WEST PHILADELPHIA COMMUNITY MENTAL HEALTH CONSORTIUM, INC.Non-Profit

Criteria: In accordance with GAAP, effective control activities that provide for the completeness and timely reconciliation of financial statement accounts are required to assist in the preparation of financial statements, as well as assist in the prevention and detection of errors and fraud. Condition: During the review of The Consortium?s accounts payable detail, a duplicate entry in benefit expenses and missing transactions in rents and professional fees were noted. Effect: As a result, benefit expenses were overstated and rents and professional fee expenses were understated. Cause: Accounts payable was not properly reviewed and some invoices were not recorded in a timely manner. This is a repeated finding (Finding 2019-001). Recommendation: We recommend that available staff is given the responsibility to handle duties related to accounts payable until a replacement is found. Additionally, we recommend that management develop policies and procedures to reconcile accounts payable to the general ledger on a regular basis. We also recommend that these procedures should incorporate periodic reviews of the payables recorded and voided to ensure the accuracy and completeness of the balance. Management's response: Management continues to agree with the comment and believe significant progress was made over prior years. We are following our internal processes and are on time with our monthly reconciliations and review processes for accounts payable. This has been ensuring the accuracy and completeness of the balance. The two balances cited were anomalies that do not reflect the overall effort that is made around our account reconciliations. This process has also been consistently continued during the challenges put in place by the COVID Pandemic. Management will continue, however, to review this process, to ensure that it achieves the desired results.

Criteria: In accordance with GAAP, effective control activities that provide for the proper and timely tracking and calculation of uncollectible amounts are required to assist in the preparation of financial statements, as well as to assist in the prevention and detection of errors and fraud. Condition: The reserve for uncollectible accounts receivable was understated. The results of the testing of subsequent collection shows less than 10% was collected during the 92 days from the year-end. Management was unable to provide an aging report or proof of further collections. Effect: As a result, the net assets and the revenues of the Consortium are overstated. Revenues reported on the invoices to funding sources may not be accurate or complete. Cause: Management did not closely monitor collection of billing and did not make accurate estimates of the reserve for uncollectible accounts receivable. This is a repeated finding (Finding 2019-002). Recommendation: We recommend the Consortium implement more effective procedures to ensure proper record keeping and monitoring in regards to uncollectible accounts receivable. The billing and fiscal departments must work closer together to review uncollectible accounts and the reserve balances recorded on the general ledger in a timely manner for accurate reporting. A more sophisticated accounting software will help the process improve. Management?s Response: Management agrees with the importance of maintaining an accurate reserve for uncollectible receivables and we believe we have made improvements over prior years. During fiscal year 2020 we built on the processes we implemented in fiscal year 2019 where we implemented and enhanced a proactive process to eliminate uncollectible receivable balance. We have also increased our monthly reserve for uncollectable revenue in FY 2020. We feel that we have improved the accuracy of our current recorded bad debt reserve, especially since some of our payers can take longer than the 92 testing period to fully pay outstanding balances. We will continue to monitor the reconciliation and review process for accounts receivable in order to continue to improve the accuracy of the estimated reserve for uncollectible accounts receivable determining if it needs to be reduced or increased. Additionally, the implementation of the new electronic medical record and billing system and the new general ledger system will make this overall process significantly easier.

Criteria: The tracking and matching of grant revenues and the related grants receivable is necessary to assist in making management decisions and for the proper reporting and use of these funds in accordance with each grant/funding source requirement. Condition: The Consortium recorded cash receipts of grant receivable for the prior year as revenue for the current year. The revenue for the Drug and Alcohol program (Block Grants for Prevention and Treatment of Substance) and the revenue from CBH were not properly recorded. Material adjustments were needed to reconcile these revenues. Effect: Receivables and revenues from Drug and Alcohol program and CBH were overstated. Grant revenue was also overstated. Cause: The Consortium's system of tracking and matching its cash receipts to revenues was not properly or timely monitored. This is a repeated finding (Finding 2019-004). Recommendation: We recommend that cash receipts for all revenues be recorded and allocated to correct program in a timely manner. Management should prepare a tracking schedule that details the total amount received in relation to each program, and relevant information regarding the receipts should be obtained, if needed. This schedule should be reconciled and reviewed periodically by management to ensure that the schedule is complete and supported by the accounting records. Management should use this schedule to prepare a complete and accurate Schedule of Expenditures of Federal, State and City Awards. Management should implement new procedures when there is any change in billing and collection from any payer, and monitor compliance with the new procedures. Management's response: Management continues to agree with this comment and continues to be working towards better accountability in the area of grant accounting. In June 2012, the Consortium implemented a financial accounting system that allows the Consortium to more appropriately match grant revenues with expenses. In addition, the departments who receive the grants file financial and program reports either quarterly or annually with the agency that provides the grants as well as close out reports when the grant is completed. The Consortium will continue to collect all grants in a central grant file. In addition, cost allocations will continue to be reviewed frequently to ensure expenses are not allocated to the wrong programs. Furthermore, we are in the process of implementing a new general ledger system, which will significantly improve on our ability to properly record, track, and monitor accounting activity.

Criteria: In accordance with GAAP, proper recordkeeping and documentation are required to assist in the preparation of financial statements, as well as assist in the prevention and detection of errors and fraud Condition: The Consortium was unable to produce the service record requested for inspection. Out of 22 items selected, one note was missing. For another item selected, there was a discrepancy of 300 units between the billing records and the service notes. Effect: The documents supporting service units billed may not be available for inspection when needed. Incomplete or inaccurate records can lead to incorrect billing. Cause: Although the Consortium has a procedure in place for recordkeeping and document filing, the control was not effective and staff did not comply. The documents were not properly filed by an employee. As a result, staff did not know the location of the documents requested. When transcribing information from the service notes to the billing system, data entry errors occurred. This is a repeated finding (Finding 2019-006). Recommendation: We recommend the Consortium implement more effective procedures to ensure proper recordkeeping and documentation. The Consortium should designate a member of the management who is responsible for monitoring retention of the complete records. Additionally, there should be a designated staff member to double-check billing records to ensure they match the service records. Management's response: Management agrees with the importance of proper recordkeeping and documentation. We continue to strive to improve this area and complete frequent internal audits to test our own processes and procedures. We are also in the process of implementing a new electronic medical records system that will significantly increase the level of automated and system based controls to achieve an even higher level of compliance.

Criteria: In accordance with GAAP, effective control activities that provide for the completeness and timely reconciliation of financial statement accounts are required to assist in the preparation of financial statements, as well as assist in the prevention and detection of errors and fraud. Condition: Accounts payable for the months of May 2019 and June 2019 was not recorded completely. Additionally, accounts payable was not reconciled to the general ledger in a timely manner at year-end. Effect: As a result, expenses were understated. Additionally, due to the delay of reconciliation, the details of the accounts payable provided did not agree to the general ledger. Cause: Staff responsible for the entry of accounts payable was not available during the months of May 2019 and June 2019 and there were no other personnel available to perform this duty in her absence. No monitoring was done over the proper reconciliation of accounts payable at year-end. This is a repeated finding (Finding 2018-001). Recommendation: We recommend that available staff is given the responsibility to handle duties related to accounts payable until a replacement is found. Additionally, we recommend that management develop policies and procedures to reconcile accounts payable to the general ledger on a regular basis. We also recommend that these procedures should incorporate periodic reviews of the payables recorded and voided to ensure the accuracy and completeness of the balance. Management's response: Management continues to agree with the comment and has made progress over the previous year. Unfortunately, due to personal issues we were short staffed mid-year which disrupted our improved processes. We have worked to get caught up and continue on a trajectory of improvement with our monthly reconciliation and review process for accounts payable to facilitate a timely review as well as ensure the accuracy and completeness of the balance. Management will continue to review this process to ensure that it is achieving the desired results.

Criteria: In accordance with GAAP, effective control activities that provide for the proper and timely tracking and calculation of uncollectibles are required to assist in the preparation of financial statements, as well as to assist in the prevention and detection of errors and fraud. Condition: The reserve for uncollectible accounts receivable was understated. The results of the testing of subsequent collection shows less than 10% was collected during the 85 days from the year-end. Management was unable to provide an aging report or proof of collections. Effect: As a result, the net assets and the revenues of the Consortium are overstated. Revenues reported on the invoices to funding sources may not be accurate or complete. Cause: Management did not closely monitor collection of billing and did not make accurate estimates of the reserve for uncollectible accounts receivable. This is a repeated finding (Finding 2018-002). Recommendation: We recommend the Consortium implement more effective procedures to ensure proper record keeping and monitoring in regards to uncollectible accounts receivable. The billing and fiscal departments must work closer together to review uncollectible accounts and the reserve balances recorded on the general ledger in a timely manner for accurate reporting. Management?s Response: Management disagrees with the comment. During fiscal year 2019 we have implemented and enhanced a proactive process to eliminate uncollectible receivable balance. The first step in this process occurs with our billing process. When potential services get submitted that are truly uncollectible, the billing team closes them out instead of billing them so no uncollectible receivable gets generated. For billable services, which the vast majority or coming from governmental sources (City, State, etc.) we get paid for the billings just sometime it can be delayed. The remaining billed services from third party providers (insurance companies, etc.) generally pay based on our contracted rates. There are some additional services or portions of services that fall under private pay that may have a higher likelihood of being outstanding. Based on the above parameters we feel that the current recorded bad debt reserve is adequate. We will continue to monitor the reconciliation and review process for accounts receivable in order to continue to improve the accuracy of the estimated reserve for uncollectible accounts receivable determining if it needs to be reduced or increased.

Criteria: The tracking and matching of grant revenues and the related grants receivable is necessary to assist in making management decisions and for the proper reporting and use of these funds in accordance with each grant/funding source requirement. Condition: The Consortium recorded cash receipts to an incorrect grant. Receipts of $83,060 received for Drug and Alcohol program (Block Grants for Prevention and Treatment of Substance Abuse) were recorded under Behavioral Health program (Social Services Block Grant). The total revenue and receivable for Behavioral Health program, Intellectual disAbility program, and Drug and Alcohol program were not reconciled to the budget, collection, and billing. Effect: Receivable for Drug and Alcohol program was overstated and receivable for Behavioral Health program was understated. The total revenue for Intellectual disAbility program, and Drug and Alcohol program were overstated. Cause: The Consortium's system of tracking and matching its cash receipts to grant revenues was not properly or timely monitored. This is a repeated finding (Finding 2018-003). Recommendation: We recommend that cash receipts for all grants be recorded and allocated to the correct program in a timely manner. Management should prepare a tracking schedule that details the total amount of the grant award and all amounts received in relation to that grant, and relevant information regarding the receipts should be obtained, if needed. This schedule should be reconciled and reviewed periodically by management to ensure that the schedule is complete and supported by the accounting records. Management should use this schedule to prepare a complete and accurate Schedule of Expenditures of Federal, State and City Awards. Management's response: Management continues to agree with this comment and continues to be working towards better accountability in the area of grant accounting. In June 2012, the Consortium implemented a financial accounting system that allows the Consortium to more appropriately match grant revenues with expenses. In addition, the departments who receive the grants file financial and program reports either quarterly or annually with the agency that provides the grants as well as close out reports when the grant is completed. The Consortium will continue to collect all grants in a central grant file. In addition, cost allocations will continue to be reviewed frequently to ensure expenses are not allocated to the wrong programs.

Criteria: In accordance with GAAP, proper recordkeeping and documentation are required to assist in the preparation of financial statements, as well as assist in the prevention and detection of errors and fraud. Condition: The Consortium was unable to produce the sample of properly signed service records of the members requested for inspection. Out of 23 items selected, one note was missing and three service notes were not signed by the service providers. Effect: The documents supporting service units billed may not be available for inspection when needed. Cause: Although the Consortium has a procedure in place for recordkeeping and document filing, the control was not effective and staff did not comply. Signatures on the service notes were not properly monitored by supervisors. The documents were not properly filed by an employee. As a result, staff did not know the location of the documents requested. Recommendation: We recommend the Consortium implement more effective procedures to ensure proper monitoring of recordkeeping and documentation. The Consortium should designate a staff member who is responsible for preventing unauthorized access to the records and keeping track of records checked out by staff. Management's response: Management agrees with the importance of proper recordkeeping and documentation. We continue to strive to improve this area and complete frequent internal audits to test our own processes and procedures. We are also in the process of implementing a new electronic medical records system that will significantly increase the level of automated and system based controls to achieve an even higher level of compliance.

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