NEK Community Broadband d/b/a NEKCV

The management of NEK Broadband acknowledges the finding of a significant deficiency in internal controls noted by our auditors. We have implemented a new control to present all general journal entries as part of the monthly financial statement package to be reviewed by the finance and audit committee. Documentation of that review will be included in the monthly meeting minutes of the finance and audit committee. Further, we plan to implement a new accounting system with workflow controls, approval requirements and an integrated inventory system within the next year.

Finding No. 2021-01/ Approval of Expenditures Approval of Expenditures Updated Procedures/ While each expense and invoice was approved by management, those approvals were not always captured in writing. The following process provides a detailed description of the steps to be followed moving forward to ensure that there is appropriate documentation of approvals. Procedure for Non-recurring Expenses (Invoice or Purchase Order) 1) Bookkeeper or other recipient will file a new invoice in ?Vendor/Active Invoices? with file name ?XXXXXX_VendorName? where XXXXXX is either the date received or the date on the invoice, whichever is earlier (Year/Month/Day format 210130). 2) For non-recurring expenses, Executive Director or ED?s designated representative will review and place his or her signature on a PDF of the invoice received by Monday EOD to show approval. Designees will be identified by type of invoice to approve and designations will be tracked in a separate spreadsheet. 3) Treasurer will review invoices on Tuesday morning. Unapproved invoices will go in a ?Vendor/For Approval? folder, which will be shared as a reminder with ED or designee. ED will email approved documents to Treasurer and Bookkeeper. Once approved, invoices should be moved into the ?Active Invoices/Approved? folder. 4) Treasurer will review Approved invoices to ensure restricted funds or unrestricted cash reserve is available for payment. Treasurer will also review expenditure in light of the approved procurement policy. If sufficient funds are available, and procurement was appropriate, Treasurer will move one copy of the approved invoices to the ?Vendor/Invoices Approved for Payment? folder. If sufficient funds are not available, or the procurement needs review or amendment, the approved invoice will go into the ?Vendor/ON HOLD? folder. 5) Bookkeeper will prepare checks for payment. Treasurer will use the Credit Card where appropriate according to approved policy, retaining receipts for reconciliation. Checks for signing will be left in the office by Wednesday at noon. Paid invoices will then be moved to the appropriate Vendor file, with a copy added to the appropriate month in the ?Accounting Files/Reconciliations? folder. Another copy should be made and put in the ?Grant/Active Reimbursement Request? sub-folder. 6) Ideally simultaneous to, but at minimum within 24 hours of preparing payment, Bookkeeper will input paid invoices into Quickbooks ensuring that the vendor has a ?Bill Due Within? period (14,30,45 days) identified. Leave Class (Distribution Area) empty if unsure of the designation. New ?On Hold? invoices should also be entered into QB so that the due date can be tracked. 7) The Treasurer or Grants Manager will prepare Reimbursement Requests for the previous month?s bills before the 15th of the following month, except for bills larger than 50% of our unrestricted cash reserve at the time, which will be submitted immediately. Requests will be submitted as invoiced expenses using QB forms and reports. Recurring Expenses (Debit/Credit Card) 1) A recurring credit card charge will be approved for the first time using the non-recurring procedure. The monthly charge will be annualized for procurement purposes. Once approved, the payment method will be put into place and entered into the ?Recurring Debit/Credit Card Charges? spreadsheet within the ?Vendors/Approved Invoices? folder. 2) Any proposed changes to the subscription will be approved using the ?non-recurring? procedure before being implemented. 3) The Treasurer and bookkeeper will refer to the spreadsheet as part of the reconciliation process.

Finding No. 2021-02/ Approval of General Journal Entries While General Journal entries were reviewed and approved by management, those approvals were not captured in writing. The following process provides a detailed description of the steps to be followed moving forward to ensure that there is appropriate documentation of approvals. General Journal entries approval and documentation procedure/ General Journal entries are made in our accounting for a variety of reasons, but most typically for the following three: (1) move restricted grant funds from the statement of position (balance sheet) to the appropriate income account (statement of activities); (2) capitalize expenses by moving Work in Progress expenses from the statement of revenues, expenses and changes in net position to the statement to the position statement or (3) to make adjustments as suggested by NEK Broadband?s accountant or auditor. A report of General Journal entries for the previous month will be prepared by the NEK Broadband Treasurer by the end of the week following end of the month for review and approval by the Executive Director. They are expected to come at the following intervals: (1) Monthly or Quarterly (2) Quarterly (3) Quarterly or Annually The report will be presented by the Treasurer with clarity as to which kind of GJ entry they represent and whether they are proposed by the Treasurer, Accountant or Auditor. Drafts of the other monthly financial reports will accompany the GJ Report. The Executive Director will seek whatever clarification is necessary for approval. Upon approval, the report of General Journal entries will be signed by the Executive Director. Once signed and approved, the signed GJ report will be filed in the ?Accounting Files/Reconciliations/Adjustments? folder. Finding No. 2021-03/ Reconciliations and Financial Reporting Monthly Closing Process/ 1) Bookkeeper should perform bank account and credit card reconciliations as soon as possible after the end of the previous month, at the latest within one week of the end of month, or the first business day after one week. 2) Grant Manager should perform ?Expenditures by Grant? reports and invoices for reimbursement as soon as possible after reconciliations are complete, at the latest by 10th day of the month or first business day after the 10th. 3) On or before the 15th of the month, Bookkeeper and Grant Manager should work together to collect copies of necessary Backup Material in ?Accounting Files/Reconciliations?, a new folder for every month, entitled Jan22, for example. When the end of the month is also the end of the quarter the file should be entitled Q1Mar22, for example. The required backup materials are: a) Bank Statements; Credit Card Statements b) QB reports: Reconciliation Report; General Ledger Transaction List; Expenditures by Grant; Monthly Journal Entry Report (Approved); P&L; Balance Sheet c) copies of all paid bills and invoices issued are in the corresponding monthly Reconciliation folder.

Finding No. 2021-03/ Reconciliations and Financial Reporting (continued) 4) These materials will be reviewed by the Treasurer. Once complete, they will be presented to the Executive Director and the members of the Finance Committee. Once the monthly reports are accepted by a vote of the Finance Committee, the month will be considered closed. Any changes to recorded entries must be reviewed and approved by the Finance Committee at a subsequent meeting. Quarterly Closing Process/ The same process as above will be followed. In addition, on or before the 15th of the following month, or the first business day after the 15th,: 1) The Treasurer will receive an updated inventory list from construction partners. 2) The Treasurer will work with the contracted accountant to ensure that all non-material expenses are appropriately categorized for capitalization. 3) The Treasurer will include capitalization General Journal entries in the Monthly Journal Entry Report for approval. Annual Pre-Audit Closing/ The same process as above will be followed. In addition, on or before January 20th, or the first business day following the 20th: 1) A password will be added to the transactions following the Finance Committee acceptance of the December reports. 2) The Treasurer will review monthly and quarterly reports to ensure that no bills or invoices have been missed or repeated. Annual Post-Audit Closing/ Following the completion of a final audit report, entries for the previous year will be closed and no further entries or adjustments will be possible.