auditor in accordance with law?

Yes No N/A 13. Does the NPC accept VA-appropriated funds only when pursuant to reimbursement for an approved Intergovernmental Personnel Act (IPA) assignment?

Yes No N/A 14. If material weaknesses or control deficiencies were identified in the auditor’s letter to management, has the NPC board approved management’s corrective plan?

Yes No N/A 15. If applicable, does management follow-up on other outside audit and internal review findings and recommendations?

Yes No N/A 16. Has the NPC obtained an exemption from state taxes, if allowed by the state?

Yes No N/A 17. Does the NPC provide research investigators with financial reports of their active projects at least quarterly, including income and expenditures (annually for dormant accounts)?

Yes No N/A 18. Does the NPC send donor acknowledgment letters reflecting the purpose and conditions of gifts that conforms to IRS requirements?

Yes No N/A 19. Are written policies and procedures reviewed periodically, approved by senior management, and readily available for use by all employees?

Yes No N/A 20. Is there an organizational chart that clearly defines the lines of management authority and responsibility?

Yes No N/A 21. Are board elections conducted in accordance with the NPC’s bylaws?

Yes No N/A 22. Are dollar limits established for check signing authority and

equipment purchases?

Yes No N/A 23. Does management understand the concept and importance of internal controls, including division of responsibility?

Yes No N/A 24. Is the internal control structure supervised and reviewed by management to determine whether it is operating as intended?

Yes No N/A 25. Are responsibilities segregated so that no single employee controls all phases of a transaction?

Yes No N/A 26. Are there adequate policies and procedures for authorization and approval of transactions at the appropriate level?

Yes No N/A 27. Is risk identification incorporated into management’s short-term and strategic planning?

Yes No N/A 28. Have there been any thefts, embezzlements, or other irregularities in your organization since the last audit?

If yes to 28, please answer questions 29-31, if no proceed to 34.

Yes No N/A 29. If there were any thefts, embezzlements, or other irregularities since your last audit, have they been properly reported to NPPO, VA OIG, and VA police?

Yes No N/A 30. Has corrective action been taken to prevent a recurrence of any thefts, embezzlements, or other irregularities that may have happened?

Yes No N/A 31. Has an appropriate effort been made to recover any thefts, embezzlements, or diversions of funds?

Yes No N/A 32. Are there any project accounts that are overdrawn and in a deficit status?

Yes No N/A 33. If any project accounts are overdrawn, are they reported in the financial statements provided to the Board?

B. Financial Reporting Cycle

Yes No N/A 1. Do written accounting policies and procedures exist and available and communicated to all accounting and applicable personnel?

Yes No N/A 2. Is the general ledger chart of accounts properly maintained by authorized personnel?

Yes No N/A 3. Is a staff member assigned the responsibility to supervise the conversion from cash basis to accrual basis accounting for the year-end financial reporting?

Yes No N/A 4. Does the NPC maintain the trial balances, adjustments and supporting workpapers to support the process of closing the general ledger and preparing financial statements and financial statement note disclosures?

Yes No N/A 5. Are the financial statements and note disclosures agreed to the underlying supporting documentation (i.e. general ledger, reconciliations, journal entries, and worksheets)?

Yes No N/A 6. Is the supporting documentation attached to the journal entries and secured in a safe location?

Yes No N/A 7. Are the financial statements and note disclosures updated to reflect any new FASB and GASB pronouncements or any other significant standards?

Yes No N/A 8. Are comparative (current period to prior year and current period to budget) quarterly statements prepared and distributed to management and the board?

Yes No N/A 9. Is there a financial highlights narrative accompanying the monthly financial statements?

C. Budget Reporting Cycle

Yes No N/A 1. Has the board approved an annual administrative budget?

Yes No N/A 2. Have procedures been adopted and communicated establishing authority and responsibility for budget revisions?

Yes No N/A 3. Are actual expenditures and revenues compared to budgeted amounts both for the quarter and the year-to-date?

Yes No N/A 4. Are comparative statements, actual to budget, prepared and distributed to management and the board quarterly?

Yes No N/A 5. Does the NPC’s Executive Director or accountant determine the availability of funds before the issuance of a purchase order or expenditure commitment?

D. Revenue Cycle

Yes No N/A 1. Is there a written policy and procedure defining responsibilities for processing and recording revenue transactions?

Yes No N/A 2. Do written procedures exist regarding the collection, recording and depositing of funds?

Yes No N/A 3. Is a restrictive endorsement placed on incoming checks at the earliest point of receipt?

Yes No N/A 4. Do deposit slips have an official depository bank number preprinted on the document?

Yes No N/A 5. If payments are made in person (seminars, workshops, etc.), are manual receipts used and accounted for and balanced to the deposits?

6. Are the following responsibilities performed by different people:

Yes No N/A a. Custodian of the funds, reconciliation of the funds and access to cash receipts?

Yes No N/A b. Listing the cash receipts, making cash disbursements, and preparing reconciliations?

Yes No N/A c. Making a deposit, billing, making General Ledger entries and collecting cash?

Yes No N/A d.Collecting cash, balancing cash, making a deposit, maintaining Accounts Receivable records and making General Ledger entries?

Yes No N/A e. Preparation of the deposit and verifying the validated bank deposit?

Yes No N/A 7. Is a mail receipts log maintained for mail receipts?

8. Is the mail receipts log reconciled to:

Yes No N/A a. The cash receipts journal?

Yes No N/A b. Validated deposit slips?

Yes No N/A 9. Are deposits made on a regular basis?

Yes No N/A 10. Are there controls in place for signature stamps?

Yes No N/A 11. Are there controls to ensure each cash disbursement is properly supported by documents and approved by the proper authorities before the disbursement occurs?

Yes No N/A 12. Are there controls over the supply of unused and voided checks?

Yes No N/A 13. Is the responsibility for processing a credit card payment segregated from the processing of a void disbursement check?

Yes No N/A 14. Is effective control maintained over receipts of grants, donations, etc. and is a follow-up made by a responsible employee to see that they have been classified and recorded properly?

Yes No N/A 15. Does management review and approve bank reconciliations on a monthly basis?

Yes No N/A 16. If you accept credit cards for payment, do you have documentation to reflect that your NPC is PCI (Payment Card Industry) compliant?

E. Accounts Receivable Cycle

Yes No N/A 1. Is there a written policy and procedures for accounts receivable?

Yes No N/A 2. Does the NPC have established policies and procedures concerning refunds of overpayments and the issuance of billing adjustments?

3. Are the following amounts properly recorded:

Yes No N/A a. Amounts due from the VAMC for Intergovernmental

Personnel Act assignment (IPAs)?

Yes No N/A b. Amounts due from funders?

Yes No N/A c. Amounts due from other grants?

Yes No N/A d. Amounts due from other misc. sources?

Yes No N/A e. Interest receivable?

Yes No N/A 4. Are remittance advices and billings retained to support entries to accounts receivable records?

Yes No N/A 5. Is the accountant notified in a timely manner of billings and collection?

Yes No N/A 6. Is access to the accounts receivable accounting system limited to authorized individuals?

F. Purchasing / Accounts Payable Cycle

Yes No N/A 1. Is there a written policy and procedure defining the responsibilities of preparing, recording, and approving on all purchases and accounts payable functions?

Yes No N/A 2. Is each purchase or expenditure justified by its relation to VA research, education or business purpose?

Yes No N/A 3. Has the NPC established procedures to ensure that all voided checks are properly accounted for and effectively canceled?

Yes No N/A 4. Does the NPC have a travel reimbursement policy that conforms to IRS requirements, that is, for actual expenses only or for GSA per diem reimbursements?

5. Do invoice processing procedures provide for:

Yes No N/A a. Obtaining copies of requisitions, purchase orders and receiving reports?

Yes No N/A b. Comparison of invoice quantities, prices, and terms with those shown on the purchase order?

Yes No N/A c. Comparison of invoice quantities with those shown on the receiving reports?

Yes No N/A 6. Is an adequate record of open purchase orders and agreements maintained?

Yes No N/A 7. Is splitting orders to avoid higher levels of approval prohibited?

Yes No N/A 8. Are returned items correlated with vendor credit invoices?

Yes No N/A 9. Does the accounting department or accountant record and follow up on partial deliveries?

Yes No N/A 10. Are credit card purchases reconciled monthly by someone other than the card holder?

G. Human Resources Cycle

Yes No N/A 1.Is there a written policy and procedures defining the responsibilities of processing, recording, approval and distribution of payroll and of personnel activities?

Yes No N/A 2. Are there written NPC personnel policies?

Yes No N/A 3. Are personnel files maintained for all employees?

Yes No N/A 4. Is access to payroll and personnel files limited to authorized individuals?

Yes No N/A 5. Are completed payroll transmittals reviewed and approved by a responsible person before check processing?

Yes No N/A 6. Are payroll registers reconciled to the payroll accounts in the general ledger by a knowledgeable person not otherwise involved in payroll processing?

7. Are individual employee time and attendance records:

Yes No N/A a. Prepared and signed by each employee for each pay period?

Yes No N/A b. Sufficiently detailed to show time charged properly?

Yes No N/A c. Reviewed and signed by each employee's supervisor?

Yes No N/A d. Reconciled with summarized time and attendance records?

Yes No N/A 8. If applicable, is overdrawn vacation or sick leave deducted when calculating final compensation upon termination?

Yes No N/A 9. Are employee leave records accrued each pay period to ensure payment is available when needed?

H. VHA Handbook 1200.17

Yes No N/A 1. Are policies and procedures consistent with statutes and VA guidance, particularly with Handbook 1200.17?

Yes No N/A 2. Is a control list maintained for required WOC appointments and is the list reviewed monthly?

Yes No N/A 3. Has the Medical Center Director concurred in the appointment of the Executive Director in writing?

Yes No N/A 4. Are the Medical Center Director, Chief of Staff, Associate Chief Staff for R&D, and/or Associate Chief of Staff for Education (or those with equivalent titles) participating members of the board?

Yes No N/A 5. Is the composition of the board in compliance with the VHA Handbook 1200.17?

Yes No N/A 6. Does the NPC maintain and follow VA procedures for record filing, retention, and disposition of original R&D documents, IRS rules for administrative files?

Yes No N/A 7. Has the VAMC’s HR Department issued Without Compensation Appointments (WOC’s) to all NPC employees who are engaged in approved VA research or education and are under VA supervision?

Yes No N/A 8. Has the VAMC’s HR department issued Without Compensation Appointments (WOC’s) to VA employees working at the NPC outside of their VA tour of duty but are engaged in approved VA research or education and are under VA supervision?

Yes No N/A 9. Has the VAMC's HR department issued an affiliate badge to NPC Administrative Personnel (those not engaged in VA approved research or education)? Forthcoming VA Handbook 0735.

Yes No N/A 10. Are copies of current WOC appointments kept on file at the NPC?

Yes No N/A 11. Are NPC employees placed on IPA appointments at the VAMC hired and paid by the NPC at least 90 days prior to the IPA appointment?

Yes No N/A 12. Are IPA appointments used strictly for scientific and technical personnel and not administrative employee?

Yes No N/A 13. Are IPA appointments made for limited durations and are copies maintained on file at the NPC?

Yes No N/A 14. Are there current, signed COI statements and disclosure forms on file at the NPC for all board members and key NPC employees?

Yes No N/A 15. Are time sheets used for joint VA -- NPC employees that clearly document that the tour of duty for each entity so that there is no dual compensation for the same hours worked?

Yes No N/A 16. Does the NPC have a residual fund policy that is in accordance with Handbook 1200.17?

Yes No N/A 17. Are transfers of active projects including associated funds and equipment approved by the donor?

Yes No N/A 18. Does the NPC pay for publications and subscriptions only when they facilitate VA’s research and/or education missions or are related to appropriate NPC business purposes?

Yes No N/A 19. Does the NPC pay for professional memberships only when justified by gaining access to research-related subscriptions or reduced registration fees for scientific conferences or for NPC business purposes?

Yes No N/A 20. Does the NPC have a Memorandum of Understanding (MOU) with the VAMC regarding reimbursing the medical services appropriation for clinical services provided purely for NPC research purposes?

Yes No N/A 21. Does the NPC provide reimbursement to the VAMC as stated in the MOU?

viii